Slide1: Travel Trends Graham McKenzie – Director FSI Travel September 28, 2007


Presentation outline: Presentation outline


Presentation outline: Presentation outline Consumer trends Growth sectors Future outlook


Destination Europe leads on a world stage: Destination Europe leads on a world stage Europe is the largest regional destination world-wide with 43% of global arrivals 492 million arrivals forecast for 2006 Leisure arrivals remain dominant with 82%


Global high growth: Global high growth Emerging destinations strike out from a low base Middle East luxury market benefits from Dubai and its global hub status Cambodia and Vietnam as Asia alternatives, boosted by LCCs and relaxed visas Venezuela benefits from economic recovery and oil revenues Ghana boosted by cultural tourism – diaspora from North America


Slide6: Top European destinations France and Spain are the most popular destinations with the gap narrowing Turkey doubles in growth, despite domestic security issues Russia exhibits good growth thanks to strong tourism flows from China However infrastructural and visa challenges


Fast growing destinations in Europe: Fast growing destinations in Europe EU accession has positive effect on tourism flows Latvia - rise of Riga as Baltic tourist centre, connectivity boosted by LCCs Bulgaria boosted by second home market


Presentation outline: Presentation outline Consumer trends Future outlook Leading destinations


Travel retail sales: Travel retail sales European travel retail market = US$221 billion (2005) Package holidays accounts for largest share of 37%, US$83 billion Flight only has a high share despite strong competition from direct supplier sales and commission cuts


Fast growing travel retail sectors: Fast growing travel retail sectors Adventure/trekking is booming – increased demand for outdoor, often challenging experiences Package holidays show mature growth as market is increasingly commoditised, with growth in the luxury, long haul and customised sectors


European destination preferences: European destination preferences Mature beach sector dominates with 55% and is still growing strong Suggests luxury beach is outgrowing mass e.g. Europe, Africa, Asia Mountain destinations showed fastest growth (59%) Driven by popularity of adventure, trekking, extreme sports, health and wellness as primary motivation for trip


The impact of low cost carriers: The impact of low cost carriers Over 10 years of LCCs has made an irreversible mark Air travel within reach of the average consumer Development of regional airports Ryanair and easyJet drive outbound and inbound trends Leisure and migration, especially for accession countries Rise of second home market benefits Eastern Europe Irreversible changes in consumer travel purchasing habits Long haul low cost will be a major challenge to European destinations Americas with Flyglobespan, Asia with Oasis Next stop Middle East & Latin America?


Low cost carriers: Low cost carriers Pan-European and Eastern European local players eat into charters’ share Scheduled airlines marginal growth vs doubling of low cost seats sold


Leading LCCs drive growth: Leading LCCs drive growth Source: ELFAA Bullish Ryanair storms ahead with aggressive route expansion and low prices Ryanair and easyJet new routes integral to destination success


Online as a growth catalyst: Online as a growth catalyst Online acts as catalyst for growth through diversification Allows open playing field for direct suppliers, intermediaries, chains and independents Niches become standard e.g. health and wellness Tap into specific consumer segments and interests Flexible and targeted Social networking Global search engines muscle in e.g. Yahoo TripPlanner


Online penetration of travel retail in Europe: Online penetration of travel retail in Europe Ireland, followed by the UK, boasts the highest levels of internet penetration Poland to increase x 8, whilst Germany, France and Spain to triple in share Poland driven by domestic online travel players and 10 million Internet users


China – full of promise?: China – full of promise? Set to become the third largest economy by end of the decade Most populous global market Fast growth for non-essential items e.g. leisure Need to understand China consumer Many different languages, dialects and cultures Concentration of wealth in first tier cities Middle class target market Europe already benefits from ADS Italy, Germany and France as top average spend of US$3,800 (France) 7 day Golden holidays and under supply Future growth Second and third tier cities Rural China Long-haul low cost as catalyst Market is under-supplied by 40%


China to outperform all and be a key source market: China to outperform all and be a key source market China set for dynamic growth to reach over 110 million outbound by 2010 However, Asia will remain preferred destination – Hong Kong, Thailand, Macau Europe needs to assess product and services offer to fill existing gaps


Presentation outline: Presentation outline Leading destinations Growth sectors Future outlook


Consumer lifestyles are changing: Consumer lifestyles are changing Rise of the global consumer Urban middle class Mirroring trends in developed markets Increasing environmental awareness Fairtrade and ethical consumerism Celebrity endorsement Increased consumer segmentation Falling brand loyalty Consumer resilience and overriding desire to travel Consumers seek Experiences and adventure – experiential travel Combine travel with personal goals


Responsible tourism and rising consumer awareness: Responsible tourism and rising consumer awareness Climate change and the carbon offsetting debate Governments, the media, trade and consumers United Nations Framework Convention on Climate Change Tourism Industry Carbon Offset Service (TICOS) 2007 launch in the UK Corporate companies begin to embrace latest consumer trend Lastminute launches carbon offsetting on bookings – first move advantage First Choice Responsible Tourism Awards Germany’s EU presidency may lead to speedier change Dilemma how to reconcile personal travel with social responsibility Green destinations will stand out from the pack


Emerging Lifestage Segments: Emerging Lifestage Segments Lifestages apparent in the US and UK Babyboomers – grey power Ageing population with high disposable income By 2050 half the population in Europe will be over 50 Price less an issue, service and expertise are key Grandparent travel DINKS Double Income No Kids – cash rich Singles Singles travel – companionship, dating Babymoons Packages for expectant mothers Flashpackers


Key segments positioning : Key segments positioning mature emerging low spend health & wellness high spend film flash-packer extreme adventure/trekking agri-tourism voluntourism


Presentation outline: Presentation outline Leading destinations Consumer trends Growth sectors


The new places to be in the world: The new places to be in the world Europe loses out on high growth momentum to more exotic locations


Europe’s future destination hot spots: Europe’s future destination hot spots Status quo remains for top 3 inbound destinations Turkey muscles its way into the top five for arrivals New accession countries hit the highest growth e.g. Bulgaria Spain set to outpace France in average arrival growth


Challenges and Opportunities for Europe: Challenges and Opportunities for Europe Opportunities Economic buoyancy Investment in infrastructure New lifestage segments and niche markets New source markets BRICs as big revenue earners Online travel and mobile technology Increased connectivity e.g. Europe-Asia, Europe-Middle East Low long haul low cost Benefit from US security stringency Challenges War, natural disasters, poverty, disease, terrorism Climate change and best practice Fuel prices Safety and security Red tape Low Internet and financial cards penetration


Future trends to watch: Future trends to watch The continued rise of the global consumer Trends converging in the middle class Changing demographics key to inbound Lead to further consumer segmentation Searching for inspiration Look to the East for technology trends Look to the US for consumer/IT trends Middle East as luxury barometer


Slide29: Graham McKenzie – Director FSI Travel September 25, 2007 Graham@FSI-Travel.com