Flash | 16 Nov 2025 17:28:37 ET │ 10 pages China Tourism Group Duty Free Corp (601888.SS) What's New from Citi 2025 China Conference: Encouraging Sales Trends in Hainan CITI'S TAKE CTG Duty Free attended Citi China Conference in Shanghai on 14 Nov. Some initial encouraging sales trends have been taking shape since the new policy took effect on 1 Nov, with Hainan offshore duty-free sales up 34.86% yoy during 1-7 Nov and Hainan online platform GMV up +40.4% during Double 11. Notably, number of buyers reverted ...

Core Viewpoint - The opening of Shenzhen's first city duty-free store marks a significant development in the retail landscape, offering a blend of duty-free and taxable goods, innovative services, and a unique shopping experience for both domestic and international travelers [1][3][10]. Group 1: Store Features and Offerings - The city duty-free store, developed by China Duty Free Group, Shenzhen Duty Free Group, and Shenye Group, spans nearly 3,000 square meters, making it the largest city duty-free store in China [1]. - The store features a diverse product matrix focusing on beauty, high-end watches, premium spirits, and local tech brands, aiming to provide a high-quality shopping experience [5][7]. - It introduces a "Shenzhen-made" element with a dedicated electronic technology experience area, showcasing local tech brands to attract foreign tourists [5][7]. Group 2: Innovative Services - The store employs a multi-faceted model combining duty-free, tax refund, and taxable goods, enhancing the shopping experience [3]. - It has launched a "cloud tax refund" service, facilitating convenient payments and efficient tax refunds for consumers [3]. - Shenzhen Customs has implemented innovative regulatory methods to streamline the shopping process, promoting a high-quality launch for the duty-free store [3]. Group 3: Consumer Engagement and Promotions - The store targets both outbound travelers and local consumers, aiming to stimulate cross-border consumption and local spending [8]. - During the opening period, the store offers exclusive promotions, including discount vouchers and loyalty points, enhancing consumer incentives [10]. - Duty-free products are priced 11%-25% lower than taxable counterparts, providing tangible benefits to consumers [10].

Core Insights - Wuhan has officially opened its first city duty-free shop, marking it as the first new store opened nationwide following the recent policy changes by the Ministry of Finance and other departments [1][5] - The duty-free shop is a joint venture between Wangfujing Group and Wushang Group, located in Wushang MALL, which is expected to attract over 32 million visitors in 2024 [1][4] Summary by Sections Store Operations - The duty-free shop targets travelers who will depart within 60 days, requiring valid exit documents and purchased tickets for international flights or cruises [3] - The shopping process involves selecting items in-store and picking them up at designated duty-free points at the exit [3][4] - The store features over 100 international brands across various categories, including cosmetics, fine wines, electronics, and local cultural products [3][4] Local and Cultural Products - The shop also showcases local heritage products, such as "Palace Museum cultural products" and "Wuhan gifts," promoting traditional crafts and cultural items [3] - The "Wuhan gifts" section includes over 200 items from local intangible cultural heritage projects [3] Market Potential - The new duty-free shop aims to cater to the consumption needs of over 2 million international travelers visiting Hubei annually [4] - During the recent "May Day" holiday, Hubei welcomed 75,000 inbound tourists, reflecting a year-on-year increase of 54.04% [4] Policy Context - The establishment of the Wuhan duty-free shop is part of a broader initiative to set up similar stores in eight cities, including Guangzhou, Chengdu, and Shenzhen [5] - Other cities are also progressing with their duty-free shop preparations, with Chengdu and Changsha expected to open their stores later this year [5]

Market Overview and Consumer Transition - The Chinese luxury travel market has shown significant recovery and transformation post-pandemic, with expectations that by 2025, China will become the largest luxury market globally, contributing half of the world's luxury consumption [1][37] - In 2019, Chinese consumers spent RMB 717.6 billion (USD 98.98 billion) on overseas luxury goods, accounting for one-third of global luxury consumption [1][37] - Hainan's duty-free shopping sales reached RMB 43.76 billion (USD 6.04 billion) in 2023, but are projected to decline by 29.3% in 2024 due to the resurgence of international travel and the influence of daigou [1][38] Consumer Behavior and Digital Payment - High-net-worth outbound travelers in China spend an average of over RMB 50,000 (USD 6,900) annually on luxury goods, with 38.2% spending between RMB 50,000 and RMB 200,000 [2] - Digital payment methods are prevalent, with WeChat Pay accounting for 56% of transactions, followed by bank cards at 30% and Alipay at 6% [2] - Duty-free e-commerce platforms are enhancing user engagement through digital tools, with Alipay's mini-program achieving over RMB 100 million (USD 14.5 million) in daily sales [2] Social Media and Precision Marketing - Social media platforms like Xiaohongshu, Douyin, and WeChat significantly influence consumer purchasing decisions, with Xiaohongshu having over 300 million monthly active users [3] - Brands are leveraging data integration across platforms for targeted marketing, exemplified by Louis Vuitton's successful live-streaming event on Xiaohongshu [3] - The collaboration between a resort in Macau and payment platforms demonstrates the effectiveness of combining travel predictions with multi-screen advertising, achieving a 5.67 ROI [3] Future Trends and Emerging Opportunities - Popular travel destinations for 2025 include Japan, Thailand, Singapore, and Hong Kong, with a growing focus on experiential luxury driven by Gen Z consumers [4] - Trends such as cultural immersion, sustainable travel, and the rise of digital nomadism are emerging, indicating a shift towards unique and personalized travel experiences [4] - Brands are encouraged to utilize digital tools and local experiences to meet the demand for "experiential luxury" among high-net-worth travelers [4] Insights into High-Spending Outbound Travelers - High-spending outbound travelers are defined as those spending RMB 300,000 (USD 41,000) or more annually, primarily from tier 1 and new tier 1 cities [50] - The demographic profile shows a significant presence of millennials and Gen Z, with 40.6% born in the 1990s and 4.3% after 2000, indicating a shift towards younger consumers [69] - The average travel duration for high-spending travelers has increased, with 77.2% traveling for more than five days, reflecting a trend towards longer stays in popular destinations [66] Transportation Preferences - Air travel is the preferred mode of transportation for international journeys, with over 95% of travelers opting for flights to most destinations in 2024 [59] - The reliance on car rentals has drastically decreased, while train travel has seen a slight increase in certain locations [59][61] - The top three destinations for high-spending travelers in 2024 are Hong Kong, Tokyo, and Bangkok, all located in Asia, highlighting a regional preference [55]