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The information and material contained in this website are designed to provide information on Martin Currie and is only directed at Institutional Investors and Consultants.

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The information contained within this website does not constitute an offer of or an invitation to apply for securities:

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In which the person making such offer is not qualified to do so or
To whom it is unlawful to make such offer or solicitation.

Martin Currie Investment Management Limited is authorised and regulated in the UK by the Financial Conduct Authority.

The distribution of this information in written format is restricted to the UK. The information contained in this site has been compiled with considerable care to ensure its accuracy at the date of publication. But no representation or warranty, express or implied, is made to its accuracy or completeness. Any research or analysis contained in this website has been procured by Martin Currie for its own use. It is provided to you only incidentally, and any opinions expressed are subject to change without notice.
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Martin Currie Investment Management Limited, registered in Scotland (no SC066107) is authorised and regulated by the UK Financial Conduct Authority. Martin Currie Fund Management Limited, registered in Scotland (no SC104896) is authorised and regulated by the UK Financial Conduct Authority as a full-scope UK AIFM.

For the avoidance of doubt, nothing excludes, limits or restricts our obligations to you under the UK Financial Services and Market Act 2000 or any other applicable law or regulation.

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For the avoidance of doubt, nothing excludes, limits or restricts our obligations to you under the UK Financial Services and Market Act 2000, the Investment Advisers Act 1940 or any other applicable law or regulation.

The opinions and views in this website do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This website does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You should consult with your professional advisers before undertaking any investment activity. The information provided on this website should not be treated as advice or a recommendation to buy or sell any particular security or other investment. The information on this website has not been reviewed by any competent regulatory authority.

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Martin Currie Investment Management Limited, registered in Scotland (no SC066107). Martin Currie Inc, incorporated in New York and having a UK branch registered in Scotland (no SF000300), Saltire Court, 20 Castle Terrace, Edinburgh EH1 2ES Tel: (44) 131 229 5252 Fax: (44) 131 222 2532 www.martincurrie.com. Both companies are authorised and regulated by the UK Financial Conduct Authority. Martin Currie Inc, 620 Eighth Avenue, 49th Floor New York, NY 10018 is also registered with the Securities Exchange Commission as an investment adviser for the purposes of the Investment Advisers Act 1940.

For the avoidance of doubt, nothing excludes, limits or restricts our obligations to you under the UK Financial Services and Market Act 2000, the Investment Advisers Act 1940 or any other applicable law or regulation.

The opinions and views in this website do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This website does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You should consult with your professional advisers before undertaking any investment activity. The information provided on this website should not be treated as advice or a recommendation to buy or sell any particular security or other investment. The information on this website has not been reviewed by any competent regulatory authority.

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Martin Currie Investment Management Limited, registered in Scotland (no SC066107) is authorised and regulated by the UK Financial Conduct Authority.

The FCA's regulatory regime differs from the Australian regulatory regime.
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The opinions and views in this website do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This website does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You should consult with your professional advisers before undertaking any investment activity. The information provided on this website should not be treated as advice or a recommendation to buy or sell any particular security or other investment. The information on this website has not been reviewed by any competent regulatory authority.

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Important Information:

Martin Currie Australia is a division of Legg Mason Asset Management Australia Limited (ABN 76 004 835 849). Legg Mason Asset Management Australia Limited is a wholly owned subsidiary of Franklin Resources, Inc., and holds an Australian Financial Services Licence (AFSL No. 240827) issued pursuant to the Corporations Act 2001.

Martin Currie Investment Management Limited, registered in Scotland (no SC066107) is authorised and regulated by the UK Financial Conduct Authority.

The FCA's regulatory regime differs from the Australian regulatory regime.
This material is provided on the basis that you are a wholesale client within the definition of ASIC Class Order 03/1099. Martin Currie is registered as a foreign company under the Corporations Act 2001 (ARBN 131 134 613). It is exempt from the requirement to hold an Australian Financial Services Licence under the Corporations Act 2001 in respect of financial services provided to Australian wholesale clients by virtue of the application of ASIC Class Order 03/1099.

The opinions and views in this website do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This website does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You should consult with your professional advisers before undertaking any investment activity. The information provided on this website should not be treated as advice or a recommendation to buy or sell any particular security or other investment. The information on this website has not been reviewed by any competent regulatory authority.

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Martin Currie Investment Management Limited, registered in Scotland (no SC066107) is authorised and regulated by the UK Financial Conduct Authority. Martin Currie Investment Management Limited has a MiFID II passport to provide investment services to Professional Clients in the European Union.

For the avoidance of doubt, nothing excludes, limits or restricts our obligations to you under the UK Financial Services and Market Act 2000 or any other applicable law or regulation.

The opinions and views in this website do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This website does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You should consult with your professional advisers before undertaking any investment activity. The information provided on this website should not be treated as advice or a recommendation to buy or sell any particular security or other investment. The information on this website has not been reviewed by any competent regulatory authority.

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Martin Currie Investment Management Limited, registered in Scotland (no SC066107) is authorised and regulated by the UK Financial Conduct Authority. Martin Currie Investment Management Limited has a MiFID II passport to provide investment services to Professional Clients in the European Union.

For the avoidance of doubt, nothing excludes, limits or restricts our obligations to you under the UK Financial Services and Market Act 2000 or any other applicable law or regulation.

The opinions and views in this website do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This website does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You should consult with your professional advisers before undertaking any investment activity. The information provided on this website should not be treated as advice or a recommendation to buy or sell any particular security or other investment. The information on this website has not been reviewed by any competent regulatory authority.

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Martin Currie Inc, incorporated in New York with its registered office at 620 Eighth Avenue, 49th Floor New York, NY 10018 and having a UK branch registered in Scotland (no SF000300), Saltire Court, 20 Castle Terrace, Edinburgh EH1 2ES Tel: (44) 131 229 5252 Fax: (44) 131 222 2532 www.martincurrie.com, is registered with the Securities Exchange Commission as an investment adviser for the purposes of the Investment Advisers Act 1940 and is also authorised and regulated by the UK Financial Conduct Authority. Martin Currie Inc. operates under the International Adviser Exemption with the Ontario Securities Commission (‘OSC’) and is therefore currently not required to be registered as a portfolio manager for the purposes of MI 31-103.

For the avoidance of doubt, nothing excludes, limits or restricts our obligations to you under the UK Financial Services and Market Act 2000, the Investment Advisers Act 1940, National Instruments or any other applicable law or regulation.

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Investors resident in the United States of America: By clicking on this link, you agree and represent to Martin Currie that you have read and understood the "Important information and risk factors", which apply to any investment in our products referred to in this website, and that you are either incorporated in, or a resident of, the United States of America and that you meet the definition of an Accredited Investor as defined in Rule 501 of the United States Securities Act of 1933, as amended (‘The 1933 Act’). The information on this section of the website is not intended for use by any other person in any other jurisdiction, including members of the public.

Martin Currie Inc, incorporated in New York with its registered office at 620 Eighth Avenue, 49th Floor New York, NY 10018 and having a UK branch registered in Scotland (no SF000300), Saltire Court, 20 Castle Terrace, Edinburgh EH1 2ES Tel: (44) 131 229 5252 Fax: (44) 131 222 2532 www.martincurrie.com, is registered with the Securities Exchange Commission as an investment adviser for the purposes of the Investment Advisers Act 1940 and is also authorised and regulated by the UK Financial Conduct Authority. Martin Currie Inc. operates under the International Adviser Exemption with the Ontario Securities Commission (‘OSC’) and is therefore currently not required to be registered as a portfolio manager for the purposes of MI 31-103.

For the avoidance of doubt, nothing excludes, limits or restricts our obligations to you under the UK Financial Services and Market Act 2000, the Investment Advisers Act 1940, National Instruments or any other applicable law or regulation.

The opinions and views in this website do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This website does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You should consult with your professional advisers before undertaking any investment activity. The information provided on this website should not be treated as advice or a recommendation to buy or sell any particular security or other investment. The information on this website has not been reviewed by any competent regulatory authority.

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By clicking on this link, you agree and represent to Martin Currie that you have read and understood the "Important information and risk factors", which apply to any investment in our products referred to in this website, and that: (i) you are an institutional investor, an intermediary investor a consultant or other professional investor; and (ii) you are entering this website on your own initiative and without being influenced or induced by any third party to do so. The information on this section of the website is not intended for use by any other person, including members of the public.

Martin Currie Investment Management Limited, registered in Scotland (no SC066107). Martin Currie Inc, incorporated in New York and having a UK branch registered in Scotland (no SF000300), Saltire Court, 20 Castle Terrace, Edinburgh EH1 2ES Tel: (44) 131 229 5252 Fax: (44) 131 222 2532 www.martincurrie.com. Both companies are authorised and regulated by the UK Financial Conduct Authority. Martin Currie Inc, 620 Eighth Avenue, 49th Floor New York, NY 10018 is also registered with the Securities Exchange Commission as an investment adviser for the purposes of the Investment Advisers Act 1940.

For the avoidance of doubt, nothing excludes, limits or restricts our obligations to you under the UK Financial Services and Market Act 2000, the Investment Advisers Act 1940 or any other applicable law or regulation. The information on this website has not been reviewed by any competent regulatory authority in any jurisdiction.

The opinions and views in this website do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This website does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You should consult with your professional advisers before undertaking any investment activity. The information provided on this website should not be treated as advice or a recommendation to buy or sell any particular security or other investment. The information on this website has not been reviewed by any competent regulatory authority.

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Martin Currie Investment Management Limited, registered in Scotland (no SC066107). Martin Currie Inc, incorporated in New York and having a UK branch registered in Scotland (no SF000300), Saltire Court, 20 Castle Terrace, Edinburgh EH1 2ES Tel: (44) 131 229 5252 Fax: (44) 131 222 2532 www.martincurrie.com. Both companies are authorised and regulated by the UK Financial Conduct Authority. Martin Currie Inc, 620 Eighth Avenue, 49th Floor New York, NY 10018 is also registered with the Securities Exchange Commission as an investment adviser for the purposes of the Investment Advisers Act 1940.

For the avoidance of doubt, nothing excludes, limits or restricts our obligations to you under the UK Financial Services and Market Act 2000, the Investment Advisers Act 1940 or any other applicable law or regulation. The information on this website has not been reviewed by any competent regulatory authority in any jurisdiction.

The opinions and views in this website do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This website does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You should consult with your professional advisers before undertaking any investment activity. The information provided on this website should not be treated as advice or a recommendation to buy or sell any particular security or other investment. The information on this website has not been reviewed by any competent regulatory authority.

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How we are travelling

Will we be going on international holidays again any time soon? Has the lockdown created pent up demand?

Aftermath series
Chris Schade Research Analyst
Kim Catechis Head of Investment Strategy

Tourism in the aftermath of COVID-19

Kim Catechis and Chris Schade, Research Analyst at Martin Currie Australia discuss the shift from international to domestic tourism, and the outlook for the sector.

Aftermath series


This video is part of our weekly AFTERMATH video series led by Kim Catechis, Head of Investment Strategy, where members of the Martin Currie investment team discuss the far-reaching impacts of COVID-19 on the economy, the equity market, society, politics, the environment and our portfolios.


Full series

The tourism industry will be significantly smaller going forward. Unfortunately, many will struggle to make it but that provides a good opportunity for the survivors.

Script

Kim: Hello again, thanks for tuning in. This is the AFTERMATH and today we are talking tourism, and I'm discussing it with my colleague from the Melbourne office Chris Schade. Chris, really good to see you.

Chris: Hi Kim, likewise.

Kim: Now tourism is a fantastic industry, no matter where you are in the world. It brings in valuable foreign currency, it employs lots of people and the really big additional positive here is that you can employ lots of semi-skilled and low-skilled people too. There are lots of jobs that money tends to spread in the local community so that's fantastic.

We know that there is a strong relationship with GDP growth, so in positive GDP growth years the relationships about 1.2 on average.1 However, in down years, we know there is a really powerful relationship there too. So for example, 2009 world tourism collapsed to the extent of five times the fall in GDP.

Now in that kind of scenario, which I guess we're replicating here Chris, how would you sum up the current state?

Chris: It’s a similar context you know, pre COVID the sector had been a really good growth sector, growing faster than GDP over much of the past decade post the GFC, as you indicated with the sort of multiplier of GDP growth. And a key driver of that was certainly Asia, so we have seen a massive increase in tourists, particularly out of China, over the last decade.

Also, post-GFC gave rise to an environment of fairly solid business travel, and also we think we've seen a consumer shift towards experiences. So travel has really benefited from that shift. So that was sort of the outlook leading into COVID, and then obviously came the biggest shock the sector has seen in probably a century.

With peak revenue declines across key sector activities, whether it be airlines or cruises or hotels or local tours, of 60-80%+2. And in many cases revenue declines are still sitting at those levels, so a dramatic shift in terms of revenue decline and therefore earnings decline. It was helped to a degree by stimulus which is obviously temporary so that delays as opposed to removes the impact.

Perhaps just a final point the sector relies quite heavily on advanced customer payments for funding, so not only have we seen quite a large revenue and earnings hit, we've also seen basically a removal of a key funding source. So the sector is in pain, to be honest, and you know it's going to be a tough recovery from here. In summary, a really challenging environment for the sector.

Kim: That makes sense. So tell me, what do you think are the lasting impacts on the sector going forward?

Chris: It will take a long time for business and international travel to return to their pre-COVID levels.

In terms of business travel, through COVID, people have become much more familiar and comfortable with video networking tools, and we simply think a lot of business travel that might have been necessary, or at least favoured, pre-COVID won't be necessary in the post-COVID more connected world.

We also think the industry will be significantly smaller going forward, so a number of players, particularly small players that don't have access to funding markets, will struggle to survive as they go through the recovery process. Unfortunately they will struggle to make it.

Now that provides a good opportunity for the survivors, so likely the larger players that do have their balance sheets in good shape, can take market share on the other side of this crisis. So that means that just because the industry is smaller, their businesses don't necessarily have to be smaller.

We certainly seen a lot of the more nimble travel businesses, with better or at least more flexible management, take this opportunity to remove some significant costs from their business, and also shift the way of doing business. So more digitally enabled business, less face to face interaction. So that means they'll be more leveraged from a profit perspective to the ultimate recovery.

Kim: That all make sense too. So, tough times for most. When we turn to outlook, what do you see?

Chris: It’s a mixed bag, the good news is domestic tourism accounts for around 70% of the global industry3, and Australia fits quite nicely into that statistic. So there's quite a bit of optimism from the sector around a domestic tourism boom, without getting too excited. Key drivers of that are pent up demand from being in lockdown, restricted to your local areas, and also an element of forced savings.

Also, surveys of travellers show people are quite willing to travel domestically, certainly in their cars, so shorter sort of trips will probably do the best, at least initially. But even domestic air travel, people are much more willing to do than they are international travel, so that sort of bodes well for the domestic industry.

Certainly, on a sustainable basis, while international travel remains closed, it's hard to see the domestic industry achieving the same level of overall activity. So we're still talking about probably quite significant decline. It's still a challenging outlook, and we can't forget there's still that sort of delayed economic hit that stimulus is currently masking that will hit this sector quite significantly. As you mentioned earlier, there is that economic multiplier effect, so yeah as I said quite a mixed bag.

Kim: Chris, thank you that was really helpful. Thank you all for listening and watching. Please send in your feedback, good or bad, as I keep saying every week and tune in next week, we're going to move to another sector.


1Source: UN World Travel Organisation. https://www.e-unwto.org/doi/10.18111/9789284421152
2Car rental: AVIS Budget Group Q12020 Earnings Call. Transcript link: http://ir.avisbudgetgroup.com/static-files/7cdf3ca7-c207-48f7-a8b9-84c9c338cbfe
Airlines: Direct conversations with QAN (analyst calls) and widely reported by most airlines.
Hotels: McKinsey report: https://www.mckinsey.com/industries/travel-logistics-and-transport-infrastructure/our-insights/hospitality-and-covid-19-how-long-until-no-vacancy-for-us-hotels#
Cruises: E.g. Celebrity Cruises suspension of cruises (i.e. zero). https://www.celebritycruises.com/au/travel-alert/voluntary-suspension-of-cruising
3World Travel & Tourism Council https://wttc.org/Research/Economic-Impact/moduleId/1445/itemId/91/controller/DownloadRequest/action/QuickDownload


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