N E W M A R K E T S & I n t e rn e t

Most information in this presentation are from ETOA, China Contact, Gullivers China, ITO

(international tourism organisation), Eye for travel research

CHINA

INDIA

RUSSIA

BRAZIL

MEXICO

CHINA •1,314,000,000

INDIA •1,129,000,000

RUSSIA • 145,000,000

BRAZIL • 187,000,000

MEXICO • 105,000,000

Compared to

USA • 302,000,000

JAPAN • 128,000,000

ICELAND • 307,000

N E W M A R K E T S & I n t e rn e t

Population

WORLD •48,244,879

USA •13,201,819 Rank 1

CHINA • 2,668,071 Rank 4

INDIA • 906,268 Rank 12

RUSSIA • 986,940 Rank 11

BRAZIL • 1,067,962 Rank 10

MEXICO • 838,182 Rank 14

ICELAND • 15,854 Rank 92

N E W M A R K E T S & I n t e rn e t2006 World’s Economy GDP in millions, listed by World Bank

WORLD •

USA •36,000,000 Rank 2

CHINA •52,000,000 Rank 1

INDIA •28,000,000 Rank 3

RUSSIA • 6,000,000 Rank 7

BRAZIL • 8,000,000 Rank 5

MEXICO • 7,700,000 Rank 6

Comments •

N E W M A R K E T S & I n t e rn e t2050 World’s Economy expectations GDP in millions, listed by Goldman Sachs

N E W M A R K E T S & I n t e rn e t

Factors to focus on:

Emerging middle class

Household consumption rising

Growth of internet subscribers

Growth of debit & credit cards issued

Travel trends

CHINESE ON-LINE MARKET SIZE

Booked travel on internet •In 2006 only 2,750,000 Chinese (to compare 4,000,000 Chinese use the World of Warcraft, the word’s most popular online game and there are about 17,800,000 fee-paying internet gamers in China)•Expected 5,700,000 Chinese to book online travel in 2008 and 9,000,000 in 2010

Booked travel on internet •In 2006 sales for est. 1,54 billion yuan (GBP 102 Millions) •Expected sales 6,5 billion yuan by 2010

Compared with the UK online travel market, China’s market is still very

smallUSA online sales account for 30 % of total tourism

industry revenue, China is less than 1 %

The rest of China’s travel websites, mostly for traditional travel agencies, work as an online brochure. Actual payment and fulfilment is

completed offline in tradtional ways.

N E W M A R K E T S & I n t e rn e tChina – Population 1,314,000,000

162,000,000 Internet users = 12,3 % Internet penetration

N E W M A R K E T S & I n t e rn e t

China – Population 1,314,000,000

Reasons why Chinese users do not buy online• Fraud concerns by both sellers and customers. Fear to be cheated =

internet is “full of traps” and too many false ads.• Internet has not a good reputation (lack of confidence)• Uncertainty about security of online shopping: 61,5 %• Little guarantee of quality and after-sales service: 45,7 %• Concerns about privacy: 28,2 %• Insufficient conditions: 23,3 %• Inconvenient payment methods: 21,7 %• Delivery delays: 10,7 %• Uncompetitive pricing: 10,2 %• Lack of asortment and quantity of goods: 8,3 %

N E W M A R K E T S & I n t e rn e t

China – Population 1,314,000,000

Asia Rising• 22 million additional Chinese middle class consumers per

year, that could be about 500 million middle class by 2015• In 2004, every US citizen made on average 2.2 air trips per

year. The corresponding figures just 0,02 trips per year for India and 0,06 for China.

• World of mouth is a part of travel culture in China (Travel information comes 54% word of mouth, 35 % travel agent, 6 % advertisement and 5 % internet)

N E W M A R K E T S & I n t e rn e t

China – Population 1,314,000,000

Inhibitors of outbound On-line Travel• Visa Restrictions• Limited consular capacity to deal with Visa’s• Lack of passports• Limited Credit Card proliferation• Licence Restrictions• Internet Infrastructure • Technology available is not matched by current infrastructure• Chinese character domains• Inherent distrust of On-line

N E W M A R K E T S & I n t e rn e t

China – Population 1,314,000,000

eCommerce in China is still in its infancy• China lacks an online payment system for handling credit card transactions in a safe, efficient manner.

• Poor logistic and distribution networks restrict how far apart sellers and buyers can be.

• These two problems have made cash-on-delivery (COD) the most popular online payment method (34 %). Only ¼ (26%) of online buyers use credit/debit cards, while 31 % use bank transfer.

• Tough to deliver physical documents once a sale is made online, slow postal service or high costs for private express services are still the norm.

• The People’s Bank of China issued a new circular with a requirement that the value of a single online purchase should not be more than RMB 1000 (USD 123) and that of a daily accumulated purchases should not exceed RMB 5000 (USD 618). This hits the travel industry badly as airline and hotel online bookings easily exceeds USD 123 per transaction.

N E W M A R K E T S & I n t e rn e t

China – Population 1,314,000,000

Chinese outbound travel 2007 (by the Chinese Tourism Administration)• China’s outbound tourists reached 40,9 million which represents 18,63 % increase from 34 million in 2006

• 36,3 million Chinese traveled within Asia, which accounts for 91 % of all outbound travel by Chinese. Most popular: Hong Kong, Thailand, Singapore.

• The remaining 9 % is devided amongst Europe, Americas, Oceania and Africa. Travel to non-Asian destinations totalled 3,8 million. Europe received 2 million Chinese visitors in 2007, which is an annual growth of 7,4 %.

• Most popular in Europe are: UK, France, Germany, Italy• According to Gullivers, Scandinavia is about 2 % of their total sales out of

China. Government & business trips very common, very little leisure travel.• Brand names are important.• Price sensitive visa! Tour operators use visa waiting time to renegociate

rates. Clients have take risk of not getting visa and therefore loosing deposit payments to online sales or travel agent.

N E W M A R K E T S & I n t e rn e t

India – Population 1,129,000,000

Internet and online business situation in India:• Half of all eCommerce in India is eTravel• 84 % of online buyers have bought travel online, but mostly low

value transactions• Air + Rail dominance, over 80 % of online market. Very little

international travel online. • Railway is the leader in internet sales (otherwise big waiting lines

and hard to get tickets)• Indian want discount!!!! Indians want human contact to negociate a

better deal (tradition & bargaining culture) and therefore internet not ideal for international travel.

• Online sites used a lot for research and price comparisons; actual purchase still through trusted travel agent.

• Reward points are important – not offered enough online

N E W M A R K E T S & I n t e rn e t

India – Population 1,129,000,000

Internet and online business situation in India:• Best chance: to sell via large online tour operators/whole sales• Online hotel business – very slow and Indians want brand names!• Language barriers (over 25 languages and dialects)• Internet penetration largely restricted to urban markets• Low speed dial-up connections slowing growth• Credit card penetration still low• Reluctance and security issues to use credit cards for online

payments• How big is the international market? 7 Mio international travellers

in 2007, and 50 Mio international travellers expected by 2020. • Most popular international travel: Singapore, Switzerland, USA

N E W M A R K E T S & I n t e rn e tRussia – Population 145,000,000

Internet and online business situation in Russia:• 40 million internet users expected in 2008• 2007-2009 up to 95 % more credit cards, 7 % more debit cards and

145 % more pre-paid cards issued = ability to transact online• Outbound travel: a strong desire to see the world. 10-15 % growing

per year to 2012. Most popular leisure destinations: Turkey, China, Egypt, Finland, Ukraine, Italy, Spain, Germany, Greece, UAE, Thailand

• Problems: Passport – lengthy and relatively expensive, visas and language.

• Hotels booked on internet: 2 % of total volume• Tour Packages sold online: 4 % of total volume• Russian Online Tour Operators sell 45 % airlines, 25 % hotel, 25 %

tour packages, 5 % ground services

N E W M A R K E T S & I n t e rn e tRussia – Population 145,000,000

Marketing tactics & challenges in Russia:

• Price cuts and special offers - mainstream• Quality of service & choice – 4 & 5 star level• Internet advertizing growing 150-200 % per year while traditional

media channels 30-35 % growth• Low brand awarness – many intermediaries are developing their

own brands.• Advertizing costs are high. Travel trade shows and travel magazins

still popular and effective.

N E W M A R K E T S & I n t e rn e tBrazil – Population 187,000,000

Internet and online business situation in Brazil:• 43 million internet users in 2006• In 2006 outbound tourism grew over 23 % from 2005, but domestic

travel is 10 times more than outbound volumes.• In 2006: 6,8 million international trips. The tourism industry still in

its infancy and far from reaching its potential.• In 2007 internet shopping grew 57 % from 2006, online tourism

shopping grew 12 % to USD 400 millions.• Excellent banking and financial system, 79 million credit cards in

2006 and Brazilians are big users of plastic.• Big potential for online travel. Huge demand. Quick adopters of new

technology and payment systems well developed, but inventory is lacking online.

N E W M A R K E T S & I n t e rn e t

Renato GruenenfelderFosshotels & Inns of Iceland

Thank you

Danke schön

Takk fyrir mig

Gracias

Obrigado