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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

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

….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

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCPf8rNy18cYCFUWd2wodsBsKZg&url=http://www.at0086.com/CGZL/&ei=SfSwVbe0McW67gawt6iwBg&bvm=bv.98476267,d.ZGU&psig=AFQjCNGoyUptE9DEE4SJswPAqsa4hh_6gQ&ust=1437746630558085

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCMSIgK618cYCFQwY2wod6MUByQ&url=http://www.china-online-marketing.com/news/china-market-news/china-tourism-market/&ei=6POwVcT0JIyw7Aboi4fIDA&bvm=bv.98476267,d.ZGU&psig=AFQjCNEWYplLtOJMy34iri5PK_HVmOrCEw&ust=1437746532763244

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)

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

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




Future strategy and growth plan

Q&A

THOMAS COOK CHINA LAUNCH

March 2015

Official launch 8 September 2016

http://logosandbrands.directory/wp-content/themes/directorypress/thumbs/Fosun-International-logo.jpg

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

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

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

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

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

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

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.

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




Concluding remarks

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)




Concluding remarks

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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