After COVID19 Travel - Lessons From China

After COVID-19:
Travel Sector
Lessons from China
Sector Sharing Session

May 2020
Agenda
How It Is Playing Out in China: Impact of COVID-19
How the Travel Industry Navigates the Crisis

Forward-Looking Implications
| © OC&C Strategy Consultants 2020
2
Overview Impact of COVID
As the situation in China de-escalates, we are able to get a first glimpse of

impacts and reactions emerging from the crisis
Proliferation of Coronavirus (COVID-19): China1 Data as of 4th May
# of Active Cases2 (# of Confirmed Cases - # of Deaths - # of Recoveries)
From peak of crisis… …to gradual recovery

100,000
Full Quarantine / Work Resumes within Gradual Reopening Gradual De-escalation Restricted Most Wuhan Coronavirus
Lockdown Most Provinces of Retail Outlets/ of Public Heath Foreign Nationals Lockdown Ended
of Hubei & Wuhan (end of extended CNY) Restaurants Alert Statuses from Entering China 8th Apr
26th January 9th Feb Mid Feb – Now Late Feb – Now 28th Mar
Cases in the rest
of the world
continue to rise
and the number
of active cases
Factories Resume Apple Store Announcement in
Full Lockdown
Ops Reopening SH
Borders Closure End of Lockdown has reached
2.17mn in 4th
Sharp Cut in Gradual Resumption May…
Rail and Flight of Rail and Air
50,000 Capacity Transport
Late Jan Late Feb – Now
…whereas the
situation in
Mainland China
has been
Transport
stabilized – limited
Transport Halt number of mostly
Resumption
imported cases
China1
0 c.530
2020/1/122020/1/192020/1/26 2020/2/2 2020/2/9 2020/2/162020/2/23 2020/3/1 2020/3/8 2020/3/152020/3/222020/3/29 2020/4/5 2020/4/122020/4/192020/4/26 2020/5/3
1. Hong Kong, Macau and Taiwan figures have been incorporated into the China figures
2. Numbers used taken from CNBS before 22nd Jan, taken from John Hopkins database after 22 nd Jan
Source: Johns Hopkins University, CSSE, Chinese National Bureau of Statistics, Desk Research, OC&C Analysis | © OC&C Strategy Consultants 2020
3
Overview Impact of COVID
China imposed a ‘health code App’ to monitor residents’ level of exposure to

COVID-19 and impose respective restrictions
Health Code in China Indicative
Commentary
 Source of information:
health commission, public
security and communications
Green: Orange: Red: administration department,
No Restrictions Under Observation Strict Quarantine telecom companies etc.
Confirmed positive virus  How to obtain the digital
No COVID-19 No COVID-19
Health Condition: status or uncleared ‘health code’: official local
symptoms symptoms
virus status government App, Alipay,
WeChat, carriers App etc.
Over 14 consecutive Return from high risk
Close contact with
Travel Record: days within a low risk areas and under 14
positive patient
city days
Level of potential
contact with positive Very Low Low High
patients: Official App Alipay WeChat
by gov.
Different by  Usage occasions:

city/establishment – communities, public
Quarantine required –
Limitation on potential restrictions transportation, shopping
No restrictions either at home or at
Activities on entering malls, department stores,
designated facilities
malls/restaurants and restaurants, etc.
public transport
Source: Desk Research, OC&C analysis | © OC&C Strategy Consultants 2020
4
Signs of a Recovery
Transport and accommodation capacity are beginning to be brought back

online as restrictions are being lifted
Recovery of Transport and Accommodation Capacity
China Domestic Flight Capacity Operation & Occupancy Rates: Hotels in China1, Feb – Mar 2020
Mn Seats % of hotels in operation, % of room occupied
70
65
60 66%
Average Occupancy Rate2:
55 c. 50 – 55%
50
45
40
35
International flights capacity 30
remain low (c.800k seats in Mar 25
2020 vs c.4mn in Mar 2019) 20 By 22nd April, the hotel operation
due to virus condition and travel rate in China reached c.85%, and
15
ban internationally 18% most of the top-tier cities have
10
exceeded 90%
5
0
02/03 02/10 02/17 02/24 03/02 03/09 03/16
Operation Rate Occupancy Rate
The recovery of capacity is partly driven by the relaxation of domestic restriction on travel - e.g. In April, Beijing
government relaxed the regulation of mandatory quarantine from covering all people entering Beijing from other areas of
China, to exempting people travelling forth and back from Jin-ji area (津冀地区)
1. The occupancy rate is based on the operating rooms
2. Based on average year-wide occupancy rates in 2018 – 2019
Source: CAPA, OAG, Zhuzhe, Desk Research, OC&C analysis | © OC&C Strategy Consultants 2020
5
Behaviour Changes Post-COVID
We surveyed c.700 leisure and business travellers to understand COVID’s

impact on travel behaviour
Chinese Traveller Survey Details and Sample Distribution
Leisure Traveller Survey Business Traveller Survey
Survey Time: Survey Time:

 April 09-14, 2020  April 09-13, 2020
Geographical Coverage: Sample Characteristics:
 Tier 1 cities: Beijing,  Occupation: Covering respondents in various professional
Shanghai, Guangzhou service sectors including finance (46%), real estate (9%),
consultant/headhunt (7%).
 Tier 2 cities: Xi'an, Beijing
Hangzhou, Chengdu  Position Seniority: Covering employees of different
seniority: 18% of senior management, 42% of middle
Sample Requirement:
Xi’an management level and 40% of non-managerial staff
 Travelled out of resided
 Company Type: Covering a fairly even split of employees
city at least 2 times in Shanghai
from state-owned enterprises (41%), private firms (34%)
past 12 months
Hangzhou and MNCs (24%)
(exclude hometown Chengdu
visits during CNY or  Travel Frequency before COVID-19: Covering mostly
national holidays) Guangzhou frequent business travellers, with 18% travelling more than
once a month and 53% travelling once every two months
prior to Covid-19
Source: OC&C Leisure and Business Traveller Survey, OC&C analysis | © OC&C Strategy Consultants 2020
6
Behaviour Changes Post-COVID
There are five behavioural changes among Chinese travellers that are
emerging in this immediate recovery period
Behaviour of Chinese Travellers After COVID-19
1 There is noticeable pent-up demand especially in Leisure travel, but

recovery of travel back to ‘normal’ will still take some time
2 Business travel in particular is likely to take a longer recovery period, with

some aspects never returning to normal with the rise of substitutes
Overall Leisure travel budget remains relatively constant – with lower

3 frequency made up by higher spend
4 In the short to medium term, there is a shift towards domestic and short-
haul locations
We also see a greater uptake of more ‘socially distant’ and independent

5 travel methods
7
1 Behaviour Changes Post-COVID
From a consumer perspective, there appears to be signs of recovery of

leisure activities across the board
Recovery of Various Leisure Activities1 Leisure Traveller Survey as of Apr 14, 2020
% of respondents, n = 600
Recover within 1 month Already recovered
94%
90%
10%
12%
71%
62%
59%
54%
33%
32% 22%
42% 42%
84%
78% 31%
34%
27%
30% 30%
22% 21%
39% 37% 17%
30%
27% 16% 10% 10%
23% 9%
15%
12% 12% 12% 10% 8% 8%
5% 2% 0%
0% 0% 1% 1%
Play video Order food Non- Dining out Watch Drinking Health & Going Travel Group Visiting Karaoke Attending Shows & Visiting Cruise
games delivery competitive e-sports out (e.g., beauty to gym (incl. day Sports theme parks & Bars live Concert cinema holidays
sports games tea, coffee treatments trips) sports
shops) events
1. How long does it take for you to restore the leisure activities (that you’ve done in the last 12 months)?
2. Once the outbreak is completely over, will you consider cruise holidays in the next 12 months?
Source: OC&C Leisure Traveller Survey, OC&C analysis | © OC&C Strategy Consultants 2020
8
Appetite towards travel appears positive – there is strong pent-up demand
Recovery of Travel Leisure Traveller Survey as of Apr 14, 2020

Travel Plans Between Apr 2020 and Feb 2021(CNY)1 Delta vs Actual
% of respondents, n = 600 The number of domestic travellers in the recent holidays
2019 Travel (both indicates the same strong pent-up demand, but international
Intl. and domestic) travel remains a stalemate under the international travel ban
Labour Day
16% 11% 5% 32% -43%
May 1
April – Qingming
Summer Holiday
34% 18% 2% 54% -12% 43mn domestic
July - August
travellers in 2020 vs
112mn in 2019
National Day
October 1
52% 22% 3% 77% -9% ( = c. -60%)
Crowds in Huangshan
during Qingming 2020
Christmas/ 1%
26% 34% +6%
New Year 7%
May – Labour Day

2021 CNY
39% 13% 2% 54% N/A
Feb.11 2021
115mn domestic
Other time
travellers in 2020 vs
2% 195mn in 2019
between now 47% 57% +4%
and 2021 CNY
8% ( = c. -41%)
Crowds in Taishan
Plan to travel, have not decided on destination during Labour Day 2020
Decided on destination, have not booked the trip
Planned and booked the trip
1. What does your travel plans for the next 9 months look like?
9
Despite the short-term release of demand, the longer-term business

environment could be difficult due to the potential economic recession
Longer Term Concerns Over Slow Recovery and Economic Recession
China Real GDP Growth

%
“Covid-19 has posed a more severe
6.4% 6.2%
and sudden financial impact on our 6.0% 6.0%
business than 9/11 and 2009 financial
crisis combined…we cannot predict
today how long this crisis will last”
CEO of Marriot International
“We’re seeing green shoots in hotel First quarterly decline since 1992
occupancy figures, but we must stress Global outbreak is expected to
that these are only early signs of a create spillover effects and would
recovery that is likely to develop continue to put pressure on the
slowly” economy
STR Regional Manager for North Asia

-6.8%
2019Q1 2019Q2 2019Q3 2019Q4 2020Q1
10
We have also seen some positive signs in business travel – work has
resumed, and business travel is beginning to pick up
Work Resumption and Business Travel Activity1 Business Traveller Survey as of Apr 13, 2020
% of respondents Resume work Return to office Begin to travel Daily confirmed

for business cases
100% 5,000
90% Feb 10: Most regional 4,500

governments (e.g.
Shanghai) permits
80% companies and factories 4,000
to resume work
70% 3,500
60% 3,000
50% 1) c.70% of the respondents travel 2,500

once every two months or more Pre-
COVID, implies a c.28% recovery
40% 2,000
2) Most of these resumed travels
30% (80%) are for external activities (e.g. 1,500
business development and sales)2
20% 1,000
10% 500
0% 0
01/27 02/03 02/10 02/17 02/24 03/02 03/09 03/16 03/23 03/30 04/06 04/13
1. When did your employer resume work (include WFH)? On which day did you return to the office? If you have travelled for business purpose after the outbreak, when is the first business travel?
2. What is the main purpose of your first business travel after covid-19?
Source: OC&C Business Traveller Survey, OC&C analysis | © OC&C Strategy Consultants 2020
11
Full recovery is expected to take a longer time to recover, in particular for

international business travel
Business Travellers’ Confidence Index: Extent of ‘Reversion to Normal’ over time1 Business Traveller Survey as of Apr 13, 2020
Index out of 5 (1 – Completely Cannot Recover to Normal; 5 Completely Back to Normal), n = 57
Average
Rating
5.0
The previous ‘normal’
4.5
4.0
In order of
Internal Activities2
increasing
3.5 External Activities3 confidence in
Trainings the ability of
Firm Building these business
3.0
Social Events activities to
Exhibition ‘normalise’
2.5
International Travel
2.0
1.5
1.0
As of April 13 In next one month By end of 2020
Timing
1. To what extent do you think that these business travel activities will revert back to normal across these three timestamps?
2. Internal activities are defined as activities that relate back to internal parties (e.g. internal meetings, branch visiting)
3. External activities are defined as activities that have a sales / client / external party element (e.g. meeting with clients)
Source: OC&C Business Traveller Survey, OC&C analysis | © OC&C Strategy Consultants 2020
12
More importantly, some parts may never return to ‘normal’ – e.g. video
conference meetings may replace a significant part of business travels
Business Travel Adjustment Protocol and Viability of VC Business Traveller Survey as of Apr 13, 2020
as an Alternative For Travel
Adjustment Protocol of Business Travel During COVID1 Viability of VC As Alternative in Future2
% of respondents, n = 57 % of respondents, n = 57
Replaced with Video Conference Delayed Cancelled
‘Internal’ Activities
66% 21% 13% 22%
(e.g. Internal Meetings)
c.70% of respondents
‘External’ Activities gave positive feedback on
(e.g. Sales, Client 63% 29% 8% 24% the VC experience
Increasing level of substitutability
Meetings)
Trainings 56% 19% 26% 39%
“Many companies have

invested in online office
Exhibition 50% 13% 38% 20%
platforms and related
training during this period,
which will make them
Firm Building Events 36% 29% 36% 15% more likely to use such
features in the future”
Professor, Cheung Kong
International Travel 30% 27% 42% 37% Graduate School of
Business, Beijing
1. During the outbreak, what did you do for different travel plans?
2. Once the outbreak is over, will you continue to use VC as an alternative for offline travel? The percentage shown is the % sum of “replace half of my travel”, “replace most of my travel” and “completely replace my travel”
Source: OC&C Business Traveller Survey, OC&C Leisure Traveller Survey, OC&C analysis | © OC&C Strategy Consultants 2020
13
Overall travel budget though remains relatively constant – with increased

spend within each trip making up for lower frequency of travel
Leisure Travel Spending Patterns After COVID-19 Leisure Traveller Survey as of Apr 14, 2020
Leisure Travel Budgeting Changes After COVID-191 Ways to Spend the Money Saved from Leisure Travel
% of respondents, n = 600 % of respondents, n=119
Investment
53% Personal Development
...as I plan to Consumption
spend more 18%
45%
“I will increase each time
my travel
spending…”
...as I plan to 34%
travel 6% 31%
more frequently
It will 19%
“No change” be roughly 46%
15% 14%
the same 13% 12%
9% 8%
6% 6%
...but will 5%
spend them 20% People have a 2%
“I will 1%
elsewhere strong tendency to
decrease my
Skincare & Beauty
Jewellry
Automobile
Entertainment
Education & Training
Housing
Food & Beverge
Apparel & Shoes
Handbags
Watches
Cultivating hobbies
Other
Financial investment
Home Furnishings
Alcohol & Spirits

Electronics
save up (70bn RMB
travel of savings channeled
spending…” ...and I don’t into the China banking
plan to spend 11% system per day in
them elsewhere 2020 Q1)
1. Will you increase or decrease your travel budget?

2. How will your spending habits within the vacation transform?
14
For leisure trips, there is a shift towards domestic destinations in the next 6
months, while international travel may experience a surge later this year
Destination Preference: Domestic vs. International Leisure Traveller Survey as of Apr 14, 2020
Past Demand Upcoming Demand

% of respondents that travelled last year (2019)1 % of respondents planned to travel this year (2020)2
n = 600 n = 290
Labour Day A shift towards

91% 9% 96% 4%
(Week of 1st May)
domestic travel
over the next 6
months, as
Summer Holiday indicated by a
65% 35% 78% 22%
(Jul & Aug) higher percentage
of domestic travel
in upcoming
National Day demand relative to
67% 33% 82% 18% the past demand…
(Week of 1st Oct)
Christmas/
…where there is a
New Year 73% 27% 61% 39%
(Dec + Jan)
potential
retaliatory
consumption in
Chinese
international travel
74% 26% 57% 43% later this year
New Year3
Domestic International Domestic International

1. If you have travelled from May last year to January this year, where did you visit?
2. You mentioned that you have some travel plans in the next 9 months. Where is your target destination and when do you plan to go?
3. Comparing 2020 CNY against 2021 CNY
Source: OC&C Leisure Traveller Survey, OC&C analysis OC&C Template (2017) | © OC&C Strategy Consultants 2020
15
For international travel, it appears that mid-haul destinations in Asia and

some ‘less hit’ European countries are becoming more desired
Destination Preference Before and After COVID: International Countries Leisure Traveller Survey as of Apr 14, 2020
Top 10 International Travel Destinations (by Country) for Chinese Travellers1,2,3
Rank- ∆ Ranking4 Locations on a Rise and Recent Consumer Commentary4

Region/Countries
ing 2020 vs. 2018
Increasing level of popularity in 2020 (post-COVID)
1 Japan 1 “Japan will be my first choice to go abroad as the COVID-

2 Singapore 2 19 seems to be more controlled and their residents have
the consensus of wearing masks!”
3 Thailand 2 Japan
4 France 5
5 Korea 2
6 Malaysia 1 “As Singapore should be relatively safe to visit…it is a

southeastern Asian country, with the relatively higher
7 Italy 2
temperature, from my perspective, the virus is harder to
8 Germany 3 Singapore survive.”
9 Turkey 4
10 UK 4
…
“I really like the style of this country (France), it is a must-go

13 Spain 1 for my next trip…the COVID-19 condition does not seem
…
that bad there right now”

France
15 USA 9
Asia Europe America

1. Based on OC&C Leisure Traveller Survey
2. Which of these cities will be your most wanted overseas destination after the outbreak? You may select up to three
3. Excluding Hong Kong and Macau
4. 2018 ranking based on the number of inbound Chinese travellers recorded by WTO
16
Tourists are shifting towards scenic destinations from dense city locations,
while spend is shifting towards food & attractions
Destination Preference Before and After COVID: Domestic Locations Leisure Traveller Survey as of Apr 14, 2020
Top 10 Domestic Travel Locations (by City) for Chinese Travellers1,2
Travel Spend Allocation After COVID-191, By Category

Rank- ∆ Ranking3
Cities in China % of respondents, n = 600
ing 2020 vs. 2019
1 Lijiang 14 Food 5% 49% 46%

Increasing level of popularity in 2020 (post-COVID)
2 Qingdao 11
Tourist attractions 15% 53% 32%
3 Chengdu 3
4 Xi'an 5
Transportation 21% 51% 29%
5 Suzhou 5
6 Hangzhou - Shopping 20% 52% 28%
7 Chongqing 5
Accommodation 23% 52% 25%
8 Guiyang 5
9 Beijing 8
Theme parks 29% 50% 21%
10 Shanghai 7
Sightseeing Sanya, Hainan appears to be another Performance & shows 62% 31% 7%
popular destination for its unique sun-and-
Food
beach experience (not included in the survey
Cultural/City as historically not among the top attractions) I will spend less Same as before I will spend more on this
1. Based on OC&C Leisure Traveller Survey
2. Which of these cities will be your most wanted domestic destination after the outbreak? You may select up to three
3. 2019 ranking based on the “Top Cities of Tourism Ranking” by Jinri Toutiao, Chinese leading news & information platform
4. Top Attractions based on Mafenggwo attraction ranking
17
Chinese travellers will also adopt more independent travel methods in a

further bid to avoid ‘crowds’
Preferences in Format of Leisure Travel After COVID-191 Leisure Traveller Survey as of Apr 14, 2020
Less than before Same as before More than before
Based on a survey conducted by

Ctrip and China Tourism Academy,
Independent Tour
7% 43% 49% c.63% of respondents would prefer
Domestic
independent tour/private tour vs.
c.37% for group tours for travelling
Independent Tour after Covid-19
45% 39% 16%
International
Small Tour Groups “I would prefer independent tour like

26% 54% 20%
Domestic going for a road trip on my own…that
would be a safer method to travel in
such circumstances”
Small Tour Groups
48% 42% 11%
Overseas Consumer Feedback
Large Tour Groups Large group tour is

65% 29% 7%
Domestic perceived with “High-end domestic independent
increasing risk of tour would be on a rise after Covid-
infection in a crowd 19, as people are still concerned
Large Tour Groups environment
76% 21% 3% travelling abroad or in group”
Overseas
Chairman of Ctrip
1. After the pandemic, how will you change your preference on ways of travel?
2. When do you prefer to travel for leisure?
18
Agenda

19
Accommodation: China hotel market consists of different tiers of hotel, with

the mid-market segment gradually gaining share
China Accommodation Landscape by Segment
Retail Value RSP, RMB Bn
397 551
Covering mostly 4- and 5-star hotels;
Luxury and dominated by international hotel brands
Upscale Hotels with a strong market position among
Luxury and business and international travellers
31%
Upscale Hotels
40%
Covering 2- to 4-star mid-priced hotels;
Mid-Market rapidly gaining share in the China market.
Hotels Both local and international chains
competing heavily
Covering mainly 2-star hotels or below;

Mid-Market gradually losing share to higher price point
39% Budget Hotels
Hotels hotels due to the trend of consumption
29% upgrade
Covering hotels without star-rating,

Unrated Hotels gradually losing share ; signs of
consolidation
Budget
19% 17%
Hotels
Booking platform for B&B Unbranded accommodations that cover a
Unrated wide spectrum of price points; gaining
7% B&B
Hotels popularity along the rise of various B&B
12%
B&B1 specialized booking platform
6%
1%
2014 2019
1. Including B&B type of lodging, hostels, motels, inns, guesthouses, campsites etc.
Source: Euromonitor, Desk Research, OC&C Analysis | © OC&C Strategy Consultants 2020
20
Booking Agency: Both OTA and brand direct channel are growing rapidly in
replacement of traditional offline booking channels
China Booking Channel Split Examples Only
Retail Value RSP, RMB Bn
505 656
3%
Most chain hotels have
16% Online Direct set up their hotel direct
13%
Hotel booking channels via
Direct official websites and
HomeInn WeChat mini
programmes
35%
Online
OTA
OTA players have been
gaining channel share
rapidly, with the largest
OTA
OTA in China, Ctrip,
having more than 300m
84% users
Offline traditional travel

50% agencies are mostly
Offline
state-owned, with an
Offline Traditional extensive offline
Travel Agency presence (CITS has
3,000+ locations) but
has not ventured to
online successfully
2014 2019
Source: Euromonitor, Desk Research, OC&C Analysis | © OC&C Strategy Consultants 2020
21
Travelers are switching from offline TTA to OTA after the crisis, as part of the
longer term evolution of travel booking channels in China
Booking Channel Preference After COVID-19
Preference on Booking Channel After COVID-191

N=600
I will use it more Same as before I will use it less OTAs emerged in China in early 2000s and have been
growing drastically over the past decades, benefiting from:
Online Travel
52% 42% 6% 1) Price Transparency and Comparison
Agencies
2) Greater Range of Product Availability

Brands’ Official websites
32% 58% 10%
/APPs
3) Transparent Customer Review System
Brands’ Wechat
21% 63% 16%
Accounts / Miniprograms 4) Pricing Advantage and Discounts (removing
wholesale and sub-agents)
Traditional Offline Travel

5% 30% 66%
5) Behavioural-based Recommendations
Agencies
1. Will you use these booking channels more or less after COVID-19?
22
Key players in travel industry are reacting with the following principles to
overcome the predicament
We believe that actions with three key

characteristics will define businesses
during this trying period
Resilience Bravery Kindness
This will test your resilience – Unprecedented times call for You will be remembered for
acting with pace and agility will bold measures; use the crisis how you engaged with your
be critical to take decisions that in more stakeholders: your customers,
normal times could have been employees and society at
impossible large
23
Resilience
Hotels and travel agencies have taken various measures of “Resilience” to

minimise losses and maintain their business integrity
Selected Measures of“Resilience” Non-exhaustive
International Local
• Discounts on basic packages

Discounts and
• Value for money in all-in-one bundles
Additional Value
• Flexible terms
Offer “Quarantine • Offer longer-stay “quarantine packages” for

Packages” both individuals and corporates
Resilience
Lock in Future • Advance-sell packages with attractive prices

Demand and flexibility of redemption
• OTAs monitor the hygiene practices of

Hygiene Monitoring hotels/attractions to provide assurance to N/A
travellers
Objective
Temporarily Close • Close hotels partially or entirely
To Minimise Loss, Hotels and • Temporary pay-cut for management
Maintain Cash Optimize Staffing • Encourage unpaid leave
Flow and Secure
the Integrity of the Work on Internal • Intensive staff trainings
Improvements • Refurbish hotels
Business
Reduce Spending, • Reduce marketing spend

and Conserve Cash • Suspend dividends to shareholders
Source: Desk Research, OC&C Analysis | © OC&C Strategy Consultants 2020
24
Resilience
Price discounts, extra benefits, and favourable booking terms are offered by
hotels to incentivize consumer demand
Illustrative Examples of “Resilience” Illustrative
Price Discounts All-in-one Packages Flexible Terms
 Hotels are offering deep discounts  Hotels are also offering extra  More flexible cancellations and
especially on non-public holidays benefits to attract guests, including terms are applied as well
– E.g. Sheraton Hangzhou Xixi room upgrade, free breakfast, – E.g. free cancellation policy
offers close to 50% off for family lunch/dinner voucher, SPA and almost becomes the default
rooms other recreational vouchers option for hotel offerings
– E.g. W Hotel in Shanghai offers
– And many hotels delayed
“ALL IN W” deal including SPA
vouchers, free breakfast and free check-out time to 2-4pm
drinks at the bar
With:
Two SPA
Coupon
Breakfast Free Cancellation
Buffet
Bar Drinks
– E.g. Sheraton Hangzhou Xixi

Check-out before 4pm
offers packages including wetland
park tickets and food basket  Also, Ctrip launched the “Future
Trips” scheme to allow customers
From 1596 to purchase tickets for
consumption in the next 4-8
months, which can be refunded
even after the tickets expire
25
Resilience
Hotels and OTAs also promote advance packages to attract consumers to

make early bookings, thus allowing them to better forecast future demand
Lock in Future Demand Leisure Traveller Survey as of Apr 14, 2020
When Do You Prefer To Book Your Trip After COVID-191

Hotels are promoting “Advance-Sell” packages
N=600
52%
 Wyndham offers advance travel packages that can be

redeemed anytime before 30th Sep 2020
– Price goes down as low as 213 RMB per night
– Applicable to 70+ hotels in China
26%
22%
 Meituan launched advance booking discounts in collaboration

with hotels including Hyatt, Jinjiang and Huazhu
I will book earlier My booking time I will postpone – Larger discount for earlier booking (e.g. Up to 40% off for
than before does not differ my booking to
from before make more "last-
14 days earlier; 30% off for 7-13 days earlier; 25% off for 3-
minute"bookings 6 days earlier)
1. When Do You Prefer To Book Your Trip After COVID-19?

Source: OC&C Leisure Traveller Survey, Desk research, OC&C analysis | © OC&C Strategy Consultants 2020
26
Resilience
To give confidence to customers, Meituan, one of the leading OTAs in China,

take the initiatives to monitor the hygiene practices of hotels/attractions
Case Study of Meituan
Meitiuan Hygiene Monitoring

Scheme
Short-cut on Customers can
the main page check on the
of the APP for sanitation
customers to practices of the
directly access hotel, which are
 Meituan launched the “Safe to the “Safe to updated on a
Stay” hotels daily basis
Stay” (安心住) and “Safe to Visit”
(安心玩) schemes to allow hotels
and attractions share their hygiene
practices with Meituan and their
customers
 Qualified hotels would be labelled
by Meituan as “Safe and Clean to
Stay” (净安心房) and customers
are able to access to the photos “Safe and clean
to Stay” hotels Hygiene
and records showcasing the
are clearly practices
hygiene practices through the labelled when related to staff
Meituan APP customers are management
browsing are also shared
 The proof of hygiene practices is through hotel on the APP
required to be regularly updated in options
order to maintain the status
27
Bravery
Hotels and travel agencies ventured into new territories during this period,
staying relevant through innovative and “Brave” actions
Selected Measures of“Bravery” Non-exhaustive
International Local
Innovate Service • Launch/reinforce “contactless” service model

Model • Further digitalize hotel operations BTH
Hotels
Bravery • Introduce delivery services

Expand Food • Offer special set menu esp. single person
Services meal
• Promote meal cards for non-staying guests
• Build and expand retailing platform to sell

travel peripheral products
Push Retail N/A
• OTAs retailised by selling products of
destinations
Objective
• Increase engagement with customers via
Enhance Customer
To Maintain and direct channels
Engagement
Expand Revenue • Utilize new tools, e.g. livestreaming
Stream with Creative
Sales and Customer
Engagement Strategy • Lobbying the government for support
Forming New
• Pooling marketing spend to promote luxury
Alliances
tourism in Hong Kong
28
Bravery
COVID-19 has accelerated the shift towards more “automated” and

“contactless” operations
Examples of “Automated” and “Contactless” Hotel Operation
Alibaba launched its first automated hotel Huazhu and its affiliated Mercure Hotels
“FlyZoo Future Hotel” in Hangzhou in expanded its contactless services, incl.
2018 to showcase the technologies that can self check-in, robot delivery and 'zero-
be delivered to the hotel industry (e.g. AI, second' checkout from 1,600 hotels to
robotics, cloud and big data capabilities) 5,700 hotels during the Covid-19 crisis
Facilities in the Flyzoo Hotel Facilities in Huazhu / Mercure
Room Facial Key Auto Drink Making Contactless Check-in Smart In-room Service
Dine-in Service Mobile Control and Check-out Robot Delivery Contactless Fast Check-out
29
Bravery
With fewer guests, hotels are seeking new revenue levers and expanding
food services to non-staying guests
Expand Food Services
Take-out Delivery Special Set Menu Meal Card
• Hotels started food delivery • Some hotels launched the special • Some hotels offered breakfast
service through 3rd party delivery set menu (fully cooked meals) and /lunch /dinner card at a very
platforms such as Meituan/ Eleme, ‘semi-cooked’ ingredients during attractive price (e.g. RMB 588 for
at a lower price with a typical COVID-19 and sold it through both one-month breakfast at Marriott)
discount of 10%~50% restaurant and delivery
Example: Shangri-La and Westin Example: Grand Metropark Hotel Example: Marriott offered a breakfast
opened delivery services through 3rd designed a special set menu during buffet card for 588 RMB per month,
party delivery platforms COVID-19 period for delivery and eat-in applicable to 148 hotel outlets in China
30
Bravery
Also, hotels as well as OTAs are heading into retailing, selling travel
peripherals and local specialties on digital platforms
Push Retail
Combine Retailing with Hotel Selling Products from International

Cross-sell to Existing Customers
Experience Destinations
X X
Midian
A mid-high end A beauty forum and A leading Chinese Integrated full- Leading OTA in China
fashion hotel, part of shopping app OTA focusing on category discounted with over 300mn
Plateno Hotel Group launched by Watsons leisure travel e-commerce platform registered users
 XANA Hotelle pushes retail in hotel space  LY.com partnered with Midian to leverage  Ctrip first launched the “Global Shopping”
and proposes the idea to sell everything on travel agents’ customer base in (全球购) in 2014, allowing customers to
that customers could have experienced in WeChat to cross-sell products, and purchase products from over 45
hotel achieved daily sales exceeding RMB 10mn destinations and over 6,000 merchants
on the 1st day of trial (1st Feb 2020)
– It has worked with Watsons since 2017  The E-commerce have likely become one of
to push the sale of beauty and personal – LY.com sent a few thousands of travel the major revenue streams during the
care products advisors to act as shopping advisors to global travel suspension
push sales
Products from international

destinations (e.g. Thailand,
Seoul) available for
purchase on WeChat Mini-
program and delivered to
Selling local home
specialities in LY.com agents
LY.com customer published ads on their
XANA Hotel Product Display WeChat group WeChat moments
31
Bravery
Hotels and OTAs are using livestreaming to directly engage customers
Enhancing Customer Engagement
W Shanghai held a cloud party on Taobao Live to engage Ctrip leveraged livestreaming to connect with customers
consumers and promote travel packages
X X
 Ctrip adopts a “founder + vertical

 Shanghai W Hotel rode on its well- expert” livestream model to
known nightlife experience and educate the customer about the
organized an online party on hotel safety and protection
Taobao Live on 18th March, measures
featuring celebrities and star DJ
directly interacting with the  During the livestream, various
audience discounts or packages would be
offered to the audience
 The event successfully showcased
the brand image and facilities of W  For instance, Ctrip Chairman Liang
Shanghai Hotel, where it has Jianzhang livestreamed on Tik Tok
attracted over 1mn of audience on 23rd March, and attracted more
all over the China than 500k viewers with sales
over 10m RMB
32
Bravery
This echoes with the on-going effort of disintermediation by hotels, drawing

customers back to their ecosystems
Online Proprietary vs. 3rd Party Channels
More and more customers book …as partially driven by provision of features in the proprietary digital presence of major hotel
through hotel-direct channels… groups, which the third-parties are unable to provide
Share of total online booking value RSP Hotel Propriety Channel Features 3rd party typically does not offer
%
Hotel Direct
Hotel Late Chat Order
Price Pay at Digital
Intermediaries Hotel Brand Loyalty Check- Function Room Others
Match Hotel Key Card
Points out w. Hotel Service
27%
✓ ✓ ✓ 1 ✓ ✓ ✓ ✓ App check-
in/out
30%
35%
 ✓ ✓ 1 ✓    Vouchers
✓ ✓ ✓ 2 ✓  ✓  App check-
out
Travel App
73%
✓ ✓ ✓ 1 ✓    Cooking
App
70%
65%
✓ ✓ ✓ 2 ✓ ✓   Vouchers
✓ ✓ ✓ ✓    Short tour
ticket
2017 2018 2019

1. For selected membership
2. Available through manual input of special request
Source: Euromonitor, Desk research, OC&C analysis | © OC&C Strategy Consultants 2020
33
Kindness
Furthermore, hotels in China have played the role of socially responsible

corporates in combating COVID-19
Selected Measures of“Kindness” Non-exhaustive
International Local
• Free cancellation of bookings

Kind to
• Extension of membership status
Customers • Higher level of hygiene/disinfectant standards
Kindness
Kind to
Epi-center • Donate cash and emergency supplies to epi-centers
Residents and • Support and reward medical staff in Hubei
Medical Staff
• Provide rooms for self-quarantine

• Ensure adequate personal protective equipment and
Objective Kind to
implement remote working where possible
Employees • Guarantee on pay and non-redundant agreement for
To Fulfill the
Corporate Social ground working employees
Responsibility and
Maintain a Positive
Image
Kind to • Financial support to franchisees and suppliers, e.g.
Business longer payment period, short-term loans, waiver of
Partners management fees and or sales commission
34
Kindness
Both hotels and airlines have modified their offerings to ensure the safety of
customers
Examples of Measures to Lower the Risk of Inflection in China Non-exhaustive
Hotel Airline
Sanitation Temperature Checking Sanitation Temperature Checking
Formed a dedicated
committee to design Mandatory checking Regular cleaning of Mandatory checking
standardized of temperature at the cabins and of temperature
cleaning procedures entrance of the hotel ventilation systems before boarding
Facility Closure Proof of Health Social Distancing Mask Wearing
Required virus test Allow passengers to Require the wearing

Closed gyms, spa results for guests choose to sit next to of masks during
centres and children from designated vacant seats if the flights except for
centres during crisis regions to check in plane is not full eating or drinking
Modification in Service Contactless Service Reduced Service (Catering) Reduced Service (Others)
Replaced the self- “Contactless” check- Replace hot meals

service buffet model in to avoid human with newly designed Stop providing
with ordering at the interaction food boxes to speed magazines, pillows
table (Covered in Bravery) up the serving process and blankets
35
Kindness
Leading players have also taken measures to safeguard the interests of key
stakeholders
Examples of Measures of“Kindness” Non-exhaustive
Both international and domestic hotels have made contribution in …as well as protecting the interest of different stakeholders
fighting Covid-19…
Kind to Epi-center Residents and Medical Staff Case Study on Huazhu
• Supplied hygienic items (e.g. hand wash, sanitisers)

Donated 5mn RMB to China Youth Kind to to customers
Development Foundation for combatting Customers • Implemented a strict 26-step room cleaning
Covid-19 in Hubei procedure to ensure the hygiene of the room
• Provided protective items (e.g. masks) to staff for
Donated 1.5mn RMB to China Red Cross to Kind to operating hotels
support the construction of temporary Employees • Promised not to lay off or reduce salary of junior
hospitals in Wuhan staff
• Reduced franchise fee and provided short-term
Kind to
Donated 10mn RMB to Wuhan Benevolent loans for franchisees
Business
General Association for combatting Covid- • Provided robots and other equipment for franchisees
Partners to practice contactless operation
19 in Wuhan
Case Study on Marco Polo Wuhan

Provided free accommodation for medical
staff and reporters in Wuhan • Adopted a lean operation model by retaining only
20% staff to serve guests under quarantine in
Wuhan (meanwhile, occupancy rate maintained at
Kind to 70%), lowering the risk to employees
Dedicated 15 hotels and over 1,000 rooms Employees • Required staff to observe mandatory periods of rest
in Wuhan for accommodating medial staff and encourage morning exercise to boost mental
health
36
Agenda

37
COVID and its impact on consumer behaviour will require businesses to

adapt accordingly
Post COVID-19 Key Implications for the Travel Sector Indicative
Take advantage of this opportunity to increase efficiency and flexibility of your operating
model – putting in place the economic model of the future e.g. increase use of automation,
accelerate investment in direct channels. Be ready for the impact of an economic recession and
a potential second wave of COVID challenges
Review product / commercial strategy to ensure effectively targeting demand – focus

offering on products/services that customers value, improve curation, tailor propositions for
resilient customer segments (eg domestic travellers), identify ancillary/adjacent sources of
revenue to set up for long term success
Optimise digital strategy to maximise ability to access volume as demand returns – on the
one hand doubling-down on digital engagement and build direct traffic, renegotiate relationships
with travel agents, OTAs, and other intermediaries, and on the other hand engaging with
customers directly through digital
Re-enforce customer relationships investing in the reliability and trustworthy nature of

your brand – how you treat customers now will be remembered, put in place a strategy to drive
repeat bookings from existing customers, and think deeply about future points of difference
Source: OC&C analysis | © OC&C Strategy Consultants 2020
38
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After COVID19 Travel - Lessons From China

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After COVID-19:

Sector Sharing Session

How It Is Playing Out in China: Impact of COVID-19

How the Travel Industry Navigates the Crisis

| © OC&C Strategy Consultants 2020

As the situation in China de-escalates, we are able to get a first glimpse of

From peak of crisis… …to gradual recovery

China imposed a ‘health code App’ to monitor residents’ level of exposure to

Different by  Usage occasions:

Source: Desk Research, OC&C analysis | © OC&C Strategy Consultants 2020

Transport and accommodation capacity are beginning to be brought back

Operation Rate Occupancy Rate

We surveyed c.700 leisure and business travellers to understand COVID’s

Leisure Traveller Survey Business Traveller Survey

Survey Time: Survey Time:

1 There is noticeable pent-up demand especially in Leisure travel, but

2 Business travel in particular is likely to take a longer recovery period, with

Overall Leisure travel budget remains relatively constant – with lower

We also see a greater uptake of more ‘socially distant’ and independent

| © OC&C Strategy Consultants 2020

From a consumer perspective, there appears to be signs of recovery of

Appetite towards travel appears positive – there is strong pent-up demand

Recovery of Travel Leisure Traveller Survey as of Apr 14, 2020

May – Labour Day

Despite the short-term release of demand, the longer-term business

China Real GDP Growth

STR Regional Manager for North Asia

Source: Desk Research, OC&C analysis | © OC&C Strategy Consultants 2020

% of respondents Resume work Return to office Begin to travel Daily confirmed

90% Feb 10: Most regional 4,500

50% 1) c.70% of the respondents travel 2,500

Full recovery is expected to take a longer time to recover, in particular for

Trainings 56% 19% 26% 39%

“Many companies have

Overall travel budget though remains relatively constant – with increased

Skincare & Beauty

Apparel & Shoes

Alcohol & Spirits

1. Will you increase or decrease your travel budget?

Past Demand Upcoming Demand

Labour Day A shift towards

Domestic International Domestic International

For international travel, it appears that mid-haul destinations in Asia and

Rank- ∆ Ranking4 Locations on a Rise and Recent Consumer Commentary4

1 Japan 1 “Japan will be my first choice to go abroad as the COVID-

6 Malaysia 1 “As Singapore should be relatively safe to visit…it is a

“I really like the style of this country (France), it is a must-go

that bad there right now”

Asia Europe America

Travel Spend Allocation After COVID-191, By Category

1 Lijiang 14 Food 5% 49% 46%

6 Hangzhou - Shopping 20% 52% 28%

Chinese travellers will also adopt more independent travel methods in a

Less than before Same as before More than before

Based on a survey conducted by

Small Tour Groups “I would prefer independent tour like

Large Tour Groups Large group tour is

How It Is Playing Out in China: Impact of COVID-19

How the Travel Industry Navigates the Crisis

| © OC&C Strategy Consultants 2020

Accommodation: China hotel market consists of different tiers of hotel, with

Covering mainly 2-star hotels or below;

Covering hotels without star-rating,