【Record】Tourism Investment and Financing Conference

Time 15:00-18:00, 5th, September

Moderator: Mr. Li Baochun, Executive Deputy Secretary-General of World Tourism Cities Federation (WTCF)

Address by Mr. Chen Dong, Secretary-General of World Tourism Cities Federation (WTCF) and Director-General of Beijing Municipal Bureau of Culture and Tourism

Signing Ceremony

Forum: Reorienting Tourism Investment and Recasting the Industry

Moderator: Mr. Li Weiqun, Chairman of WTCF Investment Committee

Keynote Speech: Dr. Andrew Yan, Managing Partner of SAIF Partners

Panelists: H.E. Mr. Parakhat Durdyev, Ambassador of the Republic of Turkmenistan to China

                   Mr. Na Shuchen, Director-General of Hebei Provincial Department of Culture & Tourism

                   Mr. Zou Feng, Managing Partner of Tourism Capital

                   Mr. Zhang Hui, Chairman of Palm Investment

                   Mr. Eddie Chen, Managing Director and Head of China & Asia, EURAZEO

Tourism Investment Workshop

Mr. Li Baochun, Executive Deputy Secretary-General of WTCF presided over the Tourism Investment and Financing Conference

Li Baochun: Distinguished guests, ladies and gentlemen, the World Conference on Tourism Cooperation and Development is jointly sponsored by WTCF and 10 other well-known international institutions and top-tier tourism exhibitors: World Tourism Organization (UNWTO), Shanghai Cooperation Organization (SCO), World Travel and Tourism Council (WTTC), Pacific Asia Travel Association (PATA), International Congress & Convention Association (ICCA), Global Tourism Economy Forum (GTEF), World Leisure Organization (WLO), World Tourism Alliance (WTA), International Mountain Tourism Alliance (IMTA), ITB Berlin and World Tourism Market (WTM). At present, we have hosted the opening ceremony, given the keynote speech, released research results and held forums.

Next, we'll hold the Tourism Investment and Financing Conference.

At first, I'd like to introduce our distinguished guests. They are:

Mr. Chen Dong, Secretary-General of WTCF,

H.E. Mr. Parakhat Durdyev, Ambassador of the Republic of Turkmenistan to China,

Mr. Na Shuchen, Director- General of Hebei Provincial Department of Culture & Tourism,

And Dr. Andrew Yan, Managing Partner of SAIF Partners.

Tourism investment is crucial to recovering the industry. In the context of the rampant pandemic, effectively increasing the investment in tourism will significantly shore up confidence in developing the industry and help achieve its recovery.

Then, Mr. Chen Dong, Secretary-General of WTCF and Director-General of Beijing Municipal Bureau of Culture and Tourism, will give a speech. Let's give him a warm welcome.

Mr. Chen Dong, Secretary-General of WTCF and Director-General of Beijing Municipal Bureau of Culture and Tourism, gave a speech

Chen Dong: Distinguished guests, ladies and gentlemen, the Tourism Investment and Financing Conference is an essential part of the World Conference on Tourism Cooperation and Development. The conference aims to conduct an in-depth study on the tourism investment and financing around the world in the context of the long-standing epidemic, so as to boost the confidence in recovering and developing global tourism and advance the reopening of the industry.

1. Grasping the Overall Situation of Tourism Recovery under Such Circumstances

Tourism is the most important industry of the world economy. According to The Report on World Tourism Economy Trends, over 12 billion trips were made in 2019 and the total income of the industry was 5 trillion dollars, which contributed 5% to the growth of the world economy. Employment in tourism accounted for one tenth of global employment.

Since the outbreak of COVID-19, governments have closed their countries' boarders, limited people's movements, reduced people's social interactions, examined people's health in order to restrain the virus from spreading on a large scale. Tourism has nearly been shut down around the world. Reopening the global tourism orderly plays an important role in prospering the world economy.

The world now is undergoing an unprecedented challenge that we have never seen in a century. According to the international conditions since the outbreak, a few countries have advocated unilateralism and industrial relocation. Competitions among big powers have been intensified. Economic globalization has been impeded. In general, the international landscape should be adjusted.

The pandemic has influenced the world tourism. From this perspective, cutting-edge technology, such as the Internet, big data and AI, will be employed more widely. Travel featuring small groups, customized routes and low-density will become acclaimed. In addition, the way to organize an international trip, industrial form and management mode will see drastic changes.

The outbreak is a huge blow to the world tourism. However, core products, the service system and basic needs of the industry remain according to the trend of tourism investment and financing in the post-pandemic era. The overall trend that global tourism will grow in the long run isn't reversed. Tourism remains the preferred industry attracting investment in the era.

2. Building a Favorable Environment for Tourism Investment during the Pandemic

A favorable environment is vital to recover the tourism. The world tourism investment has maintained breakneck growth since 2005. Its average annual growth rate surpasses 5%. Moreover, the growth rate has achieved 13% as its top. In particular, the amount of investment and financing in tourism of the Asia-Pacific region in 2019 achieved 120 billion dollars, accounting for 38% of the world amount. All these have made up a huge boost for world economy.

The outbreak of COVID-19 has decreased the world tourism investment. It is predicted that tourism investment will see an over 50% decrease in this year when compared to last year. The world tourism will confront a larger challenge than that in the 2008 financial crisis. It is estimated that the foreign direct investment (FDI) will drop by nearly 40% in 2020 when compared to 2019. Profits of the world top 5,000 multi-national companies will be cut nearly 40% on average.

Increasing investment is vital to recover the tourism. In the context of the wild pandemic, the way to boost investors' confidence lies in balancing the epidemic prevention and control and tourism reopening, applying more decisive measures and basically restraining the outbreak. At the same time, we call on governments and tourism cities to support the industry more positively by tax relief, financial aid and financing guarantee, formulate a series of more specific tourism market access criteria, and create a more favorable external condition for investors to set foot in the tourism resources, market and the development and creation of products.

3. Advancing the International Cooperation during the Pandemic

COVID-19 has swept more than 200 countries and regions, influenced the industrial chain of the world tourism, impeded people's social interactions and international exchanges, and hit the tourism market's demands, supply, service system and investment.

The priority is to orderly restore airways, maintain necessary international exchanges and people's movements while we prevent and control the epidemic, so as to recover and develop the world tourism in the context of the pandemic. Tourism companies should strengthen their international cooperation to share the risks between upstream and downstream industries, form a benefit-sharing mechanism among cross-regional cities, and create an environment in which tourism companies can work together harmoniously when the influence of COVID-19 will last long.

Tourism cities should take the needs of global tourism development into consideration to integrate technology with the industry, and innovate products, types of business and modes in order to become the main driver for refreshing the world tourism in the post-pandemic era.

Tourism cities are the core carrier of the world tourism, the major investment entity and investment objective of global tourism. In 2019, 300 tourism cities around the world attracted over 500 billion dollars investment which accounted for 50% of the world tourism investment. The Tourism Investment and Financing Conference has rolled out 21 potential projects worth over RMB 15.7 billion. I, as the Secretary-General of WTCF which is Beijing-based, hope tourism cities and companies around the world would actively communicate and cooperate with Beijing, and continuously stimulate the recovery and development of the world tourism.

Dear guests, ladies and gentlemen, WTCF is an international tourism organization focusing on cities. Guided by the core vision of Better City Life through Tourism, WTCF is committed to advance the cooperation and development of the world tourism. WTCF is willing to conduct an in-depth analysis on the opportunities and challenges brought by COVID-19 with other international organizations. In addition, we will build a service platform for multilateral cooperation in the industry, and make positive contributions to help global tourism get rid of the pandemic's influence.

I wish the Tourism Investment and Financing Conference every success. Thank you.

Li Baochun: Thank you for your speech.

WTCF is an international tourism organization formed by famous world tourism cities in 2012 under the initiative of Beijing. At present, it has 223 members among which city members are 148, international city members are 120 and the other members are renowned tourism-related companies, covering 75 countries and regions across the world. WTCF has 6 sub-committees: Committee of Tourism-Related Businesses, Committee of Civil Aviation, Committee of Investment, Committee of Media Organizations, Experts Committee and Committee of Cruise Industry.

Committee of Investment has held the Tourism Investment and Financing Conference four years in a row since its establishment. The conference has made huge success. The committee successfully signed projects worth RMB 8 billion through organizing a workshop during the China International Fair for Trade in Services (CIFTIS) last year. The committee has mastered the projects for the conference. It has solicited projects via various channels. We have set up the Tourism Investment Workshop today. 22 projects selected by investment fund managers before the conference will be presented in the workshop. 19 fund companies and 26 fund managers will coordinate with project proponents.

Now, I'd like to invite our distinguished witnesses. They are:

Mr. Chen Dong, Secretary-General of WTCF.

H.E. Mr. Parakhat Durdyev, Ambassador of the Republic of Turkmenistan to China.

And Mr. Li Weiqun, Chairman of WTCF Investment Committee.

At present, there are 21 potential projects worth RMB 15.71 billion. 5 representative projects will be signed on the spot today, including projects of Qingdao Daze Mountain Scenic Area, Zhejiang Lanxi International Yacht Town, International Music City, Safety Culture Experience Center Complex and Baihewan International Leisure Town Phase I.

Signing Ceremony

Let's congratulate signatories on their successful signing with a warm round of applause!

Li Baochun: Dear guests, ladies and gentlemen, I'd like to ask you and representatives to be seated. We're convinced that these potential projects will bring us more investment projects for stimulating the reopening of tourism after the pandemic.

Then, the forum starts.

Its topic is "Reorienting Tourism Investment and Recasting the Industry". Now, let's give the floor to Mr. Li Weiqun, Chairman of WTCF Investment Committee and Chairman of China National Wisdom Fund Management Co., Ltd., to preside over the forum.

Mr. Li Weiqun, Chairman of WTCF Investment Committee and Chairman of China National Wisdom Fund Management Co., Ltd., presided over the forum

Li Weiqun: Distinguished guests, I'm Li Weiqun, Chairman of WTCF Investment Committee. COVID-19 which broke out in early 2020 has hit the world tourism hard. However, it has provided great opportunities for reopening the industry in the post-pandemic era.

As a renowned investor with unique visions, Dr. Andrew Yan has been working on hedge funds for more than 30 years. He has more than 30 years of VC experience. He has been on the 2019 Hurun China Rich List and 30 Most Influential Investors in China in 2019 successively. SAIF Partners under his leadership was honored as the Best Investment Fund in Asia in 2005 by a world-renowned international PE magazine.

Next, let's give the floor to Dr. Andrew Yan, Managing Partner of SAIF Partners to share his unique insights on the reshaping of tourism industry after the pandemic. Dr. Yan, please deliver your keynote speech. Let's warmly welcome Dr. Yan for his keynote speech.

Dr. Andrew Yan, Managing Partner of SAIF Partners

Hello everyone! Tourism industry is the most severely affected by COVID-19 in 2020. The global hotel industry might suffer a huge loss across the board. Under such circumstances, I’d like to touch upon the topic: where do the investment opportunities in the tourism industry reside?

First, let's take a look at the pandemic. Tourism accounts for 10% of global GDP and takes 10% of global employment, which is roughly one tenth. The 2020 pandemic has so far knocked off 25% for the global tourism industry. If you look at the contribution of tourism to GDP of China, it was about 11 trillion in 2019 or 11% of overall GDP. The total number of Chinese tourists in 2019 was 6 billion, an increase of 8.4% year-on-year, and the national tourism revenue registered 663 million, an increase of 11.1% year-on- year. Basically speaking, the growth rate of China's tourism doubled that of national GDP.

Tourism development in China still delights us. Statistics of Chinese tourism during holidays of the Labor Day and the Dragon Boat Festival reveal that the tourism industry recovered about 59%, a relatively high percentage. If we put China to the broad context of the world, Chinese tourism recovered at a faster speed thanks to its general economic strength.

These are investment statistics since 2019. Last year, the total investment in China’s overall tourism industry was RMB 1.99 trillion in which over 99% was invested in improving destination resources. We know that improving destinations accounts for quite a lot of investment. About RMB 9.2 billion was invested in distribution channels and RMB 3.35 billion in tourism service. Distribution channels where investment was made include digital channels that have been talked about by many representatives.

In terms of the project number, 371 projects of investment in destination resources took 73.6% of the overall investment in culture and tourism. 41 projects are about investment in distribution channels, accounting for 9.5%, and 73 projects are related to investment in tourism service, accounting for 16.9%. This describes the tourism landscape in 2019. By comparing these statistics, we can see that in the first half of 2020, huge blows have been delivered to all of them.

From the perspective of investment, there are two aspects. One is the increase in absolute demand, and the other one is the upgrade of tourism consumption. From the perspective of demand increase, 2019 was a landmark year for China, with the GDP reaching USD 10,000 per capita. Statistics from the World Bank and UNWTO have shown that when per capita GDP exceeds USD 5,000, people’s demand for tourism shifts from sightseeing to vacation. This is why 2019 was a landmark year for China when the fortune structure improved a lot thanks to GDP per capita exceeding USD 10,000. The proportion of middle class was increased. And travel per capita increased from 0.2 in 1984 to 4.3 in 2019. This is the increase in demand. If we look at the upgrade of tourism consumption, we know that China might be famous for its bus tourism which still exists but no longer popular since consumption in China remains multi-layered. But the general trend of tourism is transforming from taking bus tourism hastily and carelessly, to enjoying personal and humanistic experience, from tourism at a long distance but low frequency to tourism at a short distance but high frequency. A sharp decline in tourism for shopping stands in contrast to the rise of enjoying gourmet food, culture and entertainment. Tourism of high quality and characteristics are more welcome in the market.

Let’s take a look at market opportunities from perspectives of investment demand and supply side. The mobile Internet has profoundly changed tourism, making it fragmented, individualized and diversified. Here are some examples to show the great contribution that digital technologies have made to tourism experience and consumption.

Tourism destinations are diversified and globalized, covering experience of natural landscapes and cultural heritages. People born before 1995 are still the main force in tourism, but those after 1995 and 2000 are rising rapidly. Tourism consumption habits have changed and travel has become a part of life experience, which means that travel is now shortened and leisure-oriented. In other words, tourism has become a component to our daily life instead of some rarity happening only few times each year.

From the supply side, tourism policies have promoted supply-side reform of the tourism industry. From tourism to Tourism+, this integration of industries has revealed many new growth points. I will share several cases about this later.

Market players in tourism are integrating resources to boost performance and transforming themselves from a single enterprise entity to a cross-sectoral business entity. It is non-tourism companies that are enjoying the fiercest cross-sectoral momentum. Among numerous Chinese companies engaging in tourism, the biggest competitors that deserve your most attention are not those originally from the tourism industry, but most likely cross-sectoral competitors, for example, Alibaba and Tencent. Their efforts are likely to bring about a huge integration effect in the tourism industry. Internet and social media have become the most important marketing tools.

From the perspective of financing and investment, the pandemic is still weighing heavily on our market. First of all, let's take a look at the overall market fund-raising scale which has dropped significantly by nearly 90% in the first half of this year compared to 2019. Investment institutions are very cautious in investing in tourism industry at this time. The valuation of projects began to be adjusted, and investment institutions have paid more attention to financial indicators. In the past, we did not care too much about the price as long as we were into the project or destinations. But now everyone is more cautious, paying particular attention to liquidity.

The Matthew Effect of the market is amplifying sharply. Financing is easy for mature and leading companies, while a huge number of companies in the middle or at the tail are in difficulties. Some of them even went to bankruptcy. The long cycle of investment decision-making poses new challenges to company’s management capabilities of liquidity.

What could we learn from this to develop the tourism industry? During this window period when deployment of rare tourism resources could be optimized thanks to the adjustment in business market valuation, enterprises are supposed to conduce fine operation with a focus on the realization of efficiency and liquidity. Tourism products and services should be distinct and updated, instead of mass production. Liquidity management is the most pressing task for enterprises that should plan for at least 12 months.

From the investment perspective, we attend to Tourism+ very much because a single tourist spot is now hard to sell in the market and this requires supporting factors. As I just mentioned tourism experience in China was quite shallow and perfunctory in the past, and we are now focused more on individual and humanistic experience. Cooperation between tourism and other sectors is so important that the biggest surprise coming out of this collaboration might be a company not from tourism industry, but from X industry.

Tourism + technology, accompanied by empowering experience, has become a key word in the new tourism industry. We have to pay attention to the application of technologies and tools to improve operational efficiency. Our channels and individualized services are both closely related to big data.

There are two examples to illustrate the fresh experience of Tourism + technology + other sectors. I’m wondering if you still remember the Night of the Lantern Festival in the Forbidden City at the beginning of 2019. APPOTRONICS, a listed company that has received our investment, produced an ultra-light show for the Forbidden City. I visited that show and was very impressed by its outstanding beauty especially at night. Everyone was trying to snatch a ticket. There were so many people.

Another case is also a company we invested in cooperation with Huangshan Tourism for the Mysterious Huashan Grottoes. In this project, the interior scene has been transformed by laser lights. If you enter the Huashan Grottoes, it’s like Alice in the Wonderland. We’ve all experienced that and the Mysterious Huashan Grottoes have attracted many tourists. This is a very good example of bringing on new tourism experience by applying new technologies to fully explore tourism resources.

You must know this very popular place, the Anaya Seaside Church. What’s more, we’ve talked about Tourism + other sectors and the most promising combination in China is Tourism + healthcare. China is aging rapidly but the current facilities in China for the elderly people as a whole are very rudimentary. There is a huge market if we combine the beautiful environment, rehabilitation and elder care together. We have seen some projects running very well, for example, there is a very beautiful area in Huangshan where a company is planning to build a huge elderly community equipped with excellent medical supports. Anaya project is now extremely famous in the North with every visitor praising its beauty. The Anaya Seaside Church is elegantly decorated and visited by a lot of tourists. We used to think that people came to that church for praying but it turned out that they are there to get married. Everyone wants to contract the whole place to shoot wedding photos. That is very interesting.

Moreover, we’ll talk about how to apply technological means to improve services. We’ve invested in a company called Shuwei Technology that is in cooperation with Huangshan Tourism. We provide location services tracking down to the centimeter and big data knows where you’d like to go, guaranteeing your safety and offering services. Every tourist in Huangshan is under our protection and guardianship because we know exactly what you need. In this way, management of Huangshan could produce precise profile for each and every tourist based on backstage data. This greatly boosts management efficiency and is what we called the application of data in specific scenarios where tourists could enjoy more exquisite and personal experience.

Automatic driving provides us with new solutions for traffic in scenic spots. Everyone knows that automatic driving is a new topic and it takes some time to be realized. The first application scenario should be fixed routes in scenic spots, and automatic bus in mining areas and communities which might be the first realized scenario. We have already seen these new technologies in application. Consequent changes to tourism industry are subtle but fundamental.

In addition, there is the impact of new media on tourism. We all know that the Internet influencer economy is quite hot these days. It drives tourism in forms of influencers promoting products and more importantly recommending popular scenic spots. Many cities now have this kind of recommended scenic spots. Attempted by their recommendations, many people would like to visit these spots. And this explains why the influencer economy in China might take the lead in the world. The first company in China investing in the influencer economy is Ruhnn listed in America. Nowadays, there are many players fueling the influencer economy in China including Douyin, Xiaohongshu and MicroBlog. The influencer economy has become one of the most important marketing instruments in Chinese tourism industry.

From the perspective of investment, the key word in tourism is Tourism+. On the one hand is Tourism + technologies, and on the other hand is Tourism + other sectors. Therefore, even though the 2020 pandemic poses both new challenges, new technologies might give us much more fresh experience. Investors including myself are expecting these opportunities. Thank you.

Li Weiqun: Thank you for your fantastic speech and illustrated professional study and judgement, Dr. Yan. It's reasonable to believe that tourism investment will actively participate in recovering global tourism in the post-pandemic era, and help the industry get rid of troubles, reopen and prosper again. Let's give Dr. Yan our loud applause for his speech.

Next, we'll move on to the panelist forum. Distinguished guests, please be seated and give your speech in order.

H.E. Mr. Parakhat Durdyev, Ambassador of the Republic of Turkmenistan to China

Mr. Zhang Hui, Chairman of Palm Investment

Mr. Na Shuchen, Director- General of Hebei Provincial Department of Culture & Tourism

Mr. Zou Feng, Managing Partner of Tourism Capital

Mr. Eddie Chen, Managing Director and Head of China & Asia, EURAZEO

Distinguished guests, panelists will conduct an in-depth discussion on "Reorienting Tourism Investment and Recasting the Industry". Three parts will be included, such as self-introduction, Q&A and a short summary section.

The first section is about self-introduction. Please briefly introduce yourself and the institution that you are working for. Besides, your feeling and expectation towards the conference should be given. All these should be stated in 2 minutes.

H.E. Mr. Parakhat Durdyev, Ambassador of the Republic of Turkmenistan to China

H.E. Mr. Parakhat Durdyev: Good afternoon! Thank you very much, moderator. I'm Parakhat Durdyev, Ambassador of the Republic of Turkmenistan to China. I'm here in China since January 2019. My first tour to China happened almost 20 years ago in 2000. I was having a one-year stay in the embassy here. Since 2001 until 2019, I had no idea I would come into China. In 2018, I heard I would get the new job. I'm really happy to accept the job. Since I've seen China some 20 years ago, I've seen such a large, big or even comprehensive change in the way the country works. Since the beginning of this year, we're all sitting under the massive pressure. With the achievements and the efforts made by the country in fighting with the global nightmare, I can be assured that I'll be safe here, and probably the same to everyone who lives in China.

As for my country, it's only 29 years old. On September 27 this year, we celebrated our 29th anniversary. This year we have a major event that is the 25th anniversary of our neutrality. Neutrality for us is everything. It's the second most important national holiday which has made its way in our constitution. Neutrality gave us such a big impetus in development that allowed us to avoid any problems while becoming a self-sufficient nation at the moment. Probably there's a time that I can talk about this. Now, I'd like to say that I'm really happy to be a part of this conference today, because we can see that a country as China is able to do more, do greater and achieve even greater high. I'm happy to be a part of it. Thank you.

Mr. Zhang Hui, Chairman of Palm Investment

Zhang Hui: I'm Zhang Hui, Chairman of Palm Investment. We have been specialized in tourism investment for 12 years and mainly invest in tourist destinations. Our company has constructed and acquired numerous tourism projects at home and abroad, such as the Western Poland Football Team participating in Premier League, Yanoda Rainforest Cultural Tourism Zone in Hainan province, Sanqianli Leisure Tourism Resort in Guilin city, Zhuxi River International Ecological Leisure Tourism Resort in Shangrao county, Yunman Lake Tourist Attraction in Guizhou province and a commercial district named "Time in Guizhou". Our system has faced an unprecedented challenge because of the pandemic, which has enlightened us on tourism investment. I'd like to share with you later. Thank you!

Mr. Na Shuchen, Director- General of Hebei Provincial Department of Culture & Tourism

Na Shuchen: I work for Hebei Provincial Department of Culture & Tourism. First of all, I'd like to introduce Hebei province. Beijing and Tianjin are surrounded by the province. If the capital is the heart, Hebei will be the chest. Distinguished guests, you need to go through Heibei whether you come to Beijing by plane, high-speed railway or car. Without knowing it, you have already passed through the province when you arrive in Beijing. With 75 million people, Hebei covers 188,000 square kilometers. It contains most of China's landforms, such as seas, lakes, plains, plateaus, mountains, hills and desert. It embraces long history, rich culture and impressive natural landscapes. Besides, Hebei is influenced by Beijing and Tianjin. It has become a wonderland. Welcome to visit Hebei more often for sightseeing and leisure. Thank you!

Mr. Eddie Chen, Managing Director and Head of China & Asia, EURAZEO

Eddie Chen: Dear guests, I’'m from EURAZEO. Our headquarter is in Paris, France. At present, our offices station in Shanghai and New York. Our company is an investment institution strategically focusing on cross-border mergers and acquisitions. With a history of 141 years, the company has invested in nearly 430 companies in various industries around the world. The amount of investment is nearly 20 billion Euros. We have paid attention to and are willing to invest in tourism. At present, we have invested in some significant tourism-related programs. For example, we own the world's second-largest provider of a tax reimbursement. In addition, the company has acquired a hotel management school in Swiss among the world's top charts. Therefore, our company might be more interested in service providers supporting the industrial chain behind the scene. Such providers might be able to remain stable in the business cycle. In China, we have also invested in plenty of project related to tourism management. I’'ll expound in the next section. Thank you!

Mr. Zou Feng, Secretary-General of WTCF Investment Committee and Managing Partner of Tourism Capital

Zou Feng: Good afternoon! I'm Zou Feng, Managing Partner of Tourism Capital. I've been working in tourism for many years. I have 10 years of experience in managing a large travel agency group. Before I set foot in investment, I was the vice chairman and CFO of China Travel Service and the president of China Comfort Travel for 7 years. It has been 7 years since I left a managerial position in 2013 and started my career of investment. I spent 3 years working for CITIC Capital on takeover and merger. In 2016, we established Tourism Capital. The company focuses on tourism-related buyouts. Types of business in the industry attract our attention, including tourist attractions, transportation, hotels, and travel agencies. In 2018, we bought out a cruise company near the Three Gorges Dam named Vitoria (hereinafter referred to as Victoria Cruise). It has undergone a tough time this year because of the pandemic. Eight months of shutdown finally ended. It just starts sailing. The guests and we have the same feeling. All of us have encountered great losses. Basically, we didn't get paid in the last 8 months. We hope the pandemic would be successfully restrained, and tourism would recover. Thank you!

Li Weiqun: Thank you, Dr. Zou. Then, we'll move on to the second section of Q&A. Mr. Ambassador, may I ask two questions? Can you expound on the development of tourism in your country in the past 5 to 10 years? Does Turkmenistan have a plan to receive more tourists in the future? Thank you!

H.E. Mr. Parakhat Durdyev: First of all, let me express my sincere gratefulness to World Tourism Cities Federation for inviting me to be here. At the same time. I also like to thank the federation for accepting my capital city, Ashkhabad, as another member. And back in May, we started the process and we got the electronic certificate of becoming a member. Although the pandemic is affecting our business, we are very optimistic and looking forward to more cooperation with each other.

Ashkhabad is a relatively young city and it has a history of almost 130 years. Recently, an event has been hosted by our city. Many international agreements and contracts are signed here, so these documents were named after the city. In recent years, Turkmenistan managed to and invested in many sectors, specifically in the development of the infrastructure. Infrastructure is mainly in logistic and transportation, airports, seaports, culture and civilization, and agriculture and many other areas, where we thought that is our best position that we have. These also gave us the opportunity to develop national economy in different areas. In our country, the small and medium sized private companies are playing major roles in the process of development. The country has potentials in many ways. Many things, like carpet, were listed on the UNESCO World Heritage. Similarly, the horse that was the essence of our connections with China back to the Western Han dynasty. The horses are of the same degree of attention that we pay in our relations because of the love from the Chinese people.

Our country is located in the desert, which means that we are lack of water. We love water, and our people cherish water. The tourism sector in Turkmenistan develops rapidly. Caspian Sea has 16 kilometers of seashore where we built a tourist area. We establish a gorgeous tourist attraction in the desert. Our country has several architectural wonders of the world with a long history about 5000 years. These buildings are having their part in the history of civilization from Southern India to Caspian Sea.

The bilateral relationship between China and Turkmenistan is crucial. And generally, the energy is our mainstay because China imports our natural gas. The natural gas has also made it possible for our country to diversify the local economy and stay away from pollutions to some extent. In fact, we have several rounds of export events organized in China. We have signed contracts with the local companies. The cooperation may not be on a large scale, but is relatively comfortable for us.

Speaking of desert, I think desert is a significant place. We are preparing our Karakum Desert to become one of the listed UNESCO Natural and Cultural Heritage. In the past 10 years, we have held two major rallies. People enjoyed the beautiful landscapes in the desert. We held an event last year. Our government has decided to enlarge economic activities to attract foreign capital with a special project until 2025. China plays a very important role in the project. We would like to continue the cooperation, and I hope that we would be able to restore the flights to China after restraining the pandemic.

When it comes to the second question about what we have in hands to combat COVID-19, I'd like to tell you that we have an emergency plan. At present, Turkmenistan is one of the luckiest countries in the world to avoid the emergency. It's an achievement itself, but we have put enormous efforts to prevent it from happening. We have to reduce the number of foreigners to arrive in our country. But now, gradually, as the situation is improved, we believe that we will be able to continue our international communication and exchanges. As we all know, our country is sitting exactly on the crossroad of the great Silk Road. A few months ago, we started paying attention to the fact that the world has put efforts to prevent and control the pandemic. We have employed strict measures. Under the minister's guidance, we have set up a response team which aims to avoid imported coronavirus cases and prevent those cases from spreading in our country. The Health Ministry, as the leading ministry, should take its responsibilities. The response team consists of 22 dedicated government officials and experts who come from different ministries and commissions. They work hard and have made some progress.

The new semester has just started. Students in Turkmenistan go to school as usual. Colleges, universities, secondary and primary schools are open. Restrictions also exist in our country. I heard others talk about restrictions on international travel today, which is the same in Turkmenistan. We abide by advices given by the WTO. I’'ve mentioned our neutrality in my self-introduction, which is very important. Turkmenistan became independent in 1991. We have regarded the Day of Neutrality as a national holiday since 2017, which has been admitted by the UN. Staying neutral is a crucial national strategy. We cherish our stance as a neutralized state. We hope that we can try our best to maintain the world peace and stability.

That's all. Probably I can add some details when we are in the final round of discussion.

Li Weiqun: Thank you very much, Mr. Ambassador. Next, let's give the floor to Mr. Na Shuchen, Director- General of Hebei Provincial Department of Culture & Tourism. Distinguished Mr. Na, we have two questions. You've mentioned that Hebei is the only province with all kinds of landforms and rich tourism resources in China. In recent years, it is the most well-known province attracting tourism investment. May I ask your opinions about the pandemic's influence on tourism investment and financing?

What's the new plan and reform on tourism development, investment and financing in the coming years in Hebei during the pandemic? This is the second question.

Na Shuchen: Thank you. Hebei province used to be a large steel producer. In recent years, it is fast evolving and highlights the modern service industry. Tourism is the pillar industry which is given priority to. Since the 13th Five-Year Plan, the province has invested more than 100 billion in tourism every year. During the 13th Five-Year Plan period, the investment has tripled than that during the 12th Five-Year Plan period.

In 2019, Hebei province received 783 million arrivals and the total income of tourism reached RMB 931.3 billion. The number of tourists has increased by 20% every year consecutively. The total income of tourism has grown by more than 30%.

Hebei attaches great importance to and puts more effort into developing tourism at full speed. Hence, the government has entitled Hebei to become one of the seven units to create an integrated tourism demonstration province. COVID-19 has greatly influenced the culture and tourism industry in 2020. In the conference, leaders and guests have elaborated on the pandemic's influence on the industry profoundly.

We should notice that the epidemic has not only restricted tourists' movement and decreased people's income, but also impacted tourism investment. Mr. Chen, Secretary-General of World Tourism Cites Federation and Director-General of Beijing Municipal Bureau of Culture and Tourism, gave a speech. In his words, the investment has decreased by 50%. As we all know, investment means capacity, bringing new types of business, products and projects. It adds momentum to future development. However, the pandemic is a huge blow to investment.

The epidemic's influence is reflected in three aspects.

Firstly, tourism investors became more cautious. They are more aware of risks.

Secondly, investment strategy, orientation and focus have changed drastically. Market demand in the industry has seen new changes. The market has more segments and becomes more specialized, personalized and customized. People's needs for green tourism when referring to life styles, work and consumption ways require investors to adjust their investment strategy, orientation and focus.

Thirdly, the current commercial operating model should be recast and innovated. Most companies in Hebei receive their financing from banks. However, they didn't expect that COVID-19 would sweep such a wide range and last so long. Therefore, the pandemic becomes the last draw when companies meet debt ratio imbalance or have bad debts. Some companies have run out of cash or restructured their assets.

These are the three aspects reflecting the pandemic's influence.

Next, I'll move on to the second question. Sitting in a special geographical position, Hebei province becomes the heart of economy. In recent years, the coordinate development of the Beijing-Tianjin-Hebei Region, the planning and establishment of Xiong'an New Area, the 2022 Winter Olympics jointly held by Beijing and Zhangjiakou have brought Hebei and its tourism unprecedented opportunities.

We will abide by the national major strategies according to the national conditions, and invite investors to share the pie. Firstly, we should give priority to create a leisure resort circle surrounding the capital. Besides, we will build an ice and snow resort in Zhangjiakou-Chengde area because of the 2022 Winter Olympics. In addition, we plan to establish a demonstration zone featuring innovative greening in Xiong'an New Area. At the same time, we will build a few travel zones, such as Taihang Mountians Travel Zone, Yan Mountains Travel Zone and Coastal Travel Zone.

As we all know, the secretary-general suggests that we should build 3 national cultural parks which are the Great Wall National Cultural Park, the Grand Canal National Cultural Park and the Long March National Cultural Park. The Great Wall has 2,498 kilometers passing through Hebei. Its most impressive section is the Jinshanling Great Wall. The Grand Canal has 530 kilometers passing through Hebei. Two of the three parks encompass the province, which is Hebei's honor. We should grasp the opportunity to establish the Great Wall Culture and Travel Zone, and the Grand Canal Culture and Travel Zone.

Secondly, we should release the potential of consumption abroad by inbound tourism and intra-provincial tourism according to domestic circulation. Travel is people's basic right and one of their ways to live. Global tourism is a huge market. At present, cross-border tourism is restricted because of the pandemic. However, people's aspiration to travel needs to be satisfied. How to safely release the potential of consumption abroad by inbound tourism? We should foster a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other. At present, we need to focus on domestic circulation in order to integrate and optimize the supply of our products and services.

Thirdly, we should focus on Hebei's features and explore deeply into the features of its cultural resources by culture and technology, adjustment of product mix, and transformation and upgrade. All these will add flavor to Hebei's culture and tourism products. Thank you.

Li Weiqun: Thank you, Mr. Na. Now, let's give the floor to Mr. Zou Feng, Managing Partner of Tourism Capital. Dr. Zou, you specialize in investment and acquisitions in the tourism industry at home and abroad. I have three questions.

Firstly, COVID-19 has brought a huge challenge to the industry. Plenty of tourism companies have encountered a slump in sales and even bankruptcy, which has brought scarce opportunities for investment, mergers, acquisitions and industrial integration. The forum focuses on "Reorienting Tourism Investment and Recasting the Industry". Could you tell us how to distinguish whether it is an opportunity or not for reorienting tourism investment, investing in, merging and acquiring companies at home and abroad in the context of regular epidemic control?

Secondly, could you please give some suggestions on dos and don'ts for tourism investment, mergers and acquisitions in the coming years?

Thirdly, as the secretary-general of WTCF Investment Committee which was one of the six WTCF committees, could you please tell us the committee's plans on strengthening the cooperation among institutions and improving tourism investment service for member cities? Thank you.

Zou Feng: Thank you, Dr. Li. The first two of the three questions are challenging. Now, I’'d like to answer the first one. Let's see supply and demand of global tourism before the outbreak. I've sorted out some information about supply and demand of the world tourism in the last five years. In general, a glut existed from the perspective of amount before the outbreak. However, unbalanced supply and demand could be seen from the perspective of structure. There was large demand to be met.

This is noticeable in China. Piles of cash have been invested in tourism every year in our country, but only a little investment will transfer to effective supply. That means many products fail. The problem was inconspicuous before the outbreak. However, companies' demand has become zero since COVID-19 appeared. Supply has become greatly in excess of demand. Under such circumstances, the pandemic might be conducive to improving the quality of supply when tourism develops. In addition, the epidemic increases the opportunities for mergers, acquisitions and integration. It's hard to fight for the market share, and merge, acquire and integrate companies when the market's prosperous and everyone can earn some money. Opportunities of mergers, acquisitions and integration increase because of the pandemic.

Since the outbreak, we have contemplated from two aspects. Firstly, let's look into the overall supply status. Most companies completely or partially suspend operations. Some firms even undergo bankruptcy or semi-bankruptcy. Most people are living a tough life. I have visited a dozen cities and tens of tourism companies across China since May. I talked with their presidents. Only about 10 companies could make money in our country, except for those exempted from taxes according to policies. The number of market-oriented companies is less than 5. More than 95% and even 99% of enterprises are running at a loss. This is the supply status.

How long will the situation last? It's hard to say. However, most regions haven't recovered yet. Three regions are in relatively good conditions. The first is the vicinity of metropolitans. The second is well-known tourist destination in China, such as Hainan and Xiamen. The third is tourist destination near metropolitan though it is not a city cluster. Therefore, the overall status of recovery is uneven. I think the situation will continue.

Secondly, let's look into the demand status. Demand has been changing since the outbreak. Some guests said in the morning that demand might rebound. I agree with them, but the demand in the past might be different from the demand in the future. I have two thoughts.

1. People's ways to travel will change. Less and less tourists will travel in large groups. We often count the number at the entrance of tourist attractions and seldom notice groups of travel agencies. Most people travel with their family and friends. My colleagues and I frequent tourist attractions and hotels to find out how tourists travel. Therefore, people's ways to travel will change.

2. Tourist destinations will change. Intercontinental destinations will receive few Chinese tourists in the coming years. Intracontinental destinations will recover faster, such as Japan, South Korea and South East Asia. Inbound tourism will recover at the fastest speed. In the future, tourists might flood into tourist destinations near large city clusters and popular tourist destinations, such as the Yangtze River Delta and Hainan. For example, we own an enterprise in Hainan. The occupancy rate of the high-end hotel was merely 30% last year. We checked the rate from May to August this year. However, the occupancy rate was over 90% in August when the price each night was RMB 2,000. That means customers changed drastically. Demand has changed.

According to the changes of supply and demand, some industries will have more opportunities to draw investment in the future. Where do these opportunities come from? They are from mergers, acquisitions and integration of existing companies, and transformation and upgrade of tourism products. We will turn invalid things to effective ones through transformation and upgrade.

Different countries are disparate. China will recover at the earliest opportunity. Southeast Asia will recover faster than other foreign countries for it relies on foreign tourists. Hence, companies in Southeast Asia will have more opportunity to be merged and acquired for Chinese frequent there. This is my answer to the first question.

Now, the second question is about my suggestions on the future investment, mergers and acquisitions. Working on mergers and acquisitions for 7 years, I've encountered numerous projects and conducted a dozen due diligence, but I have only succeeded in investment 4 or 5 times. I'd like to share with you what I have learnt.

1. It is better to hold shares, invest in majority holding rather than minority holding, and wholly-own if possible.

2. Investment should be put into the core areas, focus on crucial industrial chains and types of business. Not all segments but some crucial chains of an industry can produce profits. Investment might be invalid. Only a few regions in a country, such as China, might earn profits. We invest tourist destinations near metropolitans in South and East China along the Yangtze River. Except for Beijing, destinations in North China aren't in our list because it’'s hard to investing in and earing profits in those places. That's my opinion.

3. It is better to merge useful programs at a reasonable price. If investors buy a dodgy company, they might get themselves into trouble. Even when investors encounter natural or man-made disasters, they will be able to deal with those problems. Disasters often occur in the industry, but seldom last long. I've been the chairman of a travel agency for 10 years, so I know that well. We have to tackle various problems. Accidents often kill people. It’'s normal. However, the pandemic is not the case. Hence, an outstanding company means the efficient management, a satisfactory cash flow, smooth operation and fast recovery. However, a dodgy company might get investors into trouble.

4. Investors should manage their investment carefully and rationally after purchase. According to our experience, there are three things to do after purchase. Firstly, investors should renew their strategies. Secondly, investors should manage their teams’' shortages. Thirdly, investors should standardize their incentive mechanisms. As an investor and a major shareholder, I think these three things are necessary.

I'll briefly introduce two plans of Investment Committee because I'm running out of time. Since the establishment of the committee, it has made great progress under Dr. Li, Mr. Zhang and WTCF's guidance. The committee mainly focuses on advancing exchanges among members. We plan to draw more members, including institution members and city members. We hope more international institutions will join us because we have few foreign members. In addition, we plan to hold some events online which are convenient. People are able to communicate without the limits of space. We can help some of the city members attract capitals and investment through the events. Most cities pay attention to tourism, but professionals are scarce. Some provincial governments even spend hundreds of billions on the industry every year, but fail at the end. Cash turns invalid and flows into the real estates.

Therefore, WTCF Investment Committee will ask institutions to do it favors. We will fulfill our social responsibilities. Thank you, Dr. Li.

Li Weiqun: Thank you, Dr. Zou. Your speech is professional. In particular, your observation on the front line and study during the outbreak in the first half of 2020 are impressive. Now, let's give the floor to Mr. Zhang Hui, Chairman of Palm Investment. As a well-known research investor and "King of Characteristic Towns" admitted by professionals of tourism, you have insightful views on planning and site selection, layout and design, constructure and operation, and investment management of characteristic towns. Every town that you have planned and invested in becomes a fine example which is eco-friendly in the industry. You’'re admitted and respected by tourism investors.

I have two questions. What's the influence of COVID-19 on characteristic towns' investment, construction and future development?

Tourism has been hit hard. Characteristic towns' investment and construction have encountered two disparate situations. Could you please tell us your suggestions and expectation about the towns' sustainable development, future investment and financing?

Zhang Hui: All investment institutions, including experienced tourism investors, and local governments pay highly attention to these two questions. Today we have the director-general of Hebei Provincial Department of Culture & Tourism. We have conducted in-depth cooperation with Hebei. During the outbreak, characteristic towns have undergone difficulties. I emphasized we should do more research and create an investment standard when constructing the towns and making investment. Therefore, we will seize opportunities to present opinions in every Tourism Investment and Financing Conference hosted by WTCF. In general, we should select the subject and design the mix of industry and finance reasonably, which decides whether we would succeed in the following tourism investment.

Hence, the standard we put forward has three points. The first is resource endowment. The selection of resource endowment determines the future. The second is a popular IP which has been mentioned by other guests. Is the IP powerful or not? Does the IP hold an important place in tourists’' hears? The third is about in-depth experience of the scene, which is mentioned by distinguished guests namely "Tourism plus Technology". We should figure out what kinds of technology and works are impressive and touched. The outbreak impacted the towns, so we paused in the first half of 2020. However, the situation gets better recently. For example, Xunlong River Eco Art Town in the suburbs is popular. Tourists have to make reservations and stay in the queue. There are also some projects available without making reservations.

I'd like to share with China's tourism investment institutions that "Traveling around the World" has remained the subject. Qualified characteristic towns are still acclaimed. Our aspiration to travel is growing, although it is restrained by the public rules. Is the industry recover soon or temporarily? It is certain that tourism, including parent-child trips, family trips and customized trips in the suburbs, and unique design of products in special tourist attractions, is gradually recovering in order. We builders of characteristic towns speed up to work on the layout in the post-pandemic era. We keep in step with local governments. Our LP, investors and we have cashed out and continued to seek for new opportunities for investing in funds of various industries. A new era, in which tourism investment and financing industry will be restructured, is on its way. We have a profound understanding about tourism investment and financing, which means that we’'ll increase the number of investment conditions to prevent risks effectively. Therefore, I hope companies with projects and resources would leverage the platform provided by WTCF Investment Committee to exchange opinions and support each other. We expect that tourism investment and financing will recover soon. The situation will be better than you can imagine.

Mr. Li has mentioned that Characteristic towns have encountered two disparate situations now. The second question is about our plans which include how we will operate the towns. Dr. Zou has suggested that it's vital to select projects when referring to tourism investment and financing. However, management after purchase determines whether the investment is successful or not. Therefore, we leverage the window period offered by the pandemic to upgrade the existing towns and those in operation, such as Yanoda Rainforest Cultural Tourism Zone in Hainan province, and programs in Guilin city and Yangshuo county. During the period, we have realized that our towns can't satisfy tourists, so we have been making adjustments.

We are planning the IPO for some programs. Besides, we speed up to find a path for characteristic towns into the capital market. That's all, thank you.

Li Weiqun: Thank you, Mr. Zhang. His speech is impressive. COVID-19 has impacted the global economy, and tourism has borne the brunt. However, the pandemic also provides the industry with an opportunity for sorting out quality tourism resources with low prices, optimizing combination, reopening to prosperity. We are looking forward to sharing opinions with professionals in the platform, discovering the value of excellent programs together, and jointly advancing such programs.