CHINA Market Profile. Up to $13bn Potential to be worth by ,000. $5.7bn China. 33.6m. Overview. Aviation routes from China to Australia 3

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1 Market Profile Overview In 214, China was Australia s second largest inbound market for visitor arrivals and the largest market for total visitor expenditure and visitor nights. Findings from Tourism Australia s Consumer Demand Project indicate that Chinese leisure travellers look for (in order of importance) world class beauty, interesting attractions and safety and security when choosing a holiday destination. Australia s coastline, wildlife and food and wine are the most appealing Australian attractions, with wildlife rating as the most preferred Australian experience. Up to $13bn Potential to be worth by 22 84, 1 Visitor arrivals (á 18 per cent) Override date Aviation routes from China to Australia 3 Beijing $5.7bn China Chongqing Nanjing 2 Total spend (á 19 per cent) Chengdu Shanghai Override Show Guangzhou Hong Kong Cairns Brisbane 33.6m 2 Visitor nights (á 13 per cent) 1 Singapore Perth Sydney Oct-Jan and May-Jun Booking peak period Melbourne Which airlines 3 do Chinese visitors use to travel to Australia? 4 Airline China Southern 14% 22% 21% 19% 2% China Eastern 11% 14% 15% 16% 14% Cathay Pacific 2% 16% 16% 15% 13% Qantas Airways 17% 12% 12% 11% 11% Air China 12% 12% 11% 9% 9% Singapore Airlines 6% 5% 5% 5% 6% Sichuan Airlines % % % 2% 4% Others 19% 19% 2% 23% 23% Total 1% 1% 1% 1% 1% Oct, Jan-Feb and Jul-Aug Travel peak period 1. Source: Department of Immigration and Border Protection as at year ending December Source: International Visitor Survey, Tourism Research Australia, December 214 quarter 3. Source: CAPA-Centre for Aviation, Tourism Australia analysis 4. Table includes direct and indirect capacity. Source: Department of Immigration and Border Protection 1 Visitor profile 2 HOLIDAY VISITING FRIENDS AND RELATIVES BUSINESS 294,5 arrivals (5%*) 19,6 arrivals (18%*) 62,8 arrivals (11%*) $4,21 spend per trip $3,968 spend per trip $5,2 spend per trip $446 spend per night $67 spend per night $287 spend per night 31% repeat visitors 63% repeat visitors 5% repeat visitors Data refers to an average of * Refers to share of arrivals of respective purpose of visit 1 CHINA Market Profile 215

2 Market Performance The charts on this page provide a trend overview of visitor arrivals and expenditure by main purpose of visit and also the age demographic split of leisure* visitors and expenditure (based on latest 12 months data). Visitor arrivals Visitor arrivals by main purpose of visit Visitor arrivals (s) Dec-5 Jun-6 Dec-6 Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 84, Visitor arrivals (s) Dec-5 Jun-6 Dec-6 Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Holiday Visiting friends or relatives Education Business Other Employment Visitor expenditure Visitor expenditure by main purpose of visit 6. $5.7bn 3, Total trip spend ($bn) Dec-5 Jun-6 Dec-6 Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Total trip spend (A$s) 2,5 2, 1,5 1, 5 Dec-5 Jun-6 Dec-6 Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Education Holiday Visiting friends or relatives Business Employment Other Arrivals by age Expenditure by age yrs 31% 6 yrs & over 14% yrs 19% 6 yrs & over 6% yrs 28% 3 44 yrs 2% yrs 55% 3 44 yrs 27% * Leisure refers to main purpose of visit of holiday and visiting friends and relatives Age profile data refers to an average of Source: Department of Immigration and Border Protection International Visitor Survey, Tourism Research Australia 2 CHINA Market Profile 215

3 Aviation Landscape Over 4 per cent of Chinese visitors to Australia travelled on Chinese carriers, with 2 per cent on China Southern alone (see chart page 1). In 214 direct capacity from China to Australia decreased by five per cent following strong growth in previous years. Tourism Australia expects growth to resume in 215, up an estimated 5-1 per cent. In January 215 the Chinese and Australian governments expanded their Air Service Agreement to allow more flights between the two countries. Already Chinese carriers have announced plans to increase capacity to Australia including Xiamen Airlines reportedly considering launching Xiamen-Sydney services by the end of 215. Average loads during 214 were 84 per cent, up five percentage points compared to 213. Other than May and June, load factors hover around 8 per cent, with capacity tight during holiday peaks of January February (Chinese New Year) and July. Qantas and China Eastern are seeking to deepening their cooperation on the Shanghai-Sydney route. However in March 215 the Australian Competition and Consumer Commission rejected the proposed joint venture in a draft determination. Direct aviation capacity from China to Australia Seat capacity ( ) Dec-5 Apr-6 Aug-6 Dec-6 Apr-7 Aug-7 Dec-7 Apr-8 Aug-8 Dec-8 Apr-9 Aug-9 Dec-9 Apr-1 Aug-1 Dec-1 Apr-11 Aug-11 Apr-12 Aug-12 Apr-13 Aug-13 Apr-14 Aug-14 China Southern Airlines China Eastern Airlines Air China Qantas Airways Jetstar Sichuan Airlines Hainan Airlines Source: Bureau of Infrastructure and Regional Development Weekly services to Australia Operating Airlines Flights per week Route Alliance/ code share partner (on route) China 14 Guangzhou-Sydney Air France, Qantas Southern 1 14 Guangzhou-Melbourne 5 7 Guangzhou-Brisbane 3à4 Guangzhou-Perth* Air China 5 Beijing-Sydney Air NZ, Scandinavian Airlines 4 5 Beijing-Shanghai-Melbourne à4 Beijing-Melbourne^ 3 Beijing-Shanghai-Sydney China Eastern Shanghai-Melbourne Shanghai-Sydney Qantas China services and 3 Beijing-Nanjing-Sydney 2 Shanghai-Cairns + selected Australian, Singapore, New Zealand services Qantas 5 Shanghai-Sydney China Eastern Australian services, and selected Australia and Singapore services Sichuan 2 3 Chengdu-Melbourne Airlines 2 Chengdu-Chongqing-Sydney Jetstar 2 Wuhan-Gold Coast # * China Southern plans to increase its Guangzhou-Perth frequencies from three per week to four from 16 July 215. The airline introduced the B787 aircraft on the route from 1 April China Eastern currently operates its two weekly Shanghai-Cairns services only during Northern winter scheduling season (November-February) ^ Air China plans to launch four weekly Beijing-Melbourne services from 1 June 215 # Jetstar plans to launch two weekly Wuhan-Gold Coast services from 29 September 215 using B787 aircraft Source: CAPA- Centre for Aviation, OAG, Tourism Australia analysis 3 CHINA Market Profile 215

4 The Leisure Traveller China is Australia s second largest market for leisure visitor arrivals, first for visitor expenditure and second for visitor nights. How does Australia perform? According to consumer research conducted by Tourism Australia, approximately half of Chinese leisure travellers cite world class nature and beauty along with interesting attractions as their main motivations when selecting a travel destination. Other important factors for them include safety and security, good food and wine and value for money. Australia performs strongly in terms of its core natural offering among Chinese leisure travellers, with high rankings for its interesting attractions, world class beauty and coastal scenery. There is room for improvement with respect to Australia s associations with food and wine, rich history and heritage, in addition to value for money. Australia s coastline, wildlife and food and wine generate the greatest appeal for Chinese travellers in terms of attractions, with wildlife rating as the preferred Australian experience for approximately half of Chinese respondents. Motivations when selecting a travel destination Interesting attractions to visit 45% World class beauty and nature 45% A safe and secure destination 44% Good food and wine 38% Value for money 33% Rich history and heritage 32% A family friendly destination 28% Spectacular coastal scenery 25% Romantic destination 25% Great shopping/brands 2% Top Australian attractions Australian beaches 56% The Australian wildlife 47% Australian food and wine 46% The Great Barrier Reef 45% Australian coastal lifestyle 43% The Australian climate 42% Rainforests, forests, parks 41% Unspoilt natural wilderness 39% Island experiences 36% Laidback lifestyle 36% Most preferred Australian experiences Aquatic Wildlife 5% Wildlife (non-aquatic) 48% Beach/Coastal/Harbour 44% Niche: Diving, Golf etc 42% Food and Wine 42% Wilderness/Rainforest 38% Outback/Indigenous 37% City Experience 37% Shopping 33% Aspiration versus visitation For aspiration, awareness and intention to visit Australia ranks ahead of any other country for the Chinese traveller. However, when it comes to converting this into actual visitation, Australia falls to 1th place behind competitors such as Thailand, France and the USA. 1ST ASPIRATION 1ST AWARENESS 1ST INTENTION 1TH VISITATION These findings are based on consumer research conducted by Tourism Australia in 214, in 11 of Australia s key tourism markets. Charts show the percentage of people in the survey who rank these attributes as important or appealing. 4 CHINA Market Profile 215

5 The travel distribution system in China is highly regulated, with more than 2, travel agencies authorised to operate outbound travel business to overseas destinations, some of which can operate under the Approved Destination Status (ADS) Scheme. In general, group travel still plays a big part of it, however under the new China Tourism Law, Free Independent Travel (FIT) and semi FIT is growing at a faster rate. system Wholesalers/ Large Agents Commission Level: 15% to 2% Wholesale travel agencies cater mainly for ADS group business. Many of them are expanding their distribution networks by setting up branch offices or sales representatives in secondary and other third-tier cities. There is a growing trend for some wholesalers to expand their business to also include retail operations. Special Interest Southern China is a relatively mature market in terms of product development and consumer travel behaviour. Experiences such as selfdrive and golf have become popular niche segments in recent years, however these segments remain relatively small compared to the traditional leisure market. Luxury travel is a new niche trend with big potential. There are many education agencies that focus on the student market, and offer short or long term study options in Australia with included leisure components. These agencies do not fall within the tourism distribution network. Retail Agents Commission Level: 15% to 25% Many retail travel agencies have been expanding their branches within China and are beginning to focus on FIT products. Online Commission Level: 15% to 25% Online bookings are increasing and the volume, compared with traditional channels, are also on the rise. Some online travel portals such as Ctrip.com and Tuniu.com have been successful in the market, particularly with air tickets and hotel accommodation bookings. However, the majority of international travel packages are booked through traditional travel sellers. Traditional travel agencies, either wholesaler or retail, are making use of third-party portals to promote their products, such as Alitrip.com and Tiniu.com. Aussie Specialists Commission Level: 15% to 2% The Aussie Specialist Program (ASP) is the primary platform for Tourism Australia to train and develop retail agents to sell Australia. Each State and Territory has a module on the ASP website. As at 1 May 215, there were 5,664 qualified Aussie Specialists in mainland China and a further 6,128 agents in training. In addition, there were 1,128 Aussie specialists in Hong Kong and 266 in Taiwan. Inbound Tour Operators Commission Level: 15% to 3% Inbound Tour Operators (ITOs) are a vital link in the travel distribution chain in China and must be approved under the Approved Destination Scheme (ADS) to handle ADS group business. Tourism Australia recommends that Australian suppliers only deal with approved travel agents and ITOs for all ADS inbound business from China. Approved Destination Status (ADS) Scheme Chinese consumers travelling in a group under an ADS visa for Australia must book through an approved ADS travel seller. Australia was one of the first Western countries to gain Approved Destination Status in There are now 14 countries and regions approved under the scheme. There are currently 56 Australian Inbound Tour Operators (ITO) and more than 9 Chinese outbound travel agencies in the ADS network. These agents and operators are required to comply with the ADS Code of Business Standards and Ethics. Austrade manages the scheme in Australia with the support of Tourism Australia and the Department of Immigration and Border Protection. For further details please visit: tourism-and-business/ads. Key Partner (KDP) program Tourism Australia launched a Key Partner (KDP) program in 214. Thirty-one travel agencies/wholesalers partners were appointed located in nine Key cities: Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Nanjing, Qingdao, Chongqing and Chengdu. KDPs are committed to developing new and innovative FIT Australian tourism programs to sell to customers through their distribution channels. The KDP program aims to help establish model travel agencies/wholesalers which can be a benchmark for the wider market and a catalyst for broader change over time. 5 CHINA Market Profile 215

6 Trends Requests for tailor-made tour products are providing an opportunity for online travel agencies to expand market share in China. Some wholesalers are expanding their business to the retail sector to enhance their competiveness. Planning and purchasing travel Social media, media advocacy and word-of-mouth are becoming more powerful sources of information to assist Chinese travellers with planning and purchasing travel. Planning and purchasing travel. The use of online sources by the Chinese market was well above the average across all markets. After online sources, respondents would talk to family and friends who have previously visited Australia. Travellers from Eastern, Southern and some parts of Northern China are more experienced travellers and are more mature in their product selection. While travellers from cities in Northern and Western parts of China tend to be more price driven. The average lead time for travel bookings is 3 to 6 days. Planning a visit to market Top tips for sales calls Liaise closely with local representatives from your State and Territory Tourism Organisations (STOs). Ensure you have relevant product information and business cards produced in simplified Chinese. Both travel agents and consumers use brochures to obtain further information about products. Wechat, a social media tool, is getting popular in China. It is suggested you set up your own wechat account and link to Chinese travel agents for better engagement. Pre-arrange your appointments at least two weeks prior to your arrival by and phone. Reconfirm your appointment on arrival into China and take into account traffic conditions and travel times to your destination. Highlight your product or service in simple English and ensure sales calls are no longer than 3 minutes. Bring a gift to exchange. Hiring an interpreter is helpful as taxi drivers generally do not speak English. A casual meeting approach is preferred, such as inviting key agents for a meal or drinks. The majority of agents work through ITOs and no direct rates are expected. The best time for sales calls is March to May and September to November. The key market centres to visit are Beijing, Shanghai, Guangzhou and Chengdu. For more general information on sales calls and planning a visit to market, please see Tourism Australia s Planning for Inbound Success ebook at inboundsuccess. 6 CHINA Market Profile 215

7 Business Events Chinese decision-makers consider Australia to be one of the top long haul destinations for a business event. Many traditional travel agencies are developing a meetings, incentive, conference and events (MICE) division or subsidiary. Direct selling, insurance, pharmaceutical and IT are the key industries for business events groups from China. Due to significant growth in second tier Chinese cities, Australia needs to evolve and search for further opportunities for new business beyond the three major cities of Beijing, Shanghai, and Guangdong province to expand to Tianjin, Nanjing and Chengdu where our targeted industries are based. As the China market continues to mature, Australia needs to look at differentiated program offerings to keep inspiring and informing potential delegates from the region. Many business planners in China engage with inbound tour operators in Australia to deliver their programs. Competition continues to increase in China with many competitor destinations now placed in the region and targeting the same audience. Key trade and consumer events in 215 and 216 Event Location Date Luxury Travel Mission in China Shanghai and April 216 Beijing North Asia Business Events Showcase 216 Shanghai April 216 Australian Tourism Exchange (ATE) Gold Coast, Australia May 216 (TBC) Where to find more information Tourism Australia s activities in China are managed from its offices in Shanghai, Beijing, Guangzhou and Chengdu. For more information, visit Tourism Australia s corporate website at Australia State and Territory Organisations operating in China include: Destination NSW, South Australian Tourism Commission, Tourism and Events Queensland, Tourism NT, Tourism Tasmania, Tourism Victoria and Tourism Western Australia. Also see: China Country Brief published by the Department of Foreign Affairs and Trade at: For the latest arrivals statistics, visit: For the latest International Visitor Survey statistics, visit: For additional statistical reports refer to the ABS and TRA websites, and 7 CHINA Market Profile 215