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September 9, 2015

Nick Hentschel, Vice President, Business Development,


AmericanTours International, LLC
Key Provisions of the Law
 Article 1. This Law is enacted for the protection of
the legitimate rights and interests of tourists and tour
operators, to regulate the tourism market order, to
promote rational use of tourism resources, and to
promote the sustainable and healthy development of
the tourism industry.

 Article 2. This law is applicable to tour, vacation,


leisure and other forms of tourism activities within the
territory of the People’s Republic of China or if the
activities are outside but organized in the territory of
People’s Republic of China.

 While many provisions impact only domestic tourism in


China, other key provisions impact US tour operators.
Key Provisions of the Law
 Article 6. The government of People’s Republic of China shall
establish and improve tourism service standards and market
rules. Tour operators should follow honest operation, fair
competition, social responsibility, and provide safe, healthy,
hygienic travel services for tourists.
 Article 9. Chinese tourists have the right to choose tourism
products and services, and the right to refuse the compulsory
transactions of tourism operators.
 Meaning of compulsory transactions?

 Article 34. Travel agencies organizing tourism activities should


order products and services from qualified suppliers.
 What constitutes a qualified supplier?
Key Provisions of the Law

 Article 35. Travel agencies shall not


organize a tour at unreasonably low
prices to entice tourists, and charge
additional fees for payable items or obtain
kickbacks and other improper benefits
through ways such as arranging shopping
or other tourism activities.
Article 35 Clarified
 Written contract between Chinese Tour
Operator and passengers required
 Operators prohibited from organizing tourism
activities that:
 Are sold at unreasonably low prices
 Lure tourists
 Receive illegitimate gains such as rebates
 Influence the itinerary of other tourists
Article 35 Clarified
 No unreasonably low prices:
 A tour price is deemed to be unreasonably
low if the price is lower than the service cost
or lower than an price generally accepted by
the industry
 No luring tourists:
 Travel agencies that hide the actual tour
itinerary, providing false information in order
to sell the tour
Article 35 Clarified
 No illegitimate gains:
 When travel agencies receive rebates,
commissions, and other rewards from vendors
by conducting unfair competition or forcing
tourists to pay
 No influencing the itinerary for other
tourists:
 Meaning that reasonable alternate
arrangements need to be made for members of
a tour group that do not want to participate in
shopping or optional tours
Enforcement of Article 35
 In cases where the tour operator or
agent violates the regulations within
Article 35, tourists have the right seek a
refund for the cost of the additional fees
paid for the tourism activities within 30
days after the end of the travel
Key Provisions of the Law
 Article 69. Chinese tour operators should fulfill their
obligations in accordance with the agreement of the
package tour contract and shall not alter travel
arrangements without the consent of tourists.

 In cases where Chinese tour operators entrust the operation


of a tour to a receptive tour operator with the appropriate
qualifications in a destination, the Chinese and receptive
tour operators shall enter into a written contract stipulating
the rights and obligations of the Chinese tourist

 Chinese tour operators shall pay no less than the cost of the
receptive service to the entrusted tour operator in the
destination and receptive tour operators shall provide
services in accordance with the tour contract
Enforcement of the Law
 According to CNTA, in the first half of 2015,
there have been 9198 cases of complaints /
reports of illegal business activities, with over
20,000 passenger involved
 40% of the reported cases related to overseas
travel
 7259 cases have been investigated and
settled
 Total compensation provided for the overseas
cases equaled 5.35M RMB
Enforcement of the Law
CNTA has issued public reports twice in 2015
 Over busy Chinese New Year travel period, there were 5490
complaints that warranted an investigation
 11 travel agencies had business licenses revoked, 34 agencies were
required to suspend operations pending rectification

 Over the Labor Day travel period in May, CNTA announced 800
complaint cases were received
 Two of the cases were met with heavy punishment
 One of the cases gained media recognition internationally, where a tour
guide in Yunnan province berated passengers for not spending enough
on shopping
 The tour guide’s license was revoked, the travel agency’s business
license was suspended for one month, and the owner was fined 50,000
RMB
Impact on the Industry
 From ATI’s perspective, our operation of
Mandarin language tours has not been
been heavily impacted
 This is because ATI never engaged in the
practices that the law protects against

 Cautious approach from clients in China


regarding the sale of optional tours
 Example of Universal Studios
Impact on the Industry
 Protective approach, selling optional tours
prior to departure from China
 Intended to protect against US suppliers or their tour
leaders selling optional tours after arrival in an
aggressive or even coercive manner
 By selling before departure in China, Chinese
operators / agents are better able to control the
passenger experience
 However, this does not mean that optional tours are
not being sold in the US, or that this is not still being
done in a deceptive and coercive way
Continued Need for Improvement,
Self-regulation by our Industry
 Ensuring customers get what they believe
have paid for
 Experiencing the essential and authentic aspects of a
given destination
○ For example, staying far outside of Los Angeles then have to pay
extra for a city tour to experience Hollywood, Beverly Hills, and the
beach

 We still see many very basic tours being sold at


unreasonably low prices, where profits are clearly being
made on the back end through the sale of optional tours
that are not really optional
Continued Need for Improvement,
Self-regulation by our Industry
 These kinds of deceptive practices violate China’s tourism
law, likely US consumer protection laws, as well as general
human decency
 These practices are not sustainable
 If the Chinese Government remains dedicated to enforcing
the tourism law, fining violators and suspending their
business operations, Chinese operators will need to carefully
select their suppliers overseas
 As the Chinese government makes the names of violators
public, which we understand will be the case with a black list
being published by CNTA later this year, Chinese consumers
will be better able make decisions on who to book their travel
through
Continued Need for Improvement,
Self-regulation by our Industry
 Consistent enforcement by the Chinese Government
combined with changes in consumer behavior based on
increased transparency and better information, will make
deceptive and dishonest practices by tour operators less
accepted, and less common

 As a service industry that should be dedicated to the


passenger experience, by bringing visitors to the USA, we
should be building a bridge between our two nations

 Following the “Rules of the Road” set out by NTA is not only
good for building this bridge, building the Brand USA in
China, it is also good for business in the long run
Thank you. Any questions?

September 9, 2015

Nick Hentschel, Vice President, Business Development,


AmericanTours International, LLC

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