Prof. Dr. Wolfgang Georg Arlt Director COTRI

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China Outbound Tourism Research Institute

Prof. Dr. Wolfgang Georg ArltDirector COTRI

Influencing Luxury Shopping Behavior of Chinese Outbound Travelers to California

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COTRI China Outbound Tourism Research Institute is the worldwide leading independent research institute for analysis, consulting and quality assessment relating to the Chinese Outbound Tourism market.

Headquarter in Heide/Germany, China office in Beijing.

Director: Prof. Dr. Wolfgang Georg Arlt FRGSActive in P.R. of China since 1978 Former owner of Inbound Tour Operator China->EuropeCOTRI founder and director since 2004Professor at West Coast University of Applied Sciences

Exhibitors Workshop April 12, 2011

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Consulting Services to Richemont North America, Inc.

PurposeCOTRI to assist with evaluation and research projects regarding the luxury shopping behavior of Chinese outbound travelers to California

Research toolsFor the research two sets of research tools were develop and pre-tested in Los Angeles and San Francisco.

1) Half-open questionnaires as base for interviews with Mainland ChineseTravelers visiting California about their shopping sources of information, preferences, expectations and actual shopping behavior.

2) Conversation guide as base for interviews with Chinese living in California about their experiences of shopping behavior of Mainland Chinese visitors.

ResultsThe results will be presented to Richemont as a trend indication and also used to further calibrate the research tools for a possible boarder survey

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Global Tourism 2010: 6.7% increase of international tourism

arrivals

Asia –Pacific region20% increase year by year

Forecast for global tourism: From 930 million to 1.6 billion travels by 2020

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China´s Major Targets of the 12th Five-Year Plan

for 2011-2015

Annual average GDP growth: 7%

GDP in 2015 (based on 2010 prices): 55 trillion Yuan (US$ 8.37 trillion)

Proportion of service industry's output in GDP: up by 4 percentage points

Release of major pollutants: down by 8%-10%

Jobs created: 45 million

Average growth of residents´ income: more than 7%

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China Outbound Tourism Research Institute2010: 57.4 million outbound trips

China is the No. 1 source market in Asia even without taking into account trips to Hong Kong / Macao

For the second time in China: Outbound tourism spending higher than inbound tourism income

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2000: Global market share 1.5%

2010: Global market share 5.8%

2000: One out of 67 international travellers originates in Mainland China

2010: One out of 16 international travellers originates in Mainland China

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Share of Chinese outbound travels during three quinquenniums 1995-2009 (Source: CNTA / COTRI, no reliable data available before 1995)

More than 60% of all travels happening in last quinquennium 2005-2009

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Chinese outbound travels projection for current quinquennium 2010-2014

a) projected increase according to State Council planning b) projected increase if growth rate equals 2000-04/2005-09

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Destination: USA

• ADS agreement between USA and China officially started in 2008.

• Mainland Chinese tourists arrivals in 2010: 730,000 (NTA, up to Aug 2010)

• Over 2 million expected by 2015 (NTA)

Visitors from China to USA 99

– 2009

Source: USA Department of homeland security, Form I-94, Non-Resident Arrival Records

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• Temporarily home for more than 20,000 students

• Most important destinations: California, New York, Washington DC.

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How do Chinese citizens view the United States?

• Words that commonly describe USA: dominant, successful and expensive. On the other side, unfamiliar and unsafe.

• Motivations: seeing something new and different, learning and discovering, and experiencing a different culture.

• Overall impression of the US (10 being the most positive): 7.68

Source: University of South Carolina, Research 2010

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Destination: California

China: Seventh largest overseas market, 271,000 visitors in 2009, 51.6% of total visits to USA.

Average stay 16.9 nights, spend by visit US$ 1,606 per visitor.

Chinese visitors spend US$ 435 million in California

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Most common Metropolitan Statistical Areas visited by Chinese visitors to California, 2009Los Angeles (48%) San Francisco (42%), Hollywood /Melrose (33%)Santa Monica (17%), San Diego (12%) Monterey/Carmel (11%).

Activities while in the USA, 2009

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While visiting California:

More likely• Be on their first trip to the USA• Visit casinos and go shopping• Travel for business purposes • Work in a managerial/ executive position • Spend a higher percentage on gifts and souvenirs and

transportation

Less likely• Travel with spouse. • Visit small towns, national parks or tour the countryside.

Source: California Travel and Tourism Commission 2009

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Market Segments

Segmentation of market in

- low price/bad quality mass market For the “Europe-from-the-Coach-Window” mass market there is still a queue of at least 100 million Chinese waiting for their turn to get their photo in frontof the Eiffel tower.

and - “FIT” / “Semi-FIT”, ”MICE”, high-end market"We didn't want to go on a group tour since these can be very rushed, taking in toomany countries over a short period of time. We think we handle independent travelquite well since we were all in Singapore last Spring Festival when we also went toThailand. We think we will be able to get around Italy by ourselves.”

(China Daily 28- 01-2011)

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March 2011: 457 million internet users in China 34% internet penetration rate.

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Chinese luxury consumption worldwide

18% growth annually from 2010 – 2015

20%From the total global luxury market.

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Luxury Market

Chinese millionaires• 960,000 (Hurun Wealth Report 2011) 30% women• Average age: 39 years old, 15 years younger than Western

Chinese Luxury Tourists (CLT)• 96% first/business air travel, • 99% stay in four or five star hotels• Last minute holiday makers, no seasonality, looking for safe, stable and healthy destinations with good shopping.

Source: Market Probe Travel and Tourism

Group, 2011

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China Outbound Tourism 2011

Good news – not only because of quantitative growth but also because of qualitative developments:

1.Political support for outbound tourism2.Greater interest in in-depth travels3.Easy access to passports and hard currency

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1. Political support for outbound tourism by Chinese Central Government:

• On November 25th 2009, a State Council executive meeting chaired by Chinese Premier Wen Jiabao adopted the “Statement on Accelerating the Tourism Industry Development” which declared a planned annual increase of 9% for outbound tourism.

• In the 12th Five-Year Plan for the first time the development of outbound tourism is actively promoted instead of being hindered by the Chinese government.

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2. Greater interest in in-depth travels:

“… one of the remarkable characteristics of China tourism in 2010 was the detailed market segmentation. When the normal tourism market was still the main component of tourism section, special interest groups were forming as well. Some special attractive long-distance and niche market focused tourism products which were offered by tour operators both inside and outside China turned out to be very successful.”

Prof. Zhang Guangrui Development of China's Outbound Tourism 2010 in: Green Book of China's Tourism 2011

Niche market and special interest products offer opportunities to attract Chinese visitors

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3. Less bureaucratic problems from the Chinese side:

• 140 ADS agreements with all important destinations signed

• Access to passports and hard currency relatively easy

• Individual tourist visa agreements with Asian and some European countries

• More choice of destinations and tours than ever

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But complaints about many destinations:

• Visa problems still existing• (Perceived) Safety problems given extensive media attention in China• Quality level often not according to Chinese expectations• Not enough visible dedication to Chinese market

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Thanks

- www.china-outbound.com and - www.chinatraveltrends.com

Prof. Dr. Wolfgang Georg Arlt Director COTRI

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