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Marketing SA in China Second Edition 2007   1   Copyright © 2007 SA Tourism – not to be used without permission
SA Tourism is the Tourism Marketing Organisation of South Africa

      South African Tourism is the official tourism marketing organisation of South Africa.
      South African Tourism is the official tourism marketing organisation of South Africa.
      We market across the world focusing on three groups of travellers: international
      We market across the world focusing on three groups of travellers: international
      leisure travellers, the domestic and regional traveller, and business tourists who
      leisure travellers, the domestic and regional traveller, and business tourists who
      travel to South Africa for conferences and incentives. A key part of our business is to:
      travel to South Africa for conferences and incentives. A key part of our business is to:


                                 Understand the
                                 Understand the        Choose the
                                                       Choose the       Market the
                                                                        Market the
                                    market
                                    market        attractive segments
                                                  attractive segments   destination
                                                                        destination



      This booklet is the result of research South African Tourism did in China since 2004
      This booklet is the result of research South African Tourism did in China since 2004
      and is to help market South Africa in China. The aim of the project was to understand
      and is to help market South Africa in China. The aim of the project was to understand
      the whole of the Chinese market and not the section we are currently seeing. We also
      the whole of the Chinese market and not the section we are currently seeing. We also
      did qualitative research in Hong Kong to understand its market and the links in the
      did qualitative research in Hong Kong to understand its market and the links in the
      trade channel. Against this research, the Asia Portfolio and our country office in
      trade channel. Against this research, the Asia Portfolio and our country office in
      China have developed activation plans for the market. These plans are available from
      China have developed activation plans for the market. These plans are available from
      our office in Beijing (see address on the back cover).
      our office in Beijing (see address on the back cover).
      Current information on arrivals from China to South Africa are available on our
      Current information on arrivals from China to South Africa are available on our
      website www.southafrica.net/research and www.southafrica.net/trade
      website www.southafrica.net/research and www.southafrica.net/trade
Marketing SA in China Second Edition 2007                  2             Copyright © 2007 SA Tourism – not to be used without permission
Agenda

                     Market Overview

                     Travel Patterns

                     Channel

                     Consumers

                        – Our Target Market

                        – Target Segments

                     Current Chinese Travellers to South Africa

                        – Demographics

                        – Travel Behaviour

                     Potential Market and Their Perceptions

                     Activation Strategy

                     Hong Kong



Marketing SA in China Second Edition 2007                     3   Copyright © 2007 SA Tourism – not to be used without permission
Market Overview
           Maturity of the Market
           China, as an emerging travel market, is entering the growth phase
                                                                      introduction                            growth                                      maturity
             Tourism
             Industry Life                           % of
             Cycle                            population                                                                              Italy        Germany, Netherlands,
                                            travelling for                                                                      Canada
                                                                                                                           US                          France, UK, Japan
                                                  leisure

                                                                                                               Australia
                                                                                      South Africa
                                                                                                     China, India
                                                             SADC Nigeria Kenya

                                                                           Botswana              This phase may be very long
                                                                                                                                                                             Time*

                                                                Uninformed, Price insensitive,         Seek information & opportunity;          Very informed, price sensitive,
                                              Consumer
                                                                multi-purpose                          discover leisure                         focus on leisure

                                                                Very individualized                    Emergence of packages
                                               Product                                                                                          Specialized packages
                                                                Status oriented                        (seeking scale effects)
               Market
             Symptoms                                           few                                                                             High competition
                                             Competitor                                                Emerging specialization / focus
                                                                One-stop-shops                                                                  Clear focus

                                                                Unsophisticated, isolated,             Integrate products;                      Specialization; Information
                                               Channel
                                                                experience based                       information/choice provider              provider

                                                                                                       “shout”: get as many as you              Adapt trade and market to
              Tourism                         Marketing         Combine with trade initiatives
                                                                                                       can                                      select segments
              Authority
               Actions                                                                                 Facilitate scale effects (e.g.,          Understand segments and
                                        Overall strategy        Develop positioning
                                                                                                       packages)                                select

 * The duration of the four phases of the life cycle may vary significantly; their graphical representation with equal distances may thus be misleading
 Note: Framework based on Michael Porter: Competitive Strategy, 1980, Chapter 8 (Industry Evolution)
Marketing SA in China Second Edition 2007                                                        4                                            Copyright © 2007 SA Tourism – not to be used without permission
Market Overview
           General Statistics
           China accounts for 20% of the world's population

                                                                                                                                     Facts about China
                                                                                                                                     Facts about China
                                                                                                                        Geographic Characteristics
                                                                                                                        Geographic Characteristics
                                                                           Beijing
                                                                                                         Heilongjiang     Eastern Asia, bordering the East China
                                                                                                                          Eastern Asia, bordering the East China
                                                                                                                          Sea, Korea Bay, Yellow Sea, and South
                                                                                                                          Sea, Korea Bay, Yellow Sea, and South
                                                                                                           Jilin          China Sea, between North Korea and
                                                                                                                          China Sea, between North Korea and
                              Xinjiang
                                                                                                 Liaoning
                                                                                                                          Vietnam
                                                                                                                          Vietnam
                                               Gansu       Inner Mongolia
                                                                                                                          9,596,960 Square Kilometers (slightly
                                                                                                                          9,596,960 Square Kilometers (slightly
                                                                                     Hebei Tianjing
                                                                                                                          smaller than the US)
                                                                                                                          smaller than the US)
                                                            Ningxia        Shanxi
                                            Qinghai                                     Shandong
                                                                                                                        Population
                                                                                                                        Population
                        Tibet                                    Shaanxi       Henan        Jiangsu

                                                                                                                          1,313,973,713 (July 2006 est.)
                                                                                                                          1,313,973,713 (July 2006 est.)
                                                       Sichuan                 Hubei     Anhui           Shanghai

                                                             Chongqing
                                                                                       Jiangxi
                                                                                              Zhejiang                    Annual population growth (2006): 0.59%
                                                                                                                          Annual population growth (2006): 0.59%
                                                                       Hunan

                                                           Guizhou                          Fujian                      Gross Domestic Product
                                                                                                                        Gross Domestic Product
                                                 Yunnan
                                                                 Guangxi     Guangdong                                    $10 Trillion (2006 est.)
                                                                                                                          $10 Trillion (2006 est.)
                                                                                                                          GDP per capita $7,198*
                                                                                                                          GDP per capita $7,198*
                                                                            Hainan
                                                                                                                          Annual GDP growth 10.5% (2006 est.)
                                                                                                                          Annual GDP growth 10.5% (2006 est.)
 Note: * International dollars
 Source: CIA Fact Book, China, 2007; International Monetary Fund, World Economic Outlook Database, September 2006; Time Magazine, 11 January 2007
Marketing SA in China Second Edition 2007                                                                      5                           Copyright © 2007 SA Tourism – not to be used without permission
Market Overview
           Age Characteristics
           A fertility decline since the mid-1970s and the further increase in life expectancy gives rise to
           an ageing Chinese population
                                            Chinese Population by Age Group – Male and Female




 Source: www.iiasa.ac.at/Research/LUC/ChinaFood/data/anim/pop_ani.htm; United Nations (1999): World Population Prospects, The 1998 Revision, New York
Marketing SA in China Second Edition 2007                                   6                                    Copyright © 2007 SA Tourism – not to be used without permission
Market Overview
           Regional Characteristics – Population and Income
           Close to a third of the country’s population can be found in
           four provinces (Henan, Sichuan, Shandong, Guandong) while
           wealth is concentrated in the coastal regions
                                                                                                                                               Heilongjiang
                                                                                                                                                Pop: 38.2MM
                     Annual Urban Disposable Income
                          Tier 1: < 10,000 RMB                                               Tianjin
                                                                                                                                               Jilin
                                                                                                                     Inner Mongolia       Pop: 27.1MM
                          Tier 2: > 10,000 RMB                                                Pop:
                                                                                                                      Pop: 23.8MM
                                                                                            10.2MM


                                                                                                                                                  Liaoning Pop:
                                                  Xinjiang                                                                                             42.2MM
                                                   Pop:
                                                  19.6MM                                                                                           Beijing
                                                                                                                     Hebei                      Pop: 14.9MM
                                                                                                                  Pop: 68.1MM
                                                                                                            Shanxi
                                                                                           Ningxia           Pop:                         Shandong
                                                                                          Pop: 5.9MM        33.4MM                       Pop: 91.8MM
                                                                     Qinghai
                                                                      Pop:
                                                                     5.4MM              Gansu                       Henan
                                                                                      Pop: 26.2MM Shaanxi                                  Jiangsu Pop:
                                                                                                                   Pop:
                                                                                                    Pop:                                     74.3MM
                                                                                                                  97.2MM       Anhui
                                                                                                  37.1MM
                                                                                                                               Pop:
                                                      Xizang/Tibet                                               Hubei        64.6MM               Shanghai
                                                      Pop: 2.7MM                                Chongqing Pop: 60.2MM                                   Pop:
                                                                                Sichuan
                                                                                 Pop:
                                                                                                  Pop:                                                 17.4MM
                                                                                                 31.2MM
                                                                                87.3MM                                      Jiangxi
                                                                                                             Hunan           Pop:              Zhejiang Pop:
                                                                                                            Pop: 67MM       42.8MM                 47.2MM
                                                                                              Guizhou
                                                                                             Pop: 39MM                                      Fujian
                                                                               Yunnan                                                     Pop: 35.1MM
                                                                                Pop:                   Guangxi
 Source: National Bureau of Statistics of China, China                         44.2MM                   Pop:
         Statistical Yearbook, 2005; CLSA Asia-Pacific                                                 48.9MM                     Guangdong
                                                                                                                                      Pop: 83MM
         Markets, Chinese Tourists: Coming, Ready or Not
         Special Report, September 2005; Tourism
         Australia, China Country Overview 2006; Dr Wang                                                                       Guangzhou
                                                                                                          Hainan
         Xinjun, The Current Situation and the                                                               Pop:
         Characteristics of China’s Outbound Market                                                         8.2MM
Marketing SA in China Second Edition 2007                                         7                                                        Copyright © 2007 SA Tourism – not to be used without permission
Market Overview
           Regional Characteristics – Income
           Shanghai and Beijing residents enjoy the highest standard of living in China


                                                      Per Capita Annual Disposable Income of Urban Households, 2004
             18,000
                                16,683
                                            15,638
             15,000                                   14,546
                                                                  13,628


             12,000                                                          11,467        11,175
                                                                                                    10,482
                                                                                                                9,438     9,221               9,106
   RMB 9,000                                                                                                                                                     8,008


               6,000



               3,000



                       0
                              Shanghai                Zhejiang               Tianjin                Jiangsu             Chongqing                              Liaoning

                                            Beijing              Guangdong                 Fujian             Shangdong                       Tibet

 Source: National Bureau of Statistics of China, China Statistical Yearbook, 2005
Marketing SA in China Second Edition 2007                                              8                                  Copyright © 2007 SA Tourism – not to be used without permission
Market Overview
           GDP and Relative Wealth
           China remains a poor country with a relatively low GDP per capita even when compared to
           other developing nations
                                                                                                                           Wealthiest Countries vs. Developing
                                   Composition of the GDP – 2001 vs. 2006                                                            Countries, 2005
                   100%
                                                                                                  Agriculture           Rank             Country                 GDP per capita ($*)
                                                                        12
                                            18                                                                             1      Luxembourg                               69,800
                                                                                                                           2      Norway                                   42,364

                    80%                                                                           Industry                 3      United States                            41,399
                                                                                                  (including               4      Ireland                                  40,610
                                                                                                  construction)
                                                                                                                           5      Iceland                                  35,115
                                                                                                                           6      Denmark                                  34,740
                                                                        48                        Services
                    60%                                                                                                    7      Canada                                   34,273
                                            49                                                                             8      Hong Kong                                33,479
    Percentage                                                                                                             9      Austria                                  33,432
    Contribution
                                                                                                                          10      Switzerland                              32,571
                    40%                                                                                                   38      Czech Republic                           18,341
                                                                                                                          50      Argentina                                14,109
                                                                                                                          55      South Africa                             12,161
                                                                                                                          57      Chile                                    11,937
                    20%                                                 40                                                58      Libya                                    11,523
                                            33                                                                            65      Mexico                                   10,186
                                                                                                                          68      Brazil                                    8,561
                                                                                                                          69      Thailand                                  8,368
                      0%                                                                                                          China (People’s
                                                                                                                          87                                                7,198
                                                                                                                                  Republic)
                                            2001                       2006
                                                                                                                         122      India                                     3,320
 Note: * International dollars
 Source: CIA World Factbook; International Monetary Fund, World Economic Outlook Database, September 2006; www.asiasource.org/profiles
Marketing SA in China Second Edition 2007                                                     9                                              Copyright © 2007 SA Tourism – not to be used without permission
Market Overview
           Relative Market Attractiveness (Wealth)
           The disposable income of the Chinese population is fractionally higher compared to that of
           India, but lower than fellow developing nation, Brazil
                                                         Per Capita Personal Disposable Income per Annum1 (PPP), 2006
              35,000
                                31,817

              30,000
                                            25,718
              25,000                                 22,731 22,633 22,413 22,081
                                                                                                 20,867 20,666
                                                                                                               20,064 19,843
  USD 20,000

              15,000


              10,000


                5,000                                                                                                                          2,962
                                                                                                                                                                1,010             651
                        0

                                                                                                           Italy
                                                                                  Belgium
                                                               Germany




                                                                                                  Sweden




                                                                                                                   Australia




                                                                                                                                                                   China


                                                                                                                                                                                   India
                                                                                                                                                  Brazil
                                   U.S.




                                                      France




                                                                         Canada




                                                                                                                               Japan
                                             UK




 1 Personal Disposable Income is personal income after the deduction of personal direct taxes and fees, and current transfers abroad (such as gifts) – EIU
 Definition
 Source: EIU 2006
Marketing SA in China Second Edition 2007                                                   10                                         Copyright © 2007 SA Tourism – not to be used without permission
Market Overview
             Relative Market Attractiveness (Travel Propensity)
                                                                                                                                     Top 40 Outbound Markets in the World — 2005
             90
                   83
                             66
                                   64




             60
   Million




                                         38
                                                 33




             30
                                                            22
                                                                    22
                                                                             22
                                                                                      21
                                                                                                   19
                                                                                                             18
                                                                                                                       17
                                                                                                                                     16
                                                                                                                                                   16
                                                                                                                                                            14
                                                                                                                                                                     14
                                                                                                                                                                              12
                                                                                                                                                                                            10
                                                                                                                                                                                                        10
                                                                                                                                                                                                                  8
                                                                                                                                                                                                                           8
                                                                                                                                                                                                                                      8
                                                                                                                                                                                                                                               8
                                                                                                                                                                                                                                                         7
                                                                                                                                                                                                                                                                  7
                                                                                                                                                                                                                                                                                7
                                                                                                                                                                                                                                                                                      7
                                                                                                                                                                                                                                                                                                7
                                                                                                                                                                                                                                                                                                          7
                                                                                                                                                                                                                                                                                                                   6
                                                                                                                                                                                                                                                                                                                           6
                                                                                                                                                                                                                                                                                                                                     6
                                                                                                                                                                                                                                                                                                                                              5
                                                                                                                                                                                                                                                                                                                                                        5
                                                                                                                                                                                                                                                                                                                                                               5
                                                                                                                                                                                                                                                                                                                                                                        5
                                                                                                                                                                                                                                                                                                                                                                                    4
                                                                                                                                                                                                                                                                                                                                                                                               4
                                                                                                                                                                                                                                                                                                                                                                                                           4
                                                                                                                                                                                                                                                                                                                                                                                                                   4
              0




                                                                                                                                                            Mexico




                                                                                                                                                                                                                                                                  Egypt
                                   USA




                                                                             Italy




                                                                                                                                                                                                                  Turkey


                                                                                                                                                                                                                                     Hungary




                                                                                                                                                                                                                                                                                                                                     Norway
                                                 Malaysia




                                                                                                                                                                              Switzerland




                                                                                                                                                                                                                                                                                                          Czech
                   Germany
                             UK


                                         China


                                                            Japan




                                                                                      Hong Kong
                                                                                                   Canada
                                                                                                             France


                                                                                                                                     Singapore
                                                                                                                                                  Ukraine


                                                                                                                                                                     Sweden


                                                                                                                                                                                            Rep Korea




                                                                                                                                                                                                                           Taiwan


                                                                                                                                                                                                                                               Austria
                                                                                                                                                                                                                                                         Poland




                                                                                                                                                                                                                                                                                                                   India
                                                                                                                                                                                                                                                                                                                           Finland


                                                                                                                                                                                                                                                                                                                                              Ireland
                                                                                                                                                                                                                                                                                                                                                        Iran
                                                                                                                                                                                                                                                                                                                                                               Spain


                                                                                                                                                                                                                                                                                                                                                                                    Bulgaria
                                                                                                                                                                                                                                                                                                                                                                                               Australia
                                                                                                                                                                                                                                                                                                                                                                                                           Saudi
                                                                                                                                                                                                                                                                                                                                                                                                                   Lithuania
                                                                                                                       Netherlands




                                                                                                                                                                                                        Belgium




                                                                                                                                                                                                                                                                            Belarus
                                                                                                                                                                                                                                                                                      Denmark
                                                                                                                                                                                                                                                                                                Romania




                                                                                                                                                                                                                                                                                                                                                                        Indonesia
                                                                    Russia




                                                                                                                                      Top 20 Long-Haul Outbound Markets — 2005
                  45
                             41




                  36
   Million




                  27
                                         14.8




                  18
                                                            12.4




                   9
                                                                             5.1


                                                                                                  4.7


                                                                                                                      4.3


                                                                                                                                                 3.9


                                                                                                                                                                 3.8


                                                                                                                                                                                       3.4


                                                                                                                                                                                                             3.2


                                                                                                                                                                                                                               3.0


                                                                                                                                                                                                                                                   2.9


                                                                                                                                                                                                                                                                    2.9


                                                                                                                                                                                                                                                                                        2.1


                                                                                                                                                                                                                                                                                                           2.1


                                                                                                                                                                                                                                                                                                                            2.0


                                                                                                                                                                                                                                                                                                                                              1.7


                                                                                                                                                                                                                                                                                                                                                               1.4


                                                                                                                                                                                                                                                                                                                                                                                    1.3


                                                                                                                                                                                                                                                                                                                                                                                                           1.1
                   0




                                                                                                                                                                                                                                                                                                                            Egypt
                             USA




                                                                                                                                                                                                                                                                                                                                                                                                           UAE
                                                                                                                                                                                                                                                                                                           Italy
                                                                                                  Malaysia




                                                                                                                                                                                                                                                                                                                                                               Brazil
                                         UK




                                                                                                                                                                 Germany
                                                            Japan


                                                                             Sweden




                                                                                                                      Canada


                                                                                                                                                 China




                                                                                                                                                                                       Australia


                                                                                                                                                                                                             France


                                                                                                                                                                                                                               Singapore


                                                                                                                                                                                                                                                   India




                                                                                                                                                                                                                                                                                      Korea
                                                                                                                                                                                                                                                                    Indonesia




                                                                                                                                                                                                                                                                                                                                                                                    Israel
                                                                                                                                                                                                                                                                                                                                              Russia
                                                                                                                                                                                                                                                                                       Rep
 Long-Haul
 as a % of
   Total                     64%         22%                56%              36%                  14%                 22%                        10%                 5%               83%                   17%               19%                 47%               60%                 21%                10%             27%                 8%              55%                  34%                    38%
 Outbound

 Note: Long-Haul outbound data was calculated using the proportions estimated from WTO data source and applying it to the Euromonitor data. It is the closest
       approximation as this data is not available. Data for the USA was sourced from U.S. Department of Commerce, ITA, Office of Travel and Tourism
       Industries, September 2006 as 2005 WTO data was incomplete and skewed the results.
 Source: Euromonitor
Marketing SA in China Second Edition 2007                                                                                                                                                                          11                                                                                                        Copyright © 2007 SA Tourism – not to be used without permission
Market Overview
           Overseas Travel
           The Chinese travel market has been growing rapidly and the WTO predicts it will be the
           biggest travel market in the world by 2020
                                                                    Total Outbound Travellers, 1992–2006
                     40
                                     ’92–’06 CAGR:
                                            19.3%                                                                                                           34.5

                                                                                                                                              31.0
                     30                                                                                                         28.5




 Number of                                                                                                             20.2
 Travellers 20
 (Millions)                                                                                                     16.6


                                                                                                         12.1
                                                                                                  10.5
                     10                                                                     9.2
                                                                                8.4

                                                                  5.1     5.3
                                            3.7     3.7     4.5
                                   2.9

                       0
                               1992         1993    1994   1995   1996   1997   1998    1999      2000   2001   2002   2003     2004          2005         2006

 Source: Dr Wang / Xinjun, A Study on the Development of China’s Outbound Tourism Market; International Forum on Chinese Outbound Tourism, 2006;
         Combined SAT Departure Survey Dataset, 2002–2005
Marketing SA in China Second Edition 2007                                              12                                Copyright © 2007 SA Tourism – not to be used without permission
Market Overview
           Vacation Participation
           In 2004, outbound departures represented only two percent of the population of China


                                                               Travel Intensity of the Chinese Population, 2004
                     12%

                                                                                                                            10%
                     10%



                       8%

  Percentage
       of     6%
  Population
  that Travel
                                                                                        4%
                       4%

                                                 2%
                       2%



                       0%
                                            Total Population                   Urban Population          Population of Guangzhou, Shanghai
                                                                                                                     and Beijing


 Source: CLSA Asia-Pacific Markets, Chinese Tourists: Coming, Ready or Not, September 2005
Marketing SA in China Second Edition 2007                                          13                              Copyright © 2007 SA Tourism – not to be used without permission
Agenda

                     Market Overview
                     Travel Patterns
                     Channel
                     Consumers
                        – Our Target Market
                        – Target Segments
                     Current Chinese Travellers to South Africa
                        – Demographics
                        – Travel Behaviour
                     Potential Market and Their Perceptions
                     Activation Strategy
                     Hong Kong




Marketing SA in China Second Edition 2007                     14   Copyright © 2007 SA Tourism – not to be used without permission
Travel Patterns
           Main Destinations
           The market is dominated by travel to Hong Kong and Macao: outbound departures to these
           destinations constitute 71% of all Chinese outbound travel
                        Regional Distribution of Outbound                                                        Top 10 Outbound Destinations,
                                  Travel, 2005                                                                               2005
                                                                SA represented 2% of           Hong Kong                                                   13,525
                 Europe                                          “Other” arrivals and
                                                                  0.5% of non-Hong
                   5%                       Other                                                 Macau                               8,479
                                                                Kong/Macau arrivals
                                             7%
                                                                                                   Japan         1,117


                                                                                                 Vietnam        845

                     Other Asia
                                                                                                   Korea        843
                        17%

                                                                                                  Russia        770

                                                    Hong Kong
                                                                                                 Thailand       596
                                                    and Macau
                                                       71%
                                                                                                    USA         532


                                                                                               Singapore        477
                                                                      WTO estimates
                                                                      WTO estimates
                                                                     100MM outbound
                                                                     100MM outbound
                                                                    Chinese tourists by
                                                                    Chinese tourists by         Malaysia        355
                                                                          2020
                                                                          2020
                                                                                                            0            6,000                12,000                   18,000

                                                                                                                              Number of Travellers
                                                                                                                                 (Thousands)
 Source: Asia Travel Tips.com (www.asiatraveltips.com) “New ETC / UNWTO Study on Chinese Outbound Tourism
         Market to Be Launched at ITB 2007”; U.S. Dept. of Commerce “China Outbound Tourism Industry”
Marketing SA in China Second Edition 2007                                                 15                               Copyright © 2007 SA Tourism – not to be used without permission
Travel Patterns
           Travel Purpose
           The structure of the Chinese outbound market has changed dramatically over the last
           decade: in contrast to the situation in 1993, more than 70% of Chinese outbound tourists
           travelled for private reasons in 2003
                                            Structure of Outbound Passengers, 1993 and 2003
                            100%



                              80%              40                                                                  Travel for
                                                                                                                   private reasons

                                                                                     73
                              60%
       Percent
      Travellers
                              40%

                                               60                                                                  Travel for non-
                                                                                                                   private reasons
                              20%
                                                                                     27


                                0%
                                              1993                                  2003



 Source: Xu Fan, Marketing on China Outbound Tourism
Marketing SA in China Second Edition 2007                           16                        Copyright © 2007 SA Tourism – not to be used without permission
Travel Patterns
                Importance to South Africa
                 Chinese arrivals to South Africa are comparable to arrivals from Canada and India

                                                               Total Volume by Market (excluding Africa), 2002 and 2006
                                 600
                                                                                                                                                                             2002
                                             488
                                 500                                                                                                                                         2006
                                       443
         Thousands of Arrivals




                                 400


                                 300
                                                   249 259          255


                                 200                          183

                                                                                 125
                                                                          110            112 106
                                                                                                                89
                                 100                                                                     70
                                                                                                                      48 54         49
                                                                                                                               34        34 44           37 42              26 32

                                   0
                                                                           Netherlands




                                                                                                                                                        Hong Kong)
                                                                                                                       Italy
                                                    Germany




                                                                                                          Australia




                                                                                                                                          India
                                                                                           France




                                                                                                                                Canada




                                                                                                                                                                              Japan
                                        UK




                                                               USA




                                                                                                                                                        China (inlc
         ‘02–‘06
                                       2.46%       0.94%      8.68%       3.09%          -1.36%      6.37%            2.93%    9.74%     6.81%         3.23%              5.08%
         CAGR

 Source: SAT
Marketing SA in China Second Edition 2007                                                           17                                     Copyright © 2007 SA Tourism – not to be used without permission
Travel Patterns
           Importance to South Africa
           Although Chinese arrivals to South Africa are higher than arrivals from Canada and India,
           the economic impact of Chinese travellers is currently smaller

                                                          Importance to South Africa, 2005

                                            Seasonality                                 Spend Per Trip
                      Market                                  Distribution2                                          Arrivals                    Value (Rand)3
                                              Index1                                     in SA (Rand)3

            UK                                  8%                  1.90                     9,832                    469,730                    4,534,943,950
            Germany                            15%                  2.25                     11,142                   249,504                    2,762,411,837
            USA                                 3%                  1.90                     10,348                   233,418                    2,409,343,703
            Netherlands                        21%                  2.50                     10,679                   116,244                    1,212,223,110
            France                             10%                  2.50                     7,179                    101,139                      720,711,128
            Italy                              43%                  2.33                     7,228                    51,464                       347,925,645
            China                              10%                  1.89                     8,705                    44,352                       389,525,834
            Canada                              6%                  2.13                     10,624                   40,818                       425,044,535
            India                               5%                  1.70                     13,058                   36,045                       393,259,799


 1 Anindex value of 0% represents perfect seasonality, i.e. the market is not characterised by large fluctuations from month to month. A value of 100% means that
 seasonality is very poor, i.e. the market is characterised by large fluctuations month by month; 2 Average number of provinces visited by all foreign tourists; 3Total
 Foreign Direct Spend (excl capex)
 Source: Combined SAT Departure Survey Dataset, 2005
Marketing SA in China Second Edition 2007                                          18                                        Copyright © 2007 SA Tourism – not to be used without permission
Travel Patterns
           Travel to South Africa
           Chinese arrivals to South Africa grew at an annual average rate of 3% between 2002 and
           2006
                                                              Chinese Inbound Tourists to SA, 2000–2006
                            60,000
                                                                   ’02–’06 CAGR:
                                                                       3.2%                   51,265
                            50,000
                                                                                                             44,352
                                                                                   42,991                                          41,962
                            40,000
                                                                   37,129


     Number of
                                            30,595   29,804
     Travellers
                            30,000



                            20,000



                            10,000



                                       0
                                            2000     2001          2002            2003       2004            2005                   2006

 Source: Dr Wang / Xinjun, A Study on the Development of China’s Outbound Tourism Market; International Forum on Chinese Outbound Tourism, 2006;
         Combined SAT Departure Survey Dataset, 2002–2005; SAT Arrivals, 2006
Marketing SA in China Second Edition 2007                                     19                                  Copyright © 2007 SA Tourism – not to be used without permission
Travel Patterns
           Travel to South Africa
           Despite arrivals showing positive growth over the period 2002-2005, spend has decreased
           considerably

                              Arrivals from China to South Africa, 2002–05                                          Spend Per Trip from China to SA, 2002–05
                 60,000                                                                                    20,000
                                                          51,265               (’02–’05)                                                                                           (’02–’05)
                                                                    44,352       CAGR                                                                                                CAGR
                                               42,991                                                                14,019
                                                                                                           15,000
                 40,000           37,129                                                        Spend                           11,872
                                                                                6.1%                                                                                                -14.7%
   Arrivals                                                                                     per trip
    to SA                                                                                        to SA 10,000                                  9,458
                                                                                                                                                                  8,705
                                                                                                (Rand)
                 20,000
                                                                                                            5,000


                          0                                                                                    0
                                    2002        2003      2004          2005                                          2002       2003           2004              2005


                                        Length of Stay in SA, 2002–05                                                     Spend per Day in SA, 2002–05
                   25                                                                                       1,500                                                                  (’02–’05)
                                               21.3       21.7
                                                                               (’02–’05)                              1,236                                                          CAGR
                   20                                                            CAGR
                                                                        16.0
                                                                                                            1,000                                                                   -24.6%
                   15           12.4                                            9.1%             Spend
       No. of                                                                                    per day
       nights 10                                                                                  in SA                           551                                530
                                                                                                                                                  451
                                                                                                 (Rand)      500
                     5

                     0                                                                                         0
                                2002          2003        2004          2005                                          2002       2003            2004               2005


 Source: Combined SAT Departure Survey Dataset, 2002–2005
Marketing SA in China Second Edition 2007                                                  20                                       Copyright © 2007 SA Tourism – not to be used without permission
Travel Patterns
           Growth in Arrivals
           South Africa is not yet fully capitalising on the Chinese outbound tourism boom
                                                Chinese Travellers: Total Outbound vs. Inbound to South Africa, 2002–2006
                                 100,000                                                                                                   40,000,000
                                                       China Inbound to SA
                                                                                                                  34,500,000
                                                       China Outbound
                                                                                                                                           35,000,000
                                                                                                 31,000,000
                                   80,000
                                                                                28,500,000                                                 30,000,000


                                                                                                                                           25,000,000
                                   60,000
                                                              20,200,000            51,265
        Travellers                                                                                    44,352                               20,000,000
                                                 16,602,300        42,991                                           41,962
                                   40,000          37,129
                                                                                                                                           15,000,000


                                                                                                                                           10,000,000
                                   20,000
                                                                                                                                           5,000,000


                                            0                                                                                              0
                                                    2002            2003             2004              2005          2006
                                                                                 Inbound to SA   Total Outbound
                                                                 ’02–’06 CAGR
                                                                                     3.2%            20.1%

 Source: Combined SAT Departure Survey Dataset, 2002–2005; Dr Wang / Xinjun, A Study on the Development of China’s Outbound Tourism Market;
         International Forum on Chinese Outbound Tourism, 2006; SAT Arrivals, 2006
Marketing SA in China Second Edition 2007                                            21                              Copyright © 2007 SA Tourism – not to be used without permission
Agenda

                     Market Overview
                     Travel Patterns
                     Channel
                     Consumers
                        – Our Target Market
                        – Target Segments
                     Current Chinese Travellers to South Africa
                        – Demographics
                        – Travel Behaviour
                     Potential Market and Their Perceptions
                     Activation Strategy
                     Hong Kong




Marketing SA in China Second Edition 2007                     22   Copyright © 2007 SA Tourism – not to be used without permission
Channel
           Strategic Position of South Africa in the China Travel Market


                      Low market
                      penetration

                       Increasing                         high
                     growth rates

               High price levels
                                                                                                                                        South Africa is a low
                                                      Low
                      Low market                                                                                                        scale product within a
                                               maturity of
                    transparency                                                                                                        market which has not yet
                                            Chinese travel
                                                                                                                                        developed sophisticated
                 Low consumer                     market
                                                                                                                                        demand or supply
                  sophistication                                   SA as a tourist
                                                                                                                                        structures
                and experience                                       product in
                                                                       China
            Low tendency of
        channel to specialize                                low

        Profitability driven by                                     low                                 high
               market access
                                                                                 Low maturity of
                                                                                    Product


                                                        Low           Low              High            Low           Low
                                                      number of     variety of     relative price frequency of   knowledge of
                                                     pax (market    packages                       tour groups   sales staff re
                                                       share)                                                      product




Marketing SA in China Second Edition 2007                                               23                                        Copyright © 2007 SA Tourism – not to be used without permission
Channel
           Strategic Position of South Africa in the China Travel Market
           South Africa as a travel product in China remains in its emerging phase
                                                               Tourism Product and Market Life Cycles
                                                              in Group Package Tour Prevalent Markets

                                              Mature

                                                                                                                                        Invention /
                                Scale
                                                                                                                                        Reinvention
                               Strategy
                                                                                         SA Product                                      Strategy
                                                                SA Product                in Hong
                                                                 in Japan                  Kong




                                             Market
                                            Evolution



                                                          SA Product in
                                                             China
          Concentration
            Strategy

                                             Emerging

                                                        New                                           Established
                                                                          Product Evolution

Marketing SA in China Second Edition 2007                                    24                              Copyright © 2007 SA Tourism – not to be used without permission
Channel
            Market Characteristics
            Fast changing market conditions drive marketing uncertainties
                         Current Structural Characteristics of
                         Current Structural Characteristics of                  Emerging and Fast Changing Market
                                                                                Emerging and Fast Changing Market
                                     the Market
                                      the Market
                          Leisure travel is concentrated in 3 golden             Highly fragmented market with large number
          Consumers




                          Leisure travel is concentrated in 3 golden             Highly fragmented market with large number
                          weeks
                          weeks                                                  of players at city level
                                                                                 of players at city level

                          Group tour is the dominant form of leisure
                           Group tour is the dominant form of leisure            No true national players, largest travel
                                                                                 No true national players, largest travel
                          travel
                           travel                                                agencies have regional influences
                                                                                 agencies have regional influences

                          Organization sponsored leisure travel is
                          Organization sponsored leisure travel is               Little differentiation, all players are very
                                                                                 Little differentiation, all players are very
                          significant
                          significant                                            similar in structure and selling commodity
                                                                                 similar in structure and selling commodity
                                                                                 products
                                                                                 products
                          ADS positively influences choices of outbound
                           ADS positively influences choices of outbound
                          travel destinations
                           travel destinations                                   No universally well recognized brand in the
                                                                                 No universally well recognized brand in the
                                                                                 market
                                                                                 market
                          There are 3 distinct regional markets
                          There are 3 distinct regional markets
                                                                                 Intense competition due to large number of
                                                                                  Intense competition due to large number of
                          Integrated travel agencies dominate the self-
                           Integrated travel agencies dominate the self-         players and little differentiation
                                                                                  players and little differentiation
                          funded leisure travel market
                           funded leisure travel market
          Channels




                                                                                 Particularly for smaller volume destinations,
                                                                                 Particularly for smaller volume destinations,
                          Foreign companies participate mostly
                           Foreign companies participate mostly                  group failure is prevalent so scale is key
                                                                                 group failure is prevalent so scale is key
                          through HK
                           through HK




                            Consumer Insights and Activation Strategies should be recalibrated earlier than in other
                            Consumer Insights and Activation Strategies should be recalibrated earlier than in other
                                                                  markets
                                                                   markets
 Source: Development of Chinese Travel Agencies; Monitor Analysis
Marketing SA in China Second Edition 2007                                  25                        Copyright © 2007 SA Tourism – not to be used without permission
Channel
           Policy Environment
           China’s tourism market has historically been shaped by government policy
         1950                               1960      1970                   1980                   1990                        2000                          2006


                                                                                                  1990s
                                                                                                     Chinese economy
                                                                                                     becomes highly
                                                                                                     regionalized
                                                                                                     Beijing, Shanghai
                                                                                                     and Guangzhou
                                                                                                     become 3 key                 2003
                                                                                                     economic centres
                                                                                                                                     SA is granted
                                1957                         1980                                                                    ADS
                                   CTS established              CYTS established             1987
                                   to service                   as an all purpose               CITS, CTS, CYTS
                                   overseas Chinese             travel agency                   formally break apart
                                   travel in China                                              More independent                            2006
                                                                                                travel agencies
                                                                    1983                                                                       Now 81 ADS
         1954                                                                                   established
                                                                                                                                               countries /
            CITS established                                           HK was first             Number of travel                               regions; the USA
            for inbound travel                                         approved ADS             agencies growing                               is not on this list
            only                                                       destination              rapidly

                                                                                                              1999
   1949                                                                               1980s
                                                                                                                 First year of golden
      Communist party                                                                    China broke away        week policy
      established People’s                                                               from centralized
      Republic China                                                                                             Aimed to boost
                                                                                         economy                                                           Social and
                                                                                                                 domestic
      Foreign participation                                                              Organizational                                                    economic change
                                                                                                                 consumption
      generally barred in                                                                outbound travel
      Chinese economy                                                                                            Might be replaced by                      Travel industry
                                                                                         becomes
                                                                                                                 paid vacation                             change
                                                                                         pervasive

 Source: Development of Chinese Travel Agencies; Monitor Analysis; CLSA Asia-Pacific Markets, Chinese Tourists: Coming, Ready or Not, September 2005
Marketing SA in China Second Edition 2007                                      26                                      Copyright © 2007 SA Tourism – not to be used without permission
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China tourismresearch

  • 1. Marketing SA in China Second Edition 2007 1 Copyright © 2007 SA Tourism – not to be used without permission
  • 2. SA Tourism is the Tourism Marketing Organisation of South Africa South African Tourism is the official tourism marketing organisation of South Africa. South African Tourism is the official tourism marketing organisation of South Africa. We market across the world focusing on three groups of travellers: international We market across the world focusing on three groups of travellers: international leisure travellers, the domestic and regional traveller, and business tourists who leisure travellers, the domestic and regional traveller, and business tourists who travel to South Africa for conferences and incentives. A key part of our business is to: travel to South Africa for conferences and incentives. A key part of our business is to: Understand the Understand the Choose the Choose the Market the Market the market market attractive segments attractive segments destination destination This booklet is the result of research South African Tourism did in China since 2004 This booklet is the result of research South African Tourism did in China since 2004 and is to help market South Africa in China. The aim of the project was to understand and is to help market South Africa in China. The aim of the project was to understand the whole of the Chinese market and not the section we are currently seeing. We also the whole of the Chinese market and not the section we are currently seeing. We also did qualitative research in Hong Kong to understand its market and the links in the did qualitative research in Hong Kong to understand its market and the links in the trade channel. Against this research, the Asia Portfolio and our country office in trade channel. Against this research, the Asia Portfolio and our country office in China have developed activation plans for the market. These plans are available from China have developed activation plans for the market. These plans are available from our office in Beijing (see address on the back cover). our office in Beijing (see address on the back cover). Current information on arrivals from China to South Africa are available on our Current information on arrivals from China to South Africa are available on our website www.southafrica.net/research and www.southafrica.net/trade website www.southafrica.net/research and www.southafrica.net/trade Marketing SA in China Second Edition 2007 2 Copyright © 2007 SA Tourism – not to be used without permission
  • 3. Agenda Market Overview Travel Patterns Channel Consumers – Our Target Market – Target Segments Current Chinese Travellers to South Africa – Demographics – Travel Behaviour Potential Market and Their Perceptions Activation Strategy Hong Kong Marketing SA in China Second Edition 2007 3 Copyright © 2007 SA Tourism – not to be used without permission
  • 4. Market Overview Maturity of the Market China, as an emerging travel market, is entering the growth phase introduction growth maturity Tourism Industry Life % of Cycle population Italy Germany, Netherlands, travelling for Canada US France, UK, Japan leisure Australia South Africa China, India SADC Nigeria Kenya Botswana This phase may be very long Time* Uninformed, Price insensitive, Seek information & opportunity; Very informed, price sensitive, Consumer multi-purpose discover leisure focus on leisure Very individualized Emergence of packages Product Specialized packages Status oriented (seeking scale effects) Market Symptoms few High competition Competitor Emerging specialization / focus One-stop-shops Clear focus Unsophisticated, isolated, Integrate products; Specialization; Information Channel experience based information/choice provider provider “shout”: get as many as you Adapt trade and market to Tourism Marketing Combine with trade initiatives can select segments Authority Actions Facilitate scale effects (e.g., Understand segments and Overall strategy Develop positioning packages) select * The duration of the four phases of the life cycle may vary significantly; their graphical representation with equal distances may thus be misleading Note: Framework based on Michael Porter: Competitive Strategy, 1980, Chapter 8 (Industry Evolution) Marketing SA in China Second Edition 2007 4 Copyright © 2007 SA Tourism – not to be used without permission
  • 5. Market Overview General Statistics China accounts for 20% of the world's population Facts about China Facts about China Geographic Characteristics Geographic Characteristics Beijing Heilongjiang Eastern Asia, bordering the East China Eastern Asia, bordering the East China Sea, Korea Bay, Yellow Sea, and South Sea, Korea Bay, Yellow Sea, and South Jilin China Sea, between North Korea and China Sea, between North Korea and Xinjiang Liaoning Vietnam Vietnam Gansu Inner Mongolia 9,596,960 Square Kilometers (slightly 9,596,960 Square Kilometers (slightly Hebei Tianjing smaller than the US) smaller than the US) Ningxia Shanxi Qinghai Shandong Population Population Tibet Shaanxi Henan Jiangsu 1,313,973,713 (July 2006 est.) 1,313,973,713 (July 2006 est.) Sichuan Hubei Anhui Shanghai Chongqing Jiangxi Zhejiang Annual population growth (2006): 0.59% Annual population growth (2006): 0.59% Hunan Guizhou Fujian Gross Domestic Product Gross Domestic Product Yunnan Guangxi Guangdong $10 Trillion (2006 est.) $10 Trillion (2006 est.) GDP per capita $7,198* GDP per capita $7,198* Hainan Annual GDP growth 10.5% (2006 est.) Annual GDP growth 10.5% (2006 est.) Note: * International dollars Source: CIA Fact Book, China, 2007; International Monetary Fund, World Economic Outlook Database, September 2006; Time Magazine, 11 January 2007 Marketing SA in China Second Edition 2007 5 Copyright © 2007 SA Tourism – not to be used without permission
  • 6. Market Overview Age Characteristics A fertility decline since the mid-1970s and the further increase in life expectancy gives rise to an ageing Chinese population Chinese Population by Age Group – Male and Female Source: www.iiasa.ac.at/Research/LUC/ChinaFood/data/anim/pop_ani.htm; United Nations (1999): World Population Prospects, The 1998 Revision, New York Marketing SA in China Second Edition 2007 6 Copyright © 2007 SA Tourism – not to be used without permission
  • 7. Market Overview Regional Characteristics – Population and Income Close to a third of the country’s population can be found in four provinces (Henan, Sichuan, Shandong, Guandong) while wealth is concentrated in the coastal regions Heilongjiang Pop: 38.2MM Annual Urban Disposable Income Tier 1: < 10,000 RMB Tianjin Jilin Inner Mongolia Pop: 27.1MM Tier 2: > 10,000 RMB Pop: Pop: 23.8MM 10.2MM Liaoning Pop: Xinjiang 42.2MM Pop: 19.6MM Beijing Hebei Pop: 14.9MM Pop: 68.1MM Shanxi Ningxia Pop: Shandong Pop: 5.9MM 33.4MM Pop: 91.8MM Qinghai Pop: 5.4MM Gansu Henan Pop: 26.2MM Shaanxi Jiangsu Pop: Pop: Pop: 74.3MM 97.2MM Anhui 37.1MM Pop: Xizang/Tibet Hubei 64.6MM Shanghai Pop: 2.7MM Chongqing Pop: 60.2MM Pop: Sichuan Pop: Pop: 17.4MM 31.2MM 87.3MM Jiangxi Hunan Pop: Zhejiang Pop: Pop: 67MM 42.8MM 47.2MM Guizhou Pop: 39MM Fujian Yunnan Pop: 35.1MM Pop: Guangxi Source: National Bureau of Statistics of China, China 44.2MM Pop: Statistical Yearbook, 2005; CLSA Asia-Pacific 48.9MM Guangdong Pop: 83MM Markets, Chinese Tourists: Coming, Ready or Not Special Report, September 2005; Tourism Australia, China Country Overview 2006; Dr Wang Guangzhou Hainan Xinjun, The Current Situation and the Pop: Characteristics of China’s Outbound Market 8.2MM Marketing SA in China Second Edition 2007 7 Copyright © 2007 SA Tourism – not to be used without permission
  • 8. Market Overview Regional Characteristics – Income Shanghai and Beijing residents enjoy the highest standard of living in China Per Capita Annual Disposable Income of Urban Households, 2004 18,000 16,683 15,638 15,000 14,546 13,628 12,000 11,467 11,175 10,482 9,438 9,221 9,106 RMB 9,000 8,008 6,000 3,000 0 Shanghai Zhejiang Tianjin Jiangsu Chongqing Liaoning Beijing Guangdong Fujian Shangdong Tibet Source: National Bureau of Statistics of China, China Statistical Yearbook, 2005 Marketing SA in China Second Edition 2007 8 Copyright © 2007 SA Tourism – not to be used without permission
  • 9. Market Overview GDP and Relative Wealth China remains a poor country with a relatively low GDP per capita even when compared to other developing nations Wealthiest Countries vs. Developing Composition of the GDP – 2001 vs. 2006 Countries, 2005 100% Agriculture Rank Country GDP per capita ($*) 12 18 1 Luxembourg 69,800 2 Norway 42,364 80% Industry 3 United States 41,399 (including 4 Ireland 40,610 construction) 5 Iceland 35,115 6 Denmark 34,740 48 Services 60% 7 Canada 34,273 49 8 Hong Kong 33,479 Percentage 9 Austria 33,432 Contribution 10 Switzerland 32,571 40% 38 Czech Republic 18,341 50 Argentina 14,109 55 South Africa 12,161 57 Chile 11,937 20% 40 58 Libya 11,523 33 65 Mexico 10,186 68 Brazil 8,561 69 Thailand 8,368 0% China (People’s 87 7,198 Republic) 2001 2006 122 India 3,320 Note: * International dollars Source: CIA World Factbook; International Monetary Fund, World Economic Outlook Database, September 2006; www.asiasource.org/profiles Marketing SA in China Second Edition 2007 9 Copyright © 2007 SA Tourism – not to be used without permission
  • 10. Market Overview Relative Market Attractiveness (Wealth) The disposable income of the Chinese population is fractionally higher compared to that of India, but lower than fellow developing nation, Brazil Per Capita Personal Disposable Income per Annum1 (PPP), 2006 35,000 31,817 30,000 25,718 25,000 22,731 22,633 22,413 22,081 20,867 20,666 20,064 19,843 USD 20,000 15,000 10,000 5,000 2,962 1,010 651 0 Italy Belgium Germany Sweden Australia China India Brazil U.S. France Canada Japan UK 1 Personal Disposable Income is personal income after the deduction of personal direct taxes and fees, and current transfers abroad (such as gifts) – EIU Definition Source: EIU 2006 Marketing SA in China Second Edition 2007 10 Copyright © 2007 SA Tourism – not to be used without permission
  • 11. Market Overview Relative Market Attractiveness (Travel Propensity) Top 40 Outbound Markets in the World — 2005 90 83 66 64 60 Million 38 33 30 22 22 22 21 19 18 17 16 16 14 14 12 10 10 8 8 8 8 7 7 7 7 7 7 6 6 6 5 5 5 5 4 4 4 4 0 Mexico Egypt USA Italy Turkey Hungary Norway Malaysia Switzerland Czech Germany UK China Japan Hong Kong Canada France Singapore Ukraine Sweden Rep Korea Taiwan Austria Poland India Finland Ireland Iran Spain Bulgaria Australia Saudi Lithuania Netherlands Belgium Belarus Denmark Romania Indonesia Russia Top 20 Long-Haul Outbound Markets — 2005 45 41 36 Million 27 14.8 18 12.4 9 5.1 4.7 4.3 3.9 3.8 3.4 3.2 3.0 2.9 2.9 2.1 2.1 2.0 1.7 1.4 1.3 1.1 0 Egypt USA UAE Italy Malaysia Brazil UK Germany Japan Sweden Canada China Australia France Singapore India Korea Indonesia Israel Russia Rep Long-Haul as a % of Total 64% 22% 56% 36% 14% 22% 10% 5% 83% 17% 19% 47% 60% 21% 10% 27% 8% 55% 34% 38% Outbound Note: Long-Haul outbound data was calculated using the proportions estimated from WTO data source and applying it to the Euromonitor data. It is the closest approximation as this data is not available. Data for the USA was sourced from U.S. Department of Commerce, ITA, Office of Travel and Tourism Industries, September 2006 as 2005 WTO data was incomplete and skewed the results. Source: Euromonitor Marketing SA in China Second Edition 2007 11 Copyright © 2007 SA Tourism – not to be used without permission
  • 12. Market Overview Overseas Travel The Chinese travel market has been growing rapidly and the WTO predicts it will be the biggest travel market in the world by 2020 Total Outbound Travellers, 1992–2006 40 ’92–’06 CAGR: 19.3% 34.5 31.0 30 28.5 Number of 20.2 Travellers 20 (Millions) 16.6 12.1 10.5 10 9.2 8.4 5.1 5.3 3.7 3.7 4.5 2.9 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: Dr Wang / Xinjun, A Study on the Development of China’s Outbound Tourism Market; International Forum on Chinese Outbound Tourism, 2006; Combined SAT Departure Survey Dataset, 2002–2005 Marketing SA in China Second Edition 2007 12 Copyright © 2007 SA Tourism – not to be used without permission
  • 13. Market Overview Vacation Participation In 2004, outbound departures represented only two percent of the population of China Travel Intensity of the Chinese Population, 2004 12% 10% 10% 8% Percentage of 6% Population that Travel 4% 4% 2% 2% 0% Total Population Urban Population Population of Guangzhou, Shanghai and Beijing Source: CLSA Asia-Pacific Markets, Chinese Tourists: Coming, Ready or Not, September 2005 Marketing SA in China Second Edition 2007 13 Copyright © 2007 SA Tourism – not to be used without permission
  • 14. Agenda Market Overview Travel Patterns Channel Consumers – Our Target Market – Target Segments Current Chinese Travellers to South Africa – Demographics – Travel Behaviour Potential Market and Their Perceptions Activation Strategy Hong Kong Marketing SA in China Second Edition 2007 14 Copyright © 2007 SA Tourism – not to be used without permission
  • 15. Travel Patterns Main Destinations The market is dominated by travel to Hong Kong and Macao: outbound departures to these destinations constitute 71% of all Chinese outbound travel Regional Distribution of Outbound Top 10 Outbound Destinations, Travel, 2005 2005 SA represented 2% of Hong Kong 13,525 Europe “Other” arrivals and 0.5% of non-Hong 5% Other Macau 8,479 Kong/Macau arrivals 7% Japan 1,117 Vietnam 845 Other Asia Korea 843 17% Russia 770 Hong Kong Thailand 596 and Macau 71% USA 532 Singapore 477 WTO estimates WTO estimates 100MM outbound 100MM outbound Chinese tourists by Chinese tourists by Malaysia 355 2020 2020 0 6,000 12,000 18,000 Number of Travellers (Thousands) Source: Asia Travel Tips.com (www.asiatraveltips.com) “New ETC / UNWTO Study on Chinese Outbound Tourism Market to Be Launched at ITB 2007”; U.S. Dept. of Commerce “China Outbound Tourism Industry” Marketing SA in China Second Edition 2007 15 Copyright © 2007 SA Tourism – not to be used without permission
  • 16. Travel Patterns Travel Purpose The structure of the Chinese outbound market has changed dramatically over the last decade: in contrast to the situation in 1993, more than 70% of Chinese outbound tourists travelled for private reasons in 2003 Structure of Outbound Passengers, 1993 and 2003 100% 80% 40 Travel for private reasons 73 60% Percent Travellers 40% 60 Travel for non- private reasons 20% 27 0% 1993 2003 Source: Xu Fan, Marketing on China Outbound Tourism Marketing SA in China Second Edition 2007 16 Copyright © 2007 SA Tourism – not to be used without permission
  • 17. Travel Patterns Importance to South Africa Chinese arrivals to South Africa are comparable to arrivals from Canada and India Total Volume by Market (excluding Africa), 2002 and 2006 600 2002 488 500 2006 443 Thousands of Arrivals 400 300 249 259 255 200 183 125 110 112 106 89 100 70 48 54 49 34 34 44 37 42 26 32 0 Netherlands Hong Kong) Italy Germany Australia India France Canada Japan UK USA China (inlc ‘02–‘06 2.46% 0.94% 8.68% 3.09% -1.36% 6.37% 2.93% 9.74% 6.81% 3.23% 5.08% CAGR Source: SAT Marketing SA in China Second Edition 2007 17 Copyright © 2007 SA Tourism – not to be used without permission
  • 18. Travel Patterns Importance to South Africa Although Chinese arrivals to South Africa are higher than arrivals from Canada and India, the economic impact of Chinese travellers is currently smaller Importance to South Africa, 2005 Seasonality Spend Per Trip Market Distribution2 Arrivals Value (Rand)3 Index1 in SA (Rand)3 UK 8% 1.90 9,832 469,730 4,534,943,950 Germany 15% 2.25 11,142 249,504 2,762,411,837 USA 3% 1.90 10,348 233,418 2,409,343,703 Netherlands 21% 2.50 10,679 116,244 1,212,223,110 France 10% 2.50 7,179 101,139 720,711,128 Italy 43% 2.33 7,228 51,464 347,925,645 China 10% 1.89 8,705 44,352 389,525,834 Canada 6% 2.13 10,624 40,818 425,044,535 India 5% 1.70 13,058 36,045 393,259,799 1 Anindex value of 0% represents perfect seasonality, i.e. the market is not characterised by large fluctuations from month to month. A value of 100% means that seasonality is very poor, i.e. the market is characterised by large fluctuations month by month; 2 Average number of provinces visited by all foreign tourists; 3Total Foreign Direct Spend (excl capex) Source: Combined SAT Departure Survey Dataset, 2005 Marketing SA in China Second Edition 2007 18 Copyright © 2007 SA Tourism – not to be used without permission
  • 19. Travel Patterns Travel to South Africa Chinese arrivals to South Africa grew at an annual average rate of 3% between 2002 and 2006 Chinese Inbound Tourists to SA, 2000–2006 60,000 ’02–’06 CAGR: 3.2% 51,265 50,000 44,352 42,991 41,962 40,000 37,129 Number of 30,595 29,804 Travellers 30,000 20,000 10,000 0 2000 2001 2002 2003 2004 2005 2006 Source: Dr Wang / Xinjun, A Study on the Development of China’s Outbound Tourism Market; International Forum on Chinese Outbound Tourism, 2006; Combined SAT Departure Survey Dataset, 2002–2005; SAT Arrivals, 2006 Marketing SA in China Second Edition 2007 19 Copyright © 2007 SA Tourism – not to be used without permission
  • 20. Travel Patterns Travel to South Africa Despite arrivals showing positive growth over the period 2002-2005, spend has decreased considerably Arrivals from China to South Africa, 2002–05 Spend Per Trip from China to SA, 2002–05 60,000 20,000 51,265 (’02–’05) (’02–’05) 44,352 CAGR CAGR 42,991 14,019 15,000 40,000 37,129 Spend 11,872 6.1% -14.7% Arrivals per trip to SA to SA 10,000 9,458 8,705 (Rand) 20,000 5,000 0 0 2002 2003 2004 2005 2002 2003 2004 2005 Length of Stay in SA, 2002–05 Spend per Day in SA, 2002–05 25 1,500 (’02–’05) 21.3 21.7 (’02–’05) 1,236 CAGR 20 CAGR 16.0 1,000 -24.6% 15 12.4 9.1% Spend No. of per day nights 10 in SA 551 530 451 (Rand) 500 5 0 0 2002 2003 2004 2005 2002 2003 2004 2005 Source: Combined SAT Departure Survey Dataset, 2002–2005 Marketing SA in China Second Edition 2007 20 Copyright © 2007 SA Tourism – not to be used without permission
  • 21. Travel Patterns Growth in Arrivals South Africa is not yet fully capitalising on the Chinese outbound tourism boom Chinese Travellers: Total Outbound vs. Inbound to South Africa, 2002–2006 100,000 40,000,000 China Inbound to SA 34,500,000 China Outbound 35,000,000 31,000,000 80,000 28,500,000 30,000,000 25,000,000 60,000 20,200,000 51,265 Travellers 44,352 20,000,000 16,602,300 42,991 41,962 40,000 37,129 15,000,000 10,000,000 20,000 5,000,000 0 0 2002 2003 2004 2005 2006 Inbound to SA Total Outbound ’02–’06 CAGR 3.2% 20.1% Source: Combined SAT Departure Survey Dataset, 2002–2005; Dr Wang / Xinjun, A Study on the Development of China’s Outbound Tourism Market; International Forum on Chinese Outbound Tourism, 2006; SAT Arrivals, 2006 Marketing SA in China Second Edition 2007 21 Copyright © 2007 SA Tourism – not to be used without permission
  • 22. Agenda Market Overview Travel Patterns Channel Consumers – Our Target Market – Target Segments Current Chinese Travellers to South Africa – Demographics – Travel Behaviour Potential Market and Their Perceptions Activation Strategy Hong Kong Marketing SA in China Second Edition 2007 22 Copyright © 2007 SA Tourism – not to be used without permission
  • 23. Channel Strategic Position of South Africa in the China Travel Market Low market penetration Increasing high growth rates High price levels South Africa is a low Low Low market scale product within a maturity of transparency market which has not yet Chinese travel developed sophisticated Low consumer market demand or supply sophistication SA as a tourist structures and experience product in China Low tendency of channel to specialize low Profitability driven by low high market access Low maturity of Product Low Low High Low Low number of variety of relative price frequency of knowledge of pax (market packages tour groups sales staff re share) product Marketing SA in China Second Edition 2007 23 Copyright © 2007 SA Tourism – not to be used without permission
  • 24. Channel Strategic Position of South Africa in the China Travel Market South Africa as a travel product in China remains in its emerging phase Tourism Product and Market Life Cycles in Group Package Tour Prevalent Markets Mature Invention / Scale Reinvention Strategy SA Product Strategy SA Product in Hong in Japan Kong Market Evolution SA Product in China Concentration Strategy Emerging New Established Product Evolution Marketing SA in China Second Edition 2007 24 Copyright © 2007 SA Tourism – not to be used without permission
  • 25. Channel Market Characteristics Fast changing market conditions drive marketing uncertainties Current Structural Characteristics of Current Structural Characteristics of Emerging and Fast Changing Market Emerging and Fast Changing Market the Market the Market Leisure travel is concentrated in 3 golden Highly fragmented market with large number Consumers Leisure travel is concentrated in 3 golden Highly fragmented market with large number weeks weeks of players at city level of players at city level Group tour is the dominant form of leisure Group tour is the dominant form of leisure No true national players, largest travel No true national players, largest travel travel travel agencies have regional influences agencies have regional influences Organization sponsored leisure travel is Organization sponsored leisure travel is Little differentiation, all players are very Little differentiation, all players are very significant significant similar in structure and selling commodity similar in structure and selling commodity products products ADS positively influences choices of outbound ADS positively influences choices of outbound travel destinations travel destinations No universally well recognized brand in the No universally well recognized brand in the market market There are 3 distinct regional markets There are 3 distinct regional markets Intense competition due to large number of Intense competition due to large number of Integrated travel agencies dominate the self- Integrated travel agencies dominate the self- players and little differentiation players and little differentiation funded leisure travel market funded leisure travel market Channels Particularly for smaller volume destinations, Particularly for smaller volume destinations, Foreign companies participate mostly Foreign companies participate mostly group failure is prevalent so scale is key group failure is prevalent so scale is key through HK through HK Consumer Insights and Activation Strategies should be recalibrated earlier than in other Consumer Insights and Activation Strategies should be recalibrated earlier than in other markets markets Source: Development of Chinese Travel Agencies; Monitor Analysis Marketing SA in China Second Edition 2007 25 Copyright © 2007 SA Tourism – not to be used without permission
  • 26. Channel Policy Environment China’s tourism market has historically been shaped by government policy 1950 1960 1970 1980 1990 2000 2006 1990s Chinese economy becomes highly regionalized Beijing, Shanghai and Guangzhou become 3 key 2003 economic centres SA is granted 1957 1980 ADS CTS established CYTS established 1987 to service as an all purpose CITS, CTS, CYTS overseas Chinese travel agency formally break apart travel in China More independent 2006 travel agencies 1983 Now 81 ADS 1954 established countries / CITS established HK was first Number of travel regions; the USA for inbound travel approved ADS agencies growing is not on this list only destination rapidly 1999 1949 1980s First year of golden Communist party China broke away week policy established People’s from centralized Republic China Aimed to boost economy Social and domestic Foreign participation Organizational economic change consumption generally barred in outbound travel Chinese economy Might be replaced by Travel industry becomes paid vacation change pervasive Source: Development of Chinese Travel Agencies; Monitor Analysis; CLSA Asia-Pacific Markets, Chinese Tourists: Coming, Ready or Not, September 2005 Marketing SA in China Second Edition 2007 26 Copyright © 2007 SA Tourism – not to be used without permission