PhoCusWright’s CANADIAN ONLINE TRAVEL OVERVIEW · of Online Travel Agency Table 3.5 3.6 U.S. vs. Canada Online Agencies: Different Models, Product Mix Table 3.6 3.7 Online Travel

MARKET RESEARCH • INDUSTRY INTELLIGENCE

PhoCusWright

CANADIAN ONLINE TRAVEL OVERVIEWEXECUTIVE SUMMARY

PhoCusWright’s

By Douglas Quinby

A comprehensive analysis and forecast of Canadian

online travel market trends by sector, segment and

channel, in the context of the overall market.

All PhoCusWright Inc. publications are protected by copyright. It is illegal under U.S. federal law (17USC101 et seq.) to copy, fax or electronically distribute copyrighted material beyond the parameters of the License or outside of your organization without explicit permission.

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Philip C. Wolf President and CEO

Carol Hutzelman Senior Vice President

Christine Lent Vice President, Finance

Bruce Rosard Vice President, Sales and Marketing

Lorraine Sileo Vice President, Information Services

PhoCusWright's Canadian Online Travel Overview June 2007

PhoCusWright'sCanadian Online Travel Overview

Executive Summary

Written by Douglas Quinby

Edited by Karen Burka

Published byPhoCusWright Inc.

PhoCusWright's Canadian Online Travel Overview is published by PhoCusWright Inc. The information contained herein is derived from a variety of sources. While every effort has been made to verify the information, the publisher assumes neither responsibility for inconsis-tencies or inaccuracies in the data nor liability for any damages of any type arising from errors or omissions.

©2007 PhoCusWright Inc. All Rights Reserved.

PhoCusWright would like to recognize the following companies and organizations that partnered in this

research for the benefit of the travel industry.

Accovia Inc.

Canadian Tourism Commission

Expedia Canada Corp.

MyTravel Canada Inc.

Softvoyage

Transat A. T. Inc.

Government of New Brunswick – Department of Tourism and Parks

©2007 PhoCusWright Inc. All Rights Reserved. iv

PhoCusWright's Canadian Online Travel Overview ContentsPhoCusWright's

Canadian Online Travel Overview

Section One 1.1 Introduction

Section Two 2.1 Size of the Market

Section Three 3.1 Online Travel Agencies: Fragmented Market Loses Ground to Suppliers

Section Four 4.1 Flying Online: A Few Airlines Rule a Turbulent Market

Section Five 5.1 Packaged Travel: Fixed – Flexible – Dynamic

Section Six 6.1 Land & Sea: Lodging, Rental Car, Rail and Cruise

Table 2.1 2.1 Comparative Size of Online Travel by Region

Table 2.2 2.3 Canadian Online Travel Market Gross Bookings, 2004-2009

Table 2.3 2.3 Online Travel as a Percentage of the Total Travel Market

Table 2.4 2.4 Canada, U.S., Europe and Asia Pacific Online Leisure/Unmanaged Business Travel as Percentage of Total Travel Market

Table 2.5 2.4 Total and Online Travel Markets by Segment, 2006

Table 2.6 2.6 Total Travel Market and Online Travel Market, 2004-2009

Table 2.7 2.7 Online Travelers in Canada

Table 2.8 2.8 Level of Future Interest Among Offline Users in Buying Travel Online

Table 2.9 2.9 Usual Travel Shopping Method for Online Travelers

Table 2.10 2.9 Usual Method of Buying for Online Travelers

Table 2.11 2.10 Usual Online Purchase Method, by Component

Table 2.12 2.11 Primary Reasons for Using Buying Method

Table 2.13 2.12 Web Site Use and Influence In Travel Purchase Decisions

Table 3.1 3.2 Online Travel Agencies: Three Models in Canada

Table 3.2 3.3 Online Travel Agency Gross Bookings, 2004-2009

Table 3.3 3.4 Online Travel Agency Gross Bookings by Product Segment, 2004-2009

Table 3.4 3.5 Online Market Share by Type of Online Travel Agency

Table 3.5 3.6 U.S. vs. Canada Online Agencies: Different Models, Product Mix

Table 3.6 3.7 Online Travel Agencies Lag as Suppliers Consolidate Their Online Dominance

Table 3.7 3.9 Vertical and Global Alignment Among Leading Online Travel Agencies

Table 4.1 4.2 Airline Internet Gross Bookings, 2004-2009

Table 4.2 4.3 Top Web Sites for Purchasing Air

Table 4.3 4.4 Scheduled vs. Charter Service

Table 4.4 4.5 Airline Web Site as a Percentage of Total Bookings, Scheduled vs. Charter

Table 5.1 5.2 Packaged Travel Definitions

Table 5.2 5.4 Package Internet Gross Bookings, 2004-2009

Table 5.3 5.5 Online Agencies Dominate Online Packages, Dynamic Packaging Grows

Table 6.1 6.3 Hotel Internet Gross Bookings, 2004-2009

Table 6.2 6.5 Car Rental Internet Gross Bookings, 2004-2009

Table 6.3 6.7 Rail Internet Gross Bookings, 2004-2009

Table 6.4 6.9 Cruise Line Internet Gross Bookings, 2004-2009

Contents and Table Listings for the Complete Report

©2007 PhoCusWright Inc. All Rights Reserved. v


©2007 PhoCusWright Inc. All Rights Reserved. Page 1.1

Section One

PhoCusWright has been tracking the online travel industry since 1998,

providing rigorous market sizing and forecasting, company performance assess-ments and analyses of consumer shopping trends in the U.S., as well as across the European and Asia Pacific regions. In 2006 and 2007, PhoCusWright undertook its first comprehensive study of the Canadian online travel marketplace, conducting both a market sizing study and consumer survey to acquire a rich and complete pic-ture of the total market size and opportu-nity, as well as key traveler behavior trends. This report, PhoCusWright’s Canadian Online Travel Overview, presents the results of this research.

Why Canada, Why Now

It would be easy to consider Canada merely an extension of the U.S. online travel marketplace. After all, it has a close geographical proximity, shared history and cultural characteristics, similar high stan-dard of living, high incidence of travel, and significant penetration of Internet usage and high-speed broadband penetration.

But there are also important differences in the Canadian market, differences that, as this report reveals, give rise to a unique travel marketplace with a very distinctive traveling population. For example:

■ Tour Operators. With a geographical climate more akin to that of Northern Europe than the varied U.S. landscape, Canadians, like Europeans, are huge con-sumers of travel packages. Tour operators offering vacations to classic warm des-tinations in the Caribbean and Mexico play a large role in the Canadian leisure travel market, compared to the relatively small role of traditional tour operators in the U.S. market.

■ Scheduled and Charter Air. The dominant positions of Air Canada and WestJet airlines in a market where four airports account for almost 70% of all passenger traffic create a vastly different environment for scheduled air travel, compared to the relatively open skies of both the U.S. and Europe. The signifi-cant role of tour operators and charter carriers adds another interesting wrinkle to this unique market.

■ Population Density and Hotel and Car Fragmentation. A population little more than one tenth of the U.S. yet spread across roughly the same geo-graphical area generates vastly different dynamics in the lodging and car rental sectors. The sectors are more fragmented, less reliant on large, global brand affili-ation; and, in the case of the latter, far less dependent on airport locations.

Introduction

June 2007 Section One: Introduction

Page 1.2 ©2007 PhoCusWright Inc. All Rights Reserved.

■ Regional Differences Extend to Online Spend. PhoCusWright’s research compared and contrasted six key regions: Atlantic, Quebec, Ontario, Prairies, Alberta and British Columbia, and found that British Columbia (B.C.) spends significantly more online versus all regions but Ontario. Trip frequency was also the highest for those two regions, with online travelers taking an average of 3.9 trips in B.C. and 4.1 trips in Ontario.

These are just a few of the key dynam-ics in Canada that have given rise to its distinctive travel landscape and a unique online travel marketplace. Major global online travel players entering the market have had to adapt their models to suit Canadian tastes, while several Canadian travel suppliers, retailers and homegrown online travel entities have leveraged their knowledge of the market to capitalize on the growing shift to book travel online.

Although smaller than the U.S. market-place, the Canadian opportunity is worth-while and getting bigger. The Internet is playing an increasingly significant role in both influencing consumer shopping and as a source of transactions. Nearly one third of Canadian travel will be booked online for leisure/unmanaged business in 2007. As a point of sale for travel, the Web will enjoy growth rates well into the double digits through 2009 and beyond.

Purpose of Report

PhoCusWright conducted a comprehen-sive study of the Canadian travel market-place from November 2006-February 2007 to assess the size of the total travel market and online travel, identify key trends and project future growth and developments.

The study consisted of two concurrent phases:

■ Market Sizing. PhoCusWright inter-viewed and acquired data from more than 30 companies and industry associa-tions representing the full spectrum of travel in Canada. PhoCusWright used this data to develop market size esti-mates, acquire supply side perspective and generate trend analysis.

■ Consumer Survey. PhoCusWright gathered data from nearly 1,500 Canadian travel consumers to assess their online behavior regarding leisure travel planning and buying.

Methodology

Market SizingPhoCusWright’s Canadian Online Travel Overview addresses the Canadian market-place as a point of sale. PhoCusWright’s estimates and forecasts cover all travel purchased within Canada for domestic, transborder (Canada-U.S.) and outbound international travel, for both travel suppli-ers (scheduled and charter airlines, hotels, car rental companies, tour operators, rail-ways and cruise lines) and online travel intermediaries.

All figures are in Canadian dollars unless otherwise noted. In some cases, currency conversion from U.S. to Canadian dollars was required. PhoCusWright used a con-sistent exchange rate of C$1.20:US$1.00 based on the 2004-2007 cumulative average from the online global currency resource OANDA.

Both consumer leisure and unmanaged business travel services are included in the market size and forecast figures.



Unmanaged business travel refers to all air, car and hotel expenses associated with business travel in firms that do not have a travel policy dictating the channel, type of travel, supplier or fare/rate uses. Corporate online booking systems such as Sabre/GetThere and Amadeus/e-Travel, as well as the corporate travel units of online travel sellers (e.g., Expedia Corporate Travel) are excluded from this analysis (for more information on the corporate travel market, see PhoCusWright’s Corporate Travel Distribution: Key Markets).

PhoCusWright built its estimates and fore-casts from discussions with more than 30 travel executives regarding their compa-nies’ Internet sales, marketing and tech-nology investments, challenges, strategies and expectations. Their responses have been vetted and aggregated to determine market size for supplier Web sites and online travel agencies. PhoCusWright has also obtained data from financial reports of public companies and, in limited cases, reputable third party sources including Statistics Canada, the Canadian Tourism Commission and others.

Estimates and projections are for gross bookings, i.e., the retail value of travel sold, after cancellations for the core travel product segments (flights, hotels, car rent-al, packages, cruise and rail). This report excludes, wherever possible, additional revenues such as in-room purchases, res-taurant and retail revenues for hotels, and onboard revenues for cruise lines and rail operators. This could not be accom-plished, however, in all product segments, where some key suppliers do not separate ticket and non-ticket sources of revenue. PhoCusWright believes the extent of such “non-core” revenues to be immaterial to total market sizing estimates. Figures for airlines are flown, i.e., passenger, revenue.

In addition, estimates and projections pre-sented in this report include only travel where the entire transaction has been completed online. For its U.S. reports, PhoCusWright includes travel researched online but booked offline using a toll-free telephone number. PhoCusWright has changed its definition for this report due to a unique attribute of the online travel market in Canada. Whereas in the U.S. market online travel agencies conduct only a small portion of bookings offline, there are several online travel sellers in Canada that also conduct a significant portion of their business over the phone. PhoCusWright believes presenting such bookings here as offline presents a more accurate picture of the Canadian online travel market.

Figures for 2004-2006 are based on actual company results, although in some cases, PhoCusWright had to estimate 2004 fig-ures. Projections for 2007-2009 are based on company interviews, consumer sur-vey research and market developments. PhoCusWright also considers historical growth and economic trends when devel-oping its forecasts.

Total travel market figures (online and offline) are used to determine Internet penetration for each market segment. Total travel figures are either derived from third party sources or are PhoCusWright estimates. The figures listed in tables may not always add precisely to column totals due to rounding.

Consumer Travel & Behavior InformationPhoCusWright collected consumer travel shopping and purchasing behavior from a field survey of online Canadians utiliz-ing Ipsos Reid’s online panel. Founded in 1998, Ipsos Reid’s online panel con-

June 2007 Section One: Introduction


sists of over 153,000 randomly recruited Canadian residents. For this report, a representative sample of the online panel-ists was sent an email invitation to par-ticipate. Respondents were given a unique personal identification number to ensure strict control in the data collection pro-cess and provide access to Ipsos Reid’s secure survey Web site.

Survey fieldwork was completed in December 2006. The criteria for participa-tion was designed to reflect the dynamics of online travel purchasing in Canada among the adult population (19 years and older). Therefore, to qualify for this study, respondents had to meet the following three criteria to become "online travelers.":

1. They had personally taken a trip by charter or commercial airline or train in the last 12 months.

2. They had personally stayed at a hotel, motel or other paid accommodations on a pleasure or personal trip away

from home in the past 12 months (1+ nights).

3. They had connected to the Internet in the last month.

A total of 1,458 surveys were completed and averaged 11 minutes in length. To ensure sufficient representation across Canada, the country’s 10 provinces were classified into six regions: British Columbia, Alberta, Prairies (Manitoba and Saskatchewan), Ontario, Quebec and Atlantic (New Brunswick, Newfoundland, Nova Scotia and Prince Edward Island). A minimum of 200 surveys were completed in each of these regions.

The PhoCusWright Canadian Consumer Travel Trends Survey is fully representative, scientific, random-sample survey whose results can be projected with confidence to Canada’s online adult population. The error interval for the sample is +/- 2.8% at the 95% confidence level.

Yukon Territory Northwest

TerritoriesNanuvut

BritishColumbia

Alberta

Saskatchewan

Manitoba

Prince Edward Island

Ontario

Quebec

Newfoundland

NovaScotia

NewBrunswick

The Canadian Provinces



Section One

Canada represents a relatively small travel market compared to the U.S.

behemoth on its southern border. The more than C$24 billion that Canadians spent on travel in 2006 amounts to slightly less than 10% of what Americans spent. Yet, Canada enjoys a dynamic and distinctive travel marketplace with a strong growth outlook for the role of the Internet in travel distribution.

Although something of a slow starter relative to the U.S. and faster-grow-ing European markets, online travel in

Canada is picking up momentum (see Table 2.1). The market has more than doubled from 2004 to 2006 to reach $6.5 billion and is projected to nearly double again by 2009. Just over half, or 51%, of “online travelers” said the Internet is the usual channel through which they pur-chase travel.

This section looks at the size of the Canadian online travel market in terms of both gross dollar bookings and online penetration, as well as consumer usage and behavior.

Size of the Market

Section Two

Table 2.1 Comparative Size of Online Travel by Region (Leisure/Unmanaged Business Travel)(C$B)

Note: 2007-2008 ProjectedSource: U.S. Data – PhoCusWright’s U.S. Online Travel Overview Sixth Edition European Data – PhoCusWright’s European Online Travel Overview

2005 2006 2007

U.S.

20080

20

40

60

80

100

EuropeCanada

120

$140

2004

60

3.129

77

4.2

43

96

6.5

59

116

8.1

75

136

9.6

92

June 2007 Section Two: Size of the Market


Travel Market Rebounds

The country’s overall travel market is only recently emerging from a very challeng-ing period. The global downturn in travel and tourism following Sept. 11, 2001 was exacerbated by the SARS threat in Canada, which was one of the few coun-tries outside Asia to be directly affected by the epidemic. Canada’s relatively small airline industry was among the hardest hit. More than one airline has shut down since 2001 and Air Canada, the nation’s flag carrier and largest airline by far, spent much of 2003 and 2004 reorganizing under bankruptcy protection.

But the travel market in Canada has been rebounding impressively, with approxi-mately 10% growth in 2005 and 2006. The market has benefited from both increased overall demand for travel and a welcome rise in pricing across virtually every segment of the industry. Although industry growth rates are expected to return to more customary gains of 4-5% in 2007 and beyond, online travel will continue to surge ahead at very healthy double-digit growth rates into the foresee-able future.

For companies looking to break into the Canadian online travel market, there is certainly promising opportunity. The market has some very distinct character-istics that align it more closely to Europe on the one hand, such as the important role that tour operators and travel agents play in vacation travel. But it also pos-sesses qualities that defy comparison with other markets, such as the huge volume of offline business conducted by online travel agencies.

Have Internet, Will TravelAccording to Statistics Canada and The Canadian Inter@ctive Reid Report by Ipsos Reid, about 80% of Canada’s 24.8 million adults have Internet access. And, based on data from the Organization for Economic Co-operation and Development, about 35% of them, or a little more than seven million, subscribe to high-speed broad-band. The PhoCusWright Canadian Consumer Travel Trends Survey also found that two thirds of online Canadians have stayed in paid accommodations over the past year, four in 10 have traveled by air or train for pleasure or personal travel, and one in seven have purchased a vacation package.

Online Travel Forecast to Nearly Double by 2009Canadian travelers purchased $6.5 billion worth of leisure and unmanaged business travel via the Internet in 2006, more than twice the amount spent on travel online in 2004. The figure is projected to exceed $11 billion by 2009 (see Table 2.2). The main drivers behind this growth are the airlines, although hotel and car rental companies have also made determined efforts to get consumers to book directly via their Web sites. Canada’s varied field of online travel agencies, however, has also put a strong focus on tour operator packages and dynamic packaging.



Online Penetration Reaching One Third of Travel Market

The Internet accounted for 27% of all leisure and unmanaged business travel purchased in 2006. Online penetration is projected to reach nearly one third of the market in 2007 and almost 40% of the total market by 2009 (see Table 2.3).

Canadians booked more travel via the Internet as a percentage of all travel booked compared to travelers in Europe and Asia. The U.S. is still the global leader with online leisure/unmanaged business travel representing 34% of the total travel market (see Table 2.4).

Table 2.2Canadian Online Travel Market Gross Bookings, 2004-2009

Gross Bookings (C$M)White numbers inside bars represent annual growth/ percent change over previous year

2004 2005

+38%

2006

+55%

2007

+25%

2008

+19%

2009

+15%

$3,050$4,196

$6,486

$8,076

$9,632

$11,033

Note: 2007-2009 ProjectedSource: PhoCusWright’s Canadian Online Travel Overview

Table 2.3Online Travel as a Percentage of the Total Travel Market


Total Travel MarketOnline Leisure/UnmanagedBusiness Travel Market

2004

15%$3,050

$20,396

2005

19%$4,196

$22,177

2006

27%$6,486

$24,370

2007

32%$8,076

$25,523

2008

36%$9,632

$26,725

2009

39%$11,033

$28,003

(C$M)White numbers inside blue bars represent online share of total market



Table 2.5Total and Online Travel Markets by Segment, 2006

Source: PhoCusWright’s Canadian Online Travel Overview

Packages 20%

Rail 1% Cruise 4%

Total Travel Market Online Travel Market(Leisure/Unmanaged Business)

Air 73%

Air 42% Hotel 12%

Hotel 27%

Car 4%

Car 6%

Packages 10%Rail 1% Cruise <1%

Table 2.4Canada, U.S., Europe and Asia Pacific Online Leisure/Unmanaged Business Travel as Percentage of Total Travel Market


2008

U.S.Canada

AsiaEurope

200720062005200420032002200120001999

7%9% 11%

13%16%

4% 6%9%

14%19%

23%28%

15%19%

27%32%

36%

4% 7%10%

14%

21%25%

29%34%

38%42%



Three Out of Four Online Travel Dollars Spent on Air Air is by far the dominant product pur-chased online, representing 73% of the Canadian online travel market in 2006. This is in sharp contrast with the total Canadian travel market, where air rep-resents only 42% of the total (see Table 2.5). With two airlines, Air Canada and WestJet, accounting for more than 60% of total air spend, and four airports handling almost 70% of all passenger traffic, the moves of a few (or even one) dominant suppliers can have a significant effect on the whole market. Both Air Canada and WestJet have been powerfully successful in motivating – if not compelling – pas-sengers to book directly on their Web sites through deliberate pricing strategies that favor their Web sites and penalize custom-ers for booking through other channels. Not surprisingly, almost half (47%) of the $10.2 billion air market was booked online in 2006.

The market for hotels and rental cars is quite different than for flights. While the airline sector is highly concentrated in the hands of a few, the lodging and rental car markets are very fragmented. Less than 20% of the approximately 8,200 lodging establishments in Canada are flagged with a national or global brand. Canada’s large geographical expanse but relatively sparse population has created a much more important role for off-airport locations for car rental companies, and enabled more independent players to stake a claim in the market. As a result, online penetration of the hotel and car segments was only 11% of all hotel room revenue and 18% of total car rental revenue, respectively, in 2006.

There is one primary rail provider in Canada, as in the U.S. This company, VIA

Rail, has been very aggressive in building its direct online business and does not provide inventory for booking via any online third parties. Canadians booked $76 million, or one quarter, of the $223 million market for intercity rail travel online. This was done primarily with VIA Rail and also for some outbound transbor-der travel via Amtrak. Online rail book-ings are projected to reach almost $110 million by 2009.

Online cruise bookings, by comparison, are barely perceptible. Less than $5 mil-lion in cruise bookings were made online in 2006, representing well under 1% of the $966 million cruise market. Online cruise bookings are projected to reach 1% in 2009, when slightly more than $12 million in cruises will be booked via the Web.

Three out of Four Online Travel Dollars Spent on Supplier Sites Supplier Web sites dominate online travel with 77% of the market, versus 23% for online travel agencies (see Table 2.6). Airlines – especially Air Canada and WestJet – are driving forces behind the significant edge enjoyed by suppliers. Online travel agencies will continue to feel pressure as hotel and car rental com-panies accelerate their pursuit of aggres-sive strategies to drive Canadians directly to their Web sites.

While Canadians largely turn to supplier Web sites to book individual travel com-ponents online, Canada’s diverse field of online travel agencies accounted for 93% of all online package sales in 2006. This trend is significant because packaged trav-el accounts for almost 20% of the total Canadian travel market (compared with little more than 5% in the U.S.). Canada’s tour operators, especially the largest three (Transat, MyTravel and FirstChoice), are



expansive, vertically integrated organizations whose reach and influence extend deep into both the retail and supplier segments.

But Canada’s tour operators, much like those in the U.S. and Europe, have not been able to build a direct online business with consumers. They are grappling with the challenges of adapting legacy technol-ogy and travel agency-centric distribution models to the shifting dynamics of online travel. Several homegrown Canadian

online travel agencies, such as iTravel2000 and SellOffVacations, have stepped up to capitalize on the opportunity to sell packages online, successfully adapting the classic leisure agency model to an online world. Even Expedia.ca, which pioneered dynamic packaging in the Canadian mar-ket, began retailing tour operator packages in early 2006, an acknowledgement of how important the segment is to Canada’s leisure travel landscape.

Table 2.6Total Travel Market and Online Travel Market, 2004-2009 (C$M)

2004 2005 2006 2007 2008 2009

Supplier Web Sites 2,110 3,005 4,962 6,204 7,391 8,486 Percent Change – 42% 65% 25% 19% 15%

Online Travel Agencies 940 1,191 1,524 1,872 2,241 2,644 Percent Change – 27% 28% 23% 20% 18%

Total Online Travel Market 3,050 4,196 6,486 8,076 9,632 11,131 Percent Change – 38% 55% 25% 19% 16%

Supplier Web Site Share 69% 72% 77% 77% 77% 76%

Online Travel Agency Share 31% 28% 23% 23% 23% 24%

Total Canada Travel Market 20,396 22,177 24,370 25,523 26,730 28,003 Percent Change – 9% 10% 4.7% 4.7% 4.8%

Online as Percent of All Revenue 15% 19% 27% 32% 36% 40%

Supplier Site Share of All Revenue 10% 14% 20% 24% 28% 30%

Online Travel Agency Share of All Revenue 5% 5% 6% 7% 8% 9%




Dynamic Packaging Makes Headway Traditional fixed packages, known as inclusive tour component (ITC) pack-ages in Canada, represent the lion’s share (84%) of the country’s $4.9 billion packaged travel market. ITC’s share will experience a gradual decline – projected to dip to 79% by 2009 – as flexible itiner-ary travel (FIT) and dynamic packaging grow. But the shift from fixed to dynamic packaging will not be nearly as dramatic in Canada as it has been in the U.S. The combination of Canada’s strong ITC tour operators and limited air market puts tour operators in a very advantageous position with some of Canadians’ favorite sun and beach destinations in the Caribbean and Mexico.

Online package bookings, at 13% of the total packaged travel market in 2006, are projected to grow significantly, reaching 22% share in 2009. Dynamic packaging will be an important driver behind this growth, as will classic tour operator pack-ages. In fact, several online travel agen-cies cite ITC packages as a major source of future growth for their businesses.

Consumer Survey: Traveler Shopping & Buying Trends

PhoCusWright conducted a field survey in December 2006 with Ipsos Reid’s online panel to establish shopping and purchas-ing trends among Canadian travelers. For the purposes of this report, PhoCusWright established two subsets of the Canadian adult population:

■ Traveler: An adult (19+) who personally traveled by commercial or charter airline and/or rail and also stayed at a hotel, motel or other paid accommodations on a pleasure or personal trip away from home in the past 12 months.

■ Online Traveler: An adult who meets the criteria for “Traveler” and used the Internet within the past month.

Three Out of Four Canadian Travelers OnlineAmong Canada’s 24.8 million adults, seven million, or 28%, qualify as travelers, having traveled by air or rail and stayed in paid accommodations (see Table 2.7).

Table 2.7Online Travelers in Canada

Source: The PhoCusWright Canadian Consumer Travel Trends Survey

Canadian Millions % Adults % Travelers

Adults (19+) 24.8 100% 28%

Travelers 7 28% 100%

Online Travelers 5 20% 74%



Among travelers, five million reported using the Internet in the past month. Online travelers represent 20% of Canada’s adult population but 74% of all travelers.

Canadian travelers reported a higher inci-dence of short two-night trips, as well as trips of seven nights or longer, as opposed to single night, three-night and four-to-six night stays. This is also reflected in the average spend travelers reported for their last vacation. While 35% reported spend-ing less than $750 on their last trip, 31% reported spending more than $1,500. This dichotomous response to both spend and trip duration suggests dual opportunities for longer vacation travel as well as short-er two-night trips and weekend getaways.

Seven in 10 Canadian travelers took a trip within Canada over the past year, mak-ing domestic travel far and away the most common type of trip. But Canadians also travel extensively outside of the country. Half of survey respondents traveled to the U.S., followed by 29% to the Caribbean and Mexico. The latter is driven almost entirely by the huge volume of vacation-ers that Canada’s tour operators send to the region, principally the Dominican Republic, Cuba and the Mexican Caribbean.

Cost Not a Deterrent to Buying OnlineJust over half, or 51%, of online travel-ers said the Internet is the usual channel through which they purchase travel. And the outlook for future demand to buy travel online is very positive. Among trav-elers who usually purchase travel offline, more than two thirds, or 68%, indicated they were interested in purchasing travel online in the future (see Table 2.8).

Despite a common perception – or misperception – that the Internet is a channel principally for budget-conscious travelers seeking discounts, Canadian travelers spend almost as much buying online as offline. The mean spend for the last trip purchased via an offline chan-nel was $2,096. By comparison, the mean spend for a comparable online purchase was $1,794, only about 10% less.

This relatively high mean spend online suggests significant potential for the sale of bigger-ticket travel products via the Internet, i.e., vacation shopping and pack-age sales online. Although only 13% of packages were purchased online in 2006, the segment has been growing quickly and is projected to double between 2006 and 2009, when more than $1.2 billion in packages will be purchased via the Web.

Table 2.8Level of Future Interest Among Offline Users in Buying Travel Online

Source: The PhoCusWright Canadian Consumer Travel Trends Survey

0 25% 50% 75% 100%

29%

68%

Not At All

Not Very

Somewhat

Very



Online Shopping Habits GrowTwo out of three online travelers in Canada usually shop online, as well. Online travel agencies and general search engines were the most cited shopping methods at 25% and 23%, respectively. At 20%, supplier Web sites were not far behind. But retail travel agencies do not play an unimportant role in the shopping process, with 17% of online travelers citing traditional agencies as their usual method of shopping for travel (see Table 2.9).

When it comes to purchasing travel, 31%

of online travelers reported using supplier sites as their preferred method (see Table 2.10). This pattern of shopping online via online travel agencies and purchasing directly from supplier sites is one that is well established in the U.S. and growing in European markets.

Offline channels, especially retail travel agencies, play a much bigger role in terms of bookings. Twenty-seven percent of online travelers usually purchase travel from retail travel agencies, while 14% call suppliers. Among online travelers who usually shop online via an online travel

Table 2.10Usual Method of Buying for Online Travelers

Call SupplierOnline Travel AgencySupplier Web SiteRetail Travel AgencyGeneral Search EngineDestination Web SiteCall Online Travel Agency

14%

19%

31%

27%

4%2%2%

Table 2.9Usual Travel Shopping Method for Online Travelers

Source: The PhoCusWright Canadian Consumer Travel

Trends Survey

Call SupplierOnline Travel AgencySupplier Web SiteRetail Travel AgencyGeneral Search EngineDestination Web SiteCall Online Travel Agency

25%

20%17%

23%

4% 3% 4%



agency or supplier Web site, nearly one third, or 32%, ultimately buy from a retail travel agency. This trend of shopping online but purchasing through a retail travel agen-cy is unique to Canada and reflects the important role traditional retail agencies play in the travel purchasing process.

Consumers Choose Online Travel Agencies for Packages, Suppliers for ComponentsWhen purchasing travel online, Canadians overwhelmingly turn to supplier Web sites for booking individual flight, hotel and rental car components. Sixty-one percent

of online travel buyers usually turn to airline Web sites for purchases, almost three times the figure (23%) for online travel agencies. Nearly half, or 48%, of online travel buyers usually purchase lodg-ing from a hotel Web site versus 26% via an online travel agency (see Table 2.11).

The tables turn, however, with regard to vacation packages and other multi-com-ponent purchases. About 20% of online travelers who usually buy online indicated that when purchasing vacation packages or self-packaged itineraries (combining air, hotel and/or car to create own package), they use online travel agencies far more than supplier Web sites.

Table 2.11Usual Online Purchase Method, by Component

Base: Online travelersQ. What is the primary reason why you usually purchase your pleasure or personal travel through this method?Note: Excludes other mentions representing less than 3% incidence Source: The PhoCusWright Canadian Consumer Travel Trends Survey

Online Top Method of Purchase

Air Hotel Rental Car

Pre-Packaged Vacation

Self-Packaged

Usual Online Purchase Incidence 88% 88% 62% 43% 44%

Use Online Travel Agency 23% 26% 14% 19% 22%

Use Supplier Web Site 61% 48% 35% 9% 15%

Retail Travel Agency Web Site 2% 3% 3% 10% 3%

Another Way 2% 10% 10% 5% 4%

None/Don't Purchase Item (NET) 7% 7% 31% 51% 49%

Don't Know/Refused 5% 5% 7% 5% 7%

Total 100% 99% 100% 99% 100%

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Documents

PhoCusWright’s CANADIAN ONLINE TRAVEL OVERVIEW · of Online Travel Agency Table 3.5 3.6 U.S. vs. Canada Online Agencies: Different Models, Product Mix Table 3.6 3.7 Online Travel