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NSW AND THE CHINA INBOUND TOURISM MARKETTO AUSTRALIA5004003002001001YE March 2010YE March 2011YE March 2012YE March 2011YE March 2012YE March 2009YE March 2008YE March 2007YE March 2006YE March 2005YE March 2004YE March 2003YE March 2002Source: IVS, YE March 2012 TRA30000250002000015000100005000YE March 2009YE March 2008YE March 2007YE March 2006YE March 20050YE March 2004However, while the outlook for the market is buoyantsignificant changes to consumer travel preferences;geographic source markets within China; tradedistribution; direct airline services to other states;and the escalation of competitor threat means thatNSW needs a new strategy if it is to reach the goal ofdoubling overnight visitor expenditure by 2020.CHINESE VISITOR NIGHTS –AUSTRALIA AND NSW SINCE 2000YE March 2003NSW is now Australia’s market leader, with a60 per cent market share of Chinese visitor arrivalsand a 40 per cent share of visitor nights. Over thelast decade, despite shocks such as terrorismattacks, international pandemics and the globalfinancial crisis, Chinese annual visitor arrivals andvisitor nights have continued to climb on animpressive trajectory of growth. Australia Visitors (‘000) New South Wales Visitors (‘000)YE March 2002Since 2000, New South Wales has captured themomentum of the market – benefiting fromSydney’s global appeal, its position as the majorgateway for Chinese visitors and its ‘first mover’status – a principal destination for most first timevisitors to Australia. NSW’s servicing of the market,which began in the late 90s has been a strength insecuring trade support from China.YE March 2010Forecasts for 2020 indicate that the inbound marketfrom China is set to more than double in size,contributing more than one million visitors toAustralia and more than 6.8 billion in TotalInbound Economic Value.1YE March 20010YE March 2001Despite an initial concentration into Sydney,Melbourne and Brisbane, Chinese visitors are alsostarting to travel further afield and the market nowranks impressively as Australia’s third largest fordispersed nights.Source: IVS, YE March 2012 TRA600YE March 2000Since 2000 there has been rapid growth in tourismfrom China – it is now ranked amongst Australia’sfastest growing and highest yielding visitor markets.It outperforms all other markets in terms of lengthof stay and is richly diverse, performing well acrossHoliday, Visiting Friends and Relatives (VFR),Business and Education travel segments.CHINESE VISITOR ARRIVALS –AUSTRALIA AND NSW SINCE 2000YE March 2000In 1999 Australia became one of the first Westerncountries in the world to be granted ApprovedDestination Status (ADS) by the ChineseGovernment. This was a significant breakthroughfor the Australian tourism industry; it effectivelygave the green light for the opening up ofMainland China as a source market for inboundvisitors and delivered an early entry advantage toa market of unparalleled promise. Australia Visitor nights (‘000) New South Wales Visitor nights (‘000)Source: TFC Forecast 2012 Issue 16 7Destination New South Wales

TOURISM SNAPSHOT:CHINESE VISITORS TO NSW YEAR ENDING MARCH 2012CHINESE VISITOR ARRIVALSPURPOSE OF VISITAustralia530,000NSW320,000Growth on Previous Year: Australia 15%Growth on Previous Year: NSW 10%NSW Market Share Visitors:60% of Chinese inbound market to AustraliaVisitorsHoliday63%10%Visiting friends EmploymentVISITOR NIGHTSOtherAustralia25.6 million NSW10.2 million Growth on Previous Year: Australia 2%Growth on Previous Year: NSW–1%NSW Market Share Nights:40%Total1%0%100%100%PURPOSE OF VISIT –CHANGES ON PREVIOUS YEAR (YE MAR 2011)VisitorsAVERAGE LENGTH OF STAYAustraliaVisitors% chg onprevious year48.4 nights*NSW32 nights**includes student visitorsEXPENDITURETotal Australia 2.7 billionTotal NSW 1.1 billionGrowth on Previous Year: Australia 8%Growth on Previous Year: NSW 5%Holiday201,40023%Visiting friends isitorNights% chg onprevious yearHoliday1,035,70048%Visiting friends 800223%22,800-92%10,235,700-1%TotalVISITOR DISPERSALVisitor NightsVisitation to Sydney and Regional NSWVisitorsVisitor nights97%91%7%9%SydneyRegional NSWNOTE: figures add to more than 100% due to multipledestinations applying to some visitorsTotal Number of Visitors and Visitor NightsVisitors % chgSydneyRegionalNSWNew SouthWalesBusinessVisitor nights % 0%10,235,700-1%NOTE: NSW total is less than addition of Sydney and RegionalNSW due to multiple destinations applying to some visitorsChina Tourism StrategyVisitor NightsEducationEmploymentOtherTotalSOURCE: All figures are sourced from the International VisitorSurvey YE March 2012, Tourism Research Australia

THE CHINA MARKETNSW’S 2020/21 FORECASTSThe Tourism Forecasting Council predicts thatMainland China will continue its current growthtrend for at least the next decade.National arrival forecasts for 2020/21 have beenrevised upwards to 1.039 million and visitor nightsto more than 48.9 million. Total economic value toAustralia from China is forecast to exceed 6.8 billion.2A key outcome for NSW in the years leading up to2020 will be to maintain market leadership byprotecting and growing its share of visitors andvisitor nights and continuing to attract higher levelsof expenditure.If NSW is successful in achieving this objective, it isset to almost double the value of Chinese visitorexpenditure* within the state by 2020/21. The tablebelow outlines 2020/21 forecasts for NSW, whichare based on current TRA Forecasts to 2020/21.2020/21 CHINA MARKET FORECASTS:Impacts NSW Visitors, Expenditure, Employment and Gross State Product.3INBOUND VISITORS FROM MAINLAND CHINANSW FORECASTS 2020/21Chinese visitor arrivals623,000Visitor nights19.6 millionEconomic Contribution*Visitor expenditure 2.1 billion*Gross State Product (GSP) 2.1 billion*Total contribution to GSP over the ten fiscal years between2011/12 to 2020/21 17.4 billion*EmploymentNumber of direct jobs13,900Number of direct and indirect jobs24,100* Measured in December 2011 Australian Dollars2Source: TFC Forecast 2012 Issue 13NSW Forecasts are estimates based on TFC Forecasts 2012Issue 1, Tourism Satellite Accounts and International VisitorSurvey, Tourism Research Australia8 9Destination New South Wales

Strategic DirectionsIf NSW protects and maintains its market share of visitors and visitor nights, Chinawill contribute more than 17.4 billion to the NSW economy over the ten-year periodto 2020/21 and be directly responsible for 13,900 jobs.Destination NSW has identified eight strategic directions in its Business DevelopmentStrategy for China to ensure that NSW is able to fully capitalise on the opportunitiespresented by China in the next decade. The strategic response to these priorities willrequire commitment and involvement from a broad range of industry, Governmentand corporate partners.1Extend Marketing Activity into more Geographic Source Markets2Support Aviation and Route Development to Keep Pace with Demand3Target High Performing Consumer Segments4Improve the Quality and Range of Visitor Experiences5Increase Consumer Promotion6Develop Trade Distribution Networks7Expand Commercial and Government Partnerships8Increase Resources to Facilitate GrowthChina Tourism Strategy

Central toDestination NSW’sapproach is thephased developmentof ‘secondary city’source markets.10 11Destination New South Wales

STRATEGIC DIRECTION 1EXTEND MARKETING ACTIVITIES INTO MOREGEOGRAPHIC SOURCE MARKETS 2012–2020Tourism Australia has undertaken an evidencebased market assessment of more than 600 citiesin China that identified the cities most likely to bepotential source markets for Australia in 2020.It concluded that in the next decade up to 55 citieswould have significant populations with the financialmeans and access to travel internationally. Whileprimary regions/cities will remain criticallyimportant, ‘secondary cities’ will drive tourismgrowth to Australia in the years leading up to 2020.KEY PRIORITIES Servicing Secondary Cities via Regional HubsAlthough 55 cities seems an extraordinary numberof markets to attempt to leverage, TourismAustralia suggests that economies of scale can beachieved by focusing marketing resources in fourprimary hubs: Greater Beijing (North), GreaterShanghai (East), Guangdong province (South) andthe new, rapidly growing Central Western sectorof Chengdu/Chongqing.Destination NSW will therefore increase itsin-market resources in these major hubs in order toadequately service the market. Destination NSW’sChina headquarters are in Shanghai. Phased DevelopmentDestination NSW will be taking a phased approachto market development – stepping up tradeand consumer activity as each market reachesappropriate milestones in size, maturity andvisitation levels.Marketing and resource commitments will bealigned to the differing levels of market maturity.Given Sydney’s ‘first mover’ appeal it is logical forNSW to align its development approach withTourism Australia’s. The table on page 13 indicatesproposed target markets and their anticipated stageof development in the years leading up to 2020.STRATEGIES: GEOGRAPHIC SOURCE MARKETSDesiredOutcomeNSW attracts the majority of visitors and visitor nights from China’s growinggeographic source markets.StrategyFocus marketing and development activity on primary tourism hubs withinEastern, Southern, Northern and Central /Western China.Activities In Developed Markets implement integrated trade and consumer marketing activitiesStrategyProvide consumer marketing and trade development services from primary hubsto secondary cities identified in Tourism Australia’s Market Prioritisation Plan.Activities Phased development of up to 30 city markets via a tiered development approach aimedat progressing markets through emerging and growth phases to maturity In Emerging Markets: Travel agent education through the Aussie Specialist program andassistance with market development In Growth Markets: Trade education, sales development, retail campaigns with PremierAussie Specialist agencies and consumer PRChina Tourism Strategy

CHINA GEOGRAPHICSOURCE gguan XiamenGuangzhouHuizhouShenzhenNorthern MarketsEastern MarketsSouthern MarketsCentral / Western Markets12 13Destination New South Wales

NSW’S CITY TARGET MARKETS BY GEOGRAPHIC REGION.Indicates how city markets will evolve through emerging and growth phases towards marketmaturity between 2012–20*REGIONNorthern MarketsPhase 1 (2012–14)Phase 2 (2014–17)Phase 3 (2017–20)Developed (Hub)BeijingBeijingBeijingGrowth nShenyangJinanPost 2014 Dalian, Shenyanand Jinan have enteredthe growth phaseEastern MarketsPhase 1 (2012–14)Phase 2 (2014–17)Phase 3 (2017–20)Developed uNanjingNingboSuzhouWuxiWenzhouEmerging MarketsWenzhouWuxiWenzhouPost 2017 Wenzhou hasentered the growth phaseSouthern MarketsPhase 1 (2012–14)Phase 2 (2014–17)Phase 3 (2017–20)Developed (Hub)GuangzhouGuangzhouGuangzhouGrowth henzhenXiamenDongguanFoshanHuizhouFuzhouEmerging t 2017 Huizhou andFuzhou have entered thegrowth phaseCentral / WesternMarketsPhase 1 (2012–14)Phase 2 (2014–17)Phase 3 (2017–20)Post 2020Chengdu/ChongqingDeveloped (Hub)Growth gqingChangshaWuhanEmerging MarketsNew markets willbegin to emerge in2014ChangshaWuhan5–6 additional Markets* Targets reflect alignment with Tourism Australia’s proposed city prioritisation approach leading up to 2020.In Developed Hubs: NSW undertakes integrated trade and consumer marketingFor Cities in the Growth phase: NSW’s focus is trade and market developmentFor Cities in the Emerging phase: NSW’s focus is trade education and some market development assistanceChina Tourism Strategy

STRATEGIC DIRECTION 2SUPPORT AVIATION & ROUTE DEVELOPMENTTO KEEP PACE WITH DEMANDIf 2020 visitor forecasts and the NSWGovernment’s goal of doubling visitorexpenditure are to be realised, China-Australiaroutes are going to require more aircraft, moreservices from primary markets and more directand indirect services from second-tier cities.Sydney as the premium gateway to Australia, isserviced by Chinese carriers, other Asian airlinesand Qantas. Recent bi-lateral agreements haveresulted in significant capacity increases for existingcarriers – but more is required.NSW faces many complexities in building airlinerelationships and capacity from China over comingyears and its strategies will need to be based on amulti-airline development approach. This meansDestination NSW will continue to maintain activerelationships and co-operative marketinginvestment with all carriers servicing NSW routesand gateways. In addition, the organisation mayneed to assist new and existing carriers in theirefforts to sustain capacity levels by buildingtwo-way traffic.Continued collaboration between Destination NSWand Tourism Australia will be essential; NSW needsto be able to leverage Tourism Australia’srelationships in market and also to potentially tapinto opportunities for financial support from theorganisation’s Aviation Development Fund.KEY PRIORITIES Building Capacity from Primary MarketsPriority will be given to ensuring sufficientcapacity to meet current increases in demandfrom the three primary hubs of Beijing, Shanghaiand Guangzhou. Route DevelopmentA second priority is to encourage direct capacityinto Sydney from other major Chinese cities.Destination NSW, in co-operation with SydneyAirport Corporation, will need to concentrateon further development of strategies whichprove viability of new services or open up newdestinations. A good example of this type ofstrategy is to provide support for charter services.CHINA SYDNEY FLIGHTSSydney has 39 flights per week from China4 but capacity will need to increase dramatically if visitorforecasts for 2020 are to be realised.Due to recent agreements between the Australian and Chinese Governments there are no regulatoryimpediments for airlines to increase services and capacity to Australia in the short to medium term.Services include:China SouthernChina Eastern14 services7 servicesAir ChinaQantas11 services7 servicesIn mid-2012 low cost carrier Scoot Airlines is also scheduled to introduce services between Tianjinand secondary city ports in China and Sydney via Singapore. Hainan Airlines may soon recommenceservices to Sydney.Airfares on the Australia-China route are relatively competitive compared to other long haul destinations.4As of March 201214 15Destination New South Wales

STRATEGIES: AVIATIONDesiredOutcomeAirline capacity from China to Sydney supports and stimulates growth from primary hubsand secondary cities.StrategyContinue to pursue a multi-airline development approach, with tiered level support formarketing based on current and committed capacity, frequency and routes.Activities Dedicate resources to developing co-operative partnerships under MOU agreements withairline partnersStrategyEncourage additional capacity from primary markets of Beijing, Shanghai and Guangzhou.Activities Collaborate with Sydney Airport Corporation and Tourism Australia in encouragingexisting carriers to add additional services on Sydney routesStrategyEncourage direct capacity from secondary cities.Activities Engage with new airline partners including third country and low cost carriersStrategyInvest in route development activities.Activities Increase investment in co-operative marketing with airline partners Assist sustainability of services by working in partnership with Sydney AirportCorporation to target the Sydney-based management of Chinese carriers and Qantas toprovide contacts and assistance that can help them build the two-way traffic Seek opportunities to obtain additional financial investment for aviation opportunitiesthrough Tourism Australia’s Aviation Development Fund Work with industry partners to support charter services from developing marketsChina Tourism Strategy

STRATEGIC DIRECTION 3TARGET HIGH PERFORMING CONSUMER SEGMENTS Consumer Segments in the China market areincreasingly differentiated by region and travelmaturity. Most Chinese leisure travel to NSW isnow (and in the foreseeable future) via ADS grouptravel. However it is strategically important thatNSW ensures that other segments are alsoprioritised for development. KEY SEGMENTS ADS Group TravelOver the next decade holiday travel to NSW willremain largely dominated by ADS Group Travel.Much of this segment will be sourced fromrapidly expanding markets in secondary cities.It is essential that NSW protect its market shareby extending its product development, trademarketing and consumer awareness activitiesbeyond its existing base in the primary cities. Assisted FIT ToursThere is a general consensus amongst the industryin both China and Australia, that NSW also needsto take advantage of the maturing travel marketsin Beijing, Shanghai and Guangzhou. Consumertravel preferences in these markets are rapidlyevolving and there is a major trend towardsFIT travel.Because of its leadership position in the marketNSW has the potential to position itself stronglyto FIT visitors – but it is quite vulnerable tocompetitive pressures from other statedestinations. If NSW is to successfully tap thisgrowing segment considerable effort has to bemade to address product development issues,and bring experiences to market such as SelfDrive, Golfing, Resort, Food and Wine, UniqueEvents, Luxury and Soft Adventure.5Student TravelAnother important segment for NSW is StudentTravel. NSW’s share of visitor nights is largelydriven by this segment (accounting for around 57%of visitor nights)5 and its associated VFR traffic.It is a strategically important segment, whichimpacts the wider NSW economy and is vital tomaintaining NSW’s share of visitor nights in 2020.Business Events TravelAlthough Business Events travel from China iscurrently quite low in volume it is extremely highyielding. A priority for NSW is to grow incentiveand convention business from China. NSW’sexport industries with China offer good leverageopportunities to support growth in thistravel segment.OTHER OPPORTUNITIESIn addition to these primary consumer segments,NSW has strong potential to develop a series of highyielding niche markets from different regions ofChina. They are evidence of the evolving nature ofthe market, which is showing increased diversity inconsumer travel preferences. These include LuxuryTravel and Special Interest or Affinity Travel – andare sourced from mature markets located inprimary cities. Government driven, industry basedTechnical Visits will also continue be a strongfeature of the market.Source: IVS YE March 201216 17Destination New South Wales

PRIMARY SEGMENTADS Group TravellerCharacteristics Opportunity Will remain a primary market for NSW in the next decade because of the state’sadvantage as a ‘first mover’ destination, driven by Sydney’s appeal Offers good potential for growth as more and more cities in mainland China expandtheir middle classes Will require more resources to service travel agents and wholesalers in up to30 potential city markets by 2020New or less experienced travellersPart of growing middle classTravels in groups of up to 20 peopleLittle or no EnglishSlightly more likely to be femaleGroup market is more susceptible to external shocks such as pandemics, terrorism etc.99 per cent use packaged arrangements purchased through travel agents/wholesalersVisit up to three destinations per tripHighly price sensitiveQuality issues prevalent with ‘below cost’ tours potentially affecting visitor satisfactionAssisted FIT TravellersChara

guide business development and consumer marketing activity between 2012–2020. The strategy is directed towards ensuring that NSW keeps pace with the rapid expansion of geographic source markets within China and the changing travel preferences of maturing consumer segments. A key objective