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THOMAS COOK CHINA, MORGAN STANLEY CHINA ‘P -LEISURE’ TRIP, TUESDAY 19 SEPTEMBER 2017, SHANGHAI
THOMAS COOK CHINA STRATEGY UPDATE
Thomas Cook China strategy update
Leverage and synergies with Thomas Cook Group
China travel market – our latest view
Concluding remarks
Page 2
2016 Figures
› Visitor traffic reached 137 million, up by 12% YoY
› Spending topped USD 261 billion, increased by 12% YoY
› Growth of 15-20% pa expected for the next 5-10 years
Main driving forces
› Personal income rise
› Favorable policies
› Appreciation of RMB
CHINA TRAVEL MARKET IS LARGE AND GROWING FAST
Chinese outbound tourists (m)
(Source: China National Tourism Administration)
40.95 45.84 47.7 57.39
70.25
83.18
98.19
117 122
137
0m
20m
40m
60m
80m
100m
120m
140m
160m
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
China remains the world’s largest source market of outbound visitors and biggest spenders around the world for the third year
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….BUT IS ALSO VERY COMPETITIVE AND FRAGMENTED
Offline Travel Agents
Consolidators Leading OTAS Online
marketplaces Niche OTAs
• Large state owned companies and regional players
• Mass group focus
• Losing market to OTAs
• Focus on European destinations
• Tour operator and B2B wholesalers
• Mass group tour focus
• Consolidated market
• Ctrip alone has 65% share of the online mkt
• Components plus packages (group tours)
• No inventory
• Open retail platform model
• Large customer base
• Small customer base
• Attracting investment
• Focus on specific customer segments
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CHINESE TRAVELLER BEHAVIOURS ARE CHANGING FAST
Chinese travellers are not happy with the traditional tour packages offered by TAs
Shift towards FIT over guided packaged tours as Chinese travellers gain experience
Others
Poor accommodation
Too much extra charges
13%
3%
2%
Not professional
Some stops/ events are boring
7% Bad arrangement/
not following the route
3%
2%
Lack of option of Chinese food
Poor meals
13%
15%
Shopping time at particular shop too long
19%
In which areas were your previous tour inadequate?
FIT (including DIY trips) Group travel
~80%
~20%
~55%
~45%
~60%
~40%
~40%
~60%
Outbound short-haul: Thailand, Japan, Korea, etc
Outbound long-haul: Europe, US, Australia, etc
"There is a stop for shopping every day. The coach left us in a Jewellery department store
for 2 hours…"
"Why do they schedule so many cruises: River Rhine Cruise, Seine Cruise… all of
which were similar... "
"Felt like military training! Marching, marching and
marching!"
"I cannot stand cold drink/ food for breakfast. I lost some weight because some of the food was just not edible..."
Current estimate
Current estimate
Next ten years
Next ten years
(Source: BCG Next Billion traveller survey, expert interview, literature research)
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233m 303m
356m
420m
500m
557m
620m 695m
61% 66% 69%
75% 81%
86% 90% 95%
2009 2010 2011 2012 2013 2014 2015 2016
size of mobile Internet Users (million people)
proportion of mobile netizens in Internet users
62bn 95bn 131bn 169bn
222bn
315bn
443bn 593bn
744bn
888bn
1,048bn
27%
54%
39%
29% 31%
42% 40%
34%
25%
19% 18%
2009 2010 2011 2012 2013 2014 2015 2016 2017e2018e2019e
online travel transaction value (billion RMB) increase rate
China shows a very high and fast growing number of internet users, especially in mobile
China’s online travel market is growing twice as fast as offline and is expected to account for 50% of the total travel market by 2020
Source: ireseach.com; phocuswright
ONLINE IS INCREASINGLY IMPORTANT, ESPECIALLY MOBILE
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A NEW STRATEGIC APPROACH FOR CHINA
While large and fast growing, China’s travel market presents many complexities, from the fragmented and competitive landscape to the rapidly changing travelers behaviours.
To win in this market, we adopted a new strategic approach:
› Build a ‘local’ business with a startup mindset
› Leverage Thomas Cook brand heritage and resources overseas
› Target independent travelers (as opposed to group tours)
› Develop product propositions that are differentiated and exclusive
› Focus on online market, leveraging China’s large online distribution platform
› Develop own technology to support a scalable business model
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Thomas Cook China strategy update
Leverage and synergies with Thomas Cook Group
China travel market – our latest view
Future strategy and growth plan
Q&A
Page 8
THOMAS COOK CHINA LAUNCH
March 2015
Official launch 8 September 2016
Page 9
BUSINESS DEVELOPMENT PROGRESS IN THE LAST 12 MONTHS
Beijing
Shanghai
• 10 heads • Inbound Leisure
• 90 heads • Outbound operations • Corporate functions • Inbound MICE
HIGHLIGHTS
One-stop tour operator, with full travel service capabilities (hotel, packages tours, VISA, flights)
Strong management team in place supported by 100 staff across two offices (local hires)
Strong relationship and strategic partnerships with key local players both online and offline
Multi-channel distribution strategy, leveraging China’s large online retail platforms
Newly developed tour operating system integrated with TCG/Sunhotels hotel inventory
Reached c. 20,000 booked guests in FY17, with current run rate of 1,000 outbound visitors booked per week
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THOMAS COOK CHINA BUSINESS MODEL
..all offered under a trusted brand reflecting Thomas Cook heritage, quality and reliability
Inbound & Domestic
Inbound Leisure Tours
Inbound & Domestic MICE
Outbound Travel
Hotels, Hotel Packages
Itineraries, Tours
Sport Travel
Components, Ancillaries
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OUTBOUND PRODUCT & DISTRIBUTION STRATEGY
KEY DIFFERENTIATORS
Overseas specialists 1
Exclusive products 2
Inspirational, rich, curated content 3
Personalised service 4
Wholesale/B2B
• Hotel (room only)
• Hotel packages and tours
• DMC services
Pro
du
cts
Differentiated Complementary
• Exclusive Hotel Packages (highly curated)
• Signature itineraries
• Sports travel packages
• Hotels (room only)
• Ancillaries (tickets, excursions)
• Visa services
• Travel insurance
Sale
s C
han
nel
s
A one-stop, online focused tour operator that combines first-class technology with a full suite of high quality travel products and services under the Thomas Cook brand
thomascook.com.cn
Direct Open Platforms (OTP)
Alibaba Travel (Fliggy)
Online Offline
Page 12
PHUKET, THAILAND – outbound product example
VISA WIFI Transfer Tailor-made Local tours
11 hotels, including two Sunwing (2 or 3 nights
package)
catering to different consumer segment
Flight + Hotel FIT packages depart from Tier 1 cities
Pre-packaged to offer
more convenience and better price
“hot pot” activity Voucher (select 2 local activities
from 12)
The larger the pool, The more the selections
Hotel Voucher One price, 7 hotels
Flexible selection,
Quick decision making
….and a full suite of additional products and services to support customers’ requirements before & after departure….
A wide range of products, from hotels to local activities, aimed for independent travelers. Products are packaged in different ways to give the customer more flexibility and allow quick decision making
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PRODUCT DEVELOPMENT ROADMAP
› Current product portfolio
• 220 Itineraries in 60 destinations
• More than 200 excursions & local experiences in 15 destinations
• 50 hotels in SEA under direct contracts, complemented by 2,000 hotels through TCG/Sunhotels connection
› FY18 development initiatives
• Focused investment to build differentiated portfolio across 9 key destinations
• Secure >20 hotels in SEA with exclusive China allotments
• Expand complementary hotel portfolio to >200k hotels (through technology improvements)
United Kingdom
Morocco, Tunisia
Egypt
Kenya & Tanzania
Russia & East EU Turkey
Israel & Jordan
SEA: Thailand, Cambodia, etc.
Sri Lanka
FY18 key focus destinations for differentiated product offering
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FLIGGY, ALIBABA – distribution partnership example
› Launched in 2014, Fliggy is the online travel website of Alibaba
› Today, Fliggy has c. 15% share in the China online travel market, with a target of 100m customers by 2019
› Thomas Cook China opened its flagship store in Fliggy in October 2016
› Our Fliggy store has quickly become our main online sales channel, accounting for almost 50% of total outbound sales
› There are now 200 leisure travel products available on our Fliggy store, with another 20,00 hotels on offer through Fliggy’s hotel web search platform
› A recent campaign with Fliggy focused on travel packages for the English Premier League generated over 20 million impressions
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NEW, INTEGRATED TECHNOLOGY SOLUTION FOR CHINA
SILK
Financial reporting system
Product Distribution
Manual load product
TCG/ Sunhotels
Third Party Hotel XML
Ancillaries
DMC partners
Flights
CS / Wechat
Website
Mobile
Fliggy hotel search
Fliggy Flagship Store
Other OTPs
B2B Integration Dynamic Packaging
CRM
Revenue Management
Selling platform
Existing technology
Future developments
We recently launched SILK, a fully owned system developed locally in partnership with our strategic partner Spring. This new, more scalable technology allows for integration of end to end overseas resources with own and third party distribution platforms.
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INBOUND & MICE BUSINESS
› Leisure group tours and FIT/ VIP travel services
› Local incoming agent for all TCG source markets
› Business travel & company outings in China
› Servicing foreign and domestic corporates (incl. Fosun affiliates)
› Full suite of logistics and travel-related services to sports teams
› Official travel partner for ICC football tournaments in China
DMC and MICE service operations covering Greater China, through an asset light model, leveraging a wide network of local ground operators. It has already established a leading position in growth areas such as sports team travel and logistic services
Page 17
Thomas Cook China strategy update
Leverage and synergies with Thomas Cook Group
China travel market – our latest view
Concluding remarks
Page 18
SYNERGIES WITH REST OF THOMAS COOK GROUP
Future opportunities Existing areas of collaboration
› TCG inventory – access to own branded hotels, direct contracts, Sunhotels partnership
› TCG Tour Operators – inbound China DMC services for TCG Tour Operators
› Intourist – DMC services to Thomas Cook China outbound Chinese customers
› TC Sport UK – China outbound travel sports packages
› TC Media & Partnerships – global marketing deals with tourism boards
› TCG Hotels & Resorts – development of hotels in China under one or more TC own brands
› TC Money – development of travel-related financial products for Chinese travelers (e.g. personalised travel insurance)
› TC Airlines & Condor– distribution of scheduled seats in China (international flights and co-share flights with Chinese airlines)
Page 19
Thomas Cook China strategy update
Leverage and synergies with Thomas Cook Group
China travel market – our latest view
Concluding remarks
Page 20
KEY MESSAGES
› Significant progress has been made in China since our official launch in September 2016
› We have a strong ‘local’ management team in place with a clear strategy to develop both the outbound and inbound business
› The newly developed technology combined with the established multi-channel distribution have provided a more scalable business platform that will accelerate the growth of the outbound business
› Our new China business creates growth opportunities also for other parts of TCG, some of which are already being realised through commercial collaboration
› Both Thomas Cook and Fosun are fully committed to the JV business. The ambition is to make China a sizeable market for TCG, comparable, over time, with other key source markets in Europe
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