Package Tour Online Distribution Focus North America 2009

North AmericanOnline Travel Report 2009

- Package Focus -

© EyeforTravel Research. All rights reserved.2


North America Online Travel Report 2009

EyeforTravel Research 7-9 Fashion Street LondonE1 6PXUK

For queries contact:[email protected] www.eyefortravelresearch.com

EyeforTravel Ltd, April 2009




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Table of Contents

List of Figures 4 Methodology 7 Executive Summary 11

Chapter 1: North American Travel Market Analysis 15

North American Travel Market Overview 15US vs. Canada Travel Market Analysis 35US Travel Market Analysis 43Canadian Travel Market Analysis 52

Chapter 2: North American Package Sector Analysis 61

North American Package Sector Overview 61US Package Market Analysis 68Canadian Package Market Analysis 78




List of Figures

Figure 1.1: North America Total Volume of Travel, 2002-2012FFigure 1.2: North America Volume of Travel - Domestic vs. Outbound (%), 2002-2012FFigure 1.3: North America Volume of Domestic Travel, 2002-2012FFigure 1.4: North America Volume of Outbound Travel, 2002-2012FFigure 1.5: North America Travel Market Gross Value, 2002-2012F Figure 1.6: Spend per Trip in US$ (North America), 2002-2012FFigure 1.7: North American Travel Market - Sector Breakdown (US$), 2002-2012FFigure 1.8: North American Travel Market - Sector Breakdown (%), 2008Figure 1.9: North American Travel Market - Sector Breakdown (%), 2002-2012FFigure 1.10: North American Travel Market - Y-o-Y Growth by Sector, 2002-2012FFigure 1.11: North American Travel Market - CAGR by Sector, 2002-2007 and 2008-2012FFigure 1.12: Online Penetration of the North American Travel Market, 2002-2012FFigure 1.13: Value of North American Travel Market - Online vs. Offline, 2002-2012FFigure 1.14: Sector Breakdown of North American Online Travel Market (%), 2008Figure 1.15: Sector Breakdown of North American Online Travel Market (%), 2002-2012FFigure 1.16: North American Online Travel Market - CAGR by Sector, 2002-2007 and 2008-2012FFigure 1.17: Online/Offline Distribution Values - North American Airline Market, 2002-2012FFigure 1.18: Online/Offline Distribution Values - North American Hotel Market, 2002-2012FFigure 1.19: Online/Offline Distribution Values - North American Car Rental Market, 2002-2012Figure 1.20: Online/Offline Distribution Values - North American Bus Market, 2002-2012F Figure 1.21: Online/Offline Distribution Values - North American Cruise Market, 2002-2012F Figure 1.22: Online/Offline Distribution Values - North American Railway Market, 2002-2012FFigure 1.23: Online/Offline Distribution Values - North American Package Market, 2002-2012FFigure 1.24: Value of the North American Travel Market - Domestic vs. Outbound, 2002-2012F Figure 1.25: North American Travel Market - Domestic vs. Outbound (%), 2008Figure 1.26: North American Travel Market - Domestic vs. Outbound (%), 2002-2012FFigure 1.27: North American Travel Market - Y-o-Y Growth Domestic vs. Outbound (%), 2002-2012FFigure 1.28: Spend per Trip (North America Averages) - Domestic vs. Outbound, 2002-2012FFigure 1.29: North American Online Travel Market - Domestic vs. Outbound (%), 2002-2012F Figure 1.30: North American Online Travel Market - Domestic vs. Outbound (%), 2008 Figure 1.31: Value of the North American Online Travel Market - Domestic vs. Outbound, 2002-2012FFigure 1.32: North American Online Travel Market - Y-o-Y Growth Domestic vs. Outbound (%), 2002-2012FFigure 1.33: North American Domestic Online Travel Market - Sector Breakdown (%), 2002-2012FFigure 1.34: North American Domestic Online Travel Market - Sector Breakdown (%), 2008Figure 1.35: North American Domestic Online Travel Market - Sector Breakdown Values (US$), 2002-2012FFigure 1.36: North American Outbound Online Travel Market - Sector Breakdown (%), 2002-2012FFigure 1.37: North American Outbound Online Travel Market - Sector Breakdown (%), 2008Figure 1.38: North American Outbound Online Travel Market Value - Sector Breakdown (US$), 2002-2012FFigure 1.39: US vs. Canada Total Volume of Travel, 2002-2012FFigure 1.40: US vs. Canada Total Volume of Travel (%), 2002-2012FFigure 1.41: US Volume of Domestic Trips, 2002-2012FFigure 1.42: US Volume of Outbound Trips, 2002-2012FFigure 1.43: Canada Volume of Domestic Trips, 2002-2012FFigure 1.44: Canada Volume of Outbound Trips, 2002-2012FFigure 1.45: Value of the North American Travel Market - US vs. Canada, 2002-2012FFigure 1.46: North American Travel Market - US vs. Canada (%), 2002-2012FFigure 1.47: Average Spend per Person per Trip - US and Canada, 2002-2012FFigure 1.48: North American Online Travel Market - US vs.Canada (%), 2002-2012FFigure 1.49: Value of the North American Online Travel Market, US vs. Canada, 2002-2012FFigure 1.50: Online Penetration Comparison of the US and Canadian Gross Travel Markets, 2002-2012FFigure 1.51: Online Penetration of the US Gross Travel Market, 2002-2012F

List of Figures

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Figure 1.52: Online Penetration of the Canadian Gross Travel Market, 2002-2012F Figure 1.53: Value of the US Gross Travel Market, 2002-2012F Figure 1.54: Value of the US Online Travel Market, 2002-2012FFigure 1.55: US Travel Market - Domestic vs. Outbound (%), 2002-2012FFigure 1.56: Value of US Gross Travel Market - Domestic vs. Outbound, 2002-2012FFigure 1.57: Outbound Travel Destination Trends, 2002-2012FFigure 1.58: Value of US Online Travel Market - Domestic vs. Outbound, 2002-2012FFigure 1.59: US Online Travel Market - Domestic vs. Outbound (%), 2002-2012FFigure 1.60: Online Penetration Comparison of US Domestic and Outbound Travel Markets, 2002-2012F Figure 1.61: US Travel Market - Sector Breakdown (%), 2002-2012FFigure 1.62: US Travel Market - Sector Breakdown (%), 2008Figure 1.63: US Travel Market - Sector Breakdown (US$), 2002-2012FFigure 1.64: US Travel Market - Y-o-Y Growth by Sector, 2002-2012FFigure 1.65: US Online Travel Market - Sector Breakdown (%), 2002-2012FFigure 1.66: US Online Travel Market - Sector Breakdown (%), 2008Figure 1.67: US Online Travel Market - Sector Breakdown (US$), 2002-2012FFigure 1.68: US Online Travel Market - Y-o-Y Growth by Sector, 2002-2012FFigure 1.69: Sector Online Penetration, 2002-2012FFigure 1.70: Value of the Canadian Gross Travel Market, 2002-2012FFigure 1.71: Canadian Travel Market - Domestic vs. Outbound (%), 2002-2012FFigure 1.72: Value of the Canadian Travel Market - Domestic vs. Outbound, 2002-2012F Figure 1.73: Value of the Canadian Online Travel Market, 2002-2012FFigure 1.74: Canadian Online Travel Market - Domestic vs. Outbound (%), 2002-2012FFigure 1.75: Online Penetration Comparison of Domestic and Outbound Canadian Travel Market, 2002-2012F Figure 1.76: Value of the Canadian Online Travel Market – Domestic vs. Outbound, 2002-2012FFigure 1.77: Canadian Travel Market - Sector Breakdown (%), 2002-2012FFigure 1.78: Canadian Travel Market - Sector Breakdown (%), 2008Figure 1.79: Canadian Travel Market - Sector Breakdown (CAD $), 2002-2012FFigure 1.80: Canadian Travel Market - Y-o-Y Growth by Sector, 2002-2012FFigure 1.81: Canadian Online Travel Market - Sector Breakdown (%), 2002-2012FFigure 1.82: Canadian Online Travel Market - Sector Breakdown (%), 2008Figure 1.83: Sector Online Penetration, 2002-2012FFigure 1.84: Canadian Online Travel Market - Y-o-Y Growth by Sector, 2002-2012FFigure 1.85: Canadian Online Travel Market - Sector Breakdown (CAD $), 2002-2012FFigure 2.1: Value of the North American Gross Package Market, 2002-2012FFigure 2.2: North American Package Market - Domestic vs. Outbound (%), 2002-2012FFigure 2.3: Value of the North American Package Market - Domestic vs. Outbound, 2002-2012FFigure 2.4: North American Package Market - US vs. Canada (%), 2002-2012FFigure 2.5: Value of the North American Package Market - US vs. Canada, 2002-2012FFigure 2.6: Online Penetration of the North American Package Market, 2002-2012FFigure 2.7: Value of the North American Online Package Market, 2002-2012FFigure 2.8: North American Online Package Market - Domestic vs. Outbound (%), 2002-2012FFigure 2.9: Value of the North American Online Package Market - Domestic vs. Outbound, 2002-2012FFigure 2.10: North American Online Package Market - US vs. Canada (%), 2002-2012FFigure 2.11: Value of the North American Online Package Market - US vs. Canada, 2002-2012FFigure 2.12: North American Online Package Market - Direct vs. Indirect Distribution (%), 2002-2012FFigure 2.13: Value of the North American Online Package Market - Direct vs. Indirect Distribution, 2002-2012FFigure 2.14: US Package Market - Package vs. Non-Package Travel (%), 2002-2012FFigure 2.15: US Package Market - Domestic vs. Outbound (%), 2002-2012FFigure 2.16: Value of the US Package Market - Domestic vs. Outbound, 2002-2012FFigure 2.17: Online Penetration of the US Package Market, 2002-2012FFigure 2.18: Value of the US Package Market - Online vs. Offline, 2002-2012FFigure 2.19: US Online Package Market - Domestic vs. Outbound (%), 2002-2012FFigure 2.20: Value of the US Online Package Market - Domestic vs. Outbound, 2002-2012FFigure 2.21: Online Penetration of the US Domestic Package Market, 2002-2012F

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Figure 2.22: Value of the US Domestic Online Package Market - Online vs. Offline, 2002-2012FFigure 2.23: Online Penetration of the US Outbound Package Market, 2002-2012FFigure 2.24: Value of the US Outbound Online Package Market - Online vs. Offline, 2002-2012FFigure 2.25: US Package Market - Direct vs. Indirect Distribution (%), 2002-2012FFigure 2.26: Value of the US Package Market - Direct vs. Indirect Distribution, 2002-2012FFigure 2.27: US Domestic Package Market - Direct vs. Indirect Distribution (%), 2002-2012FFigure 2.28: Value of the US Domestic Package Market - Direct vs. Indirect Distribution, 2002-2012FFigure 2.29: US Outbound Package Market - Direct vs. Indirect Distribution (%), 2002-2012FFigure 2.30: Value of the US Outbound Package Market - Direct vs. Indirect Distribution, 2002-2012FFigure 2.31: Canadian Package Market - Domestic vs. Outbound (%), 2002-2012FFigure 2.32: Value of the Canadian Package Market - Domestic vs. Outbound, 2002-2012FFigure 2.33: Online Penetration of the Canadian Package Market, 2002-2012FFigure 2.34: Value of the Canadian Package Market - Online vs. Offline, 2002-2012FFigure 2.35: Canadian Online Package Market - Domestic vs. Outbound (%), 2002-2012FFigure 2.36: Value of the Canadian Online Package Market - Domestic vs. Outbound, 2002-2012FFigure 2.37: Online Penetration of the Canadian Domestic Package Market, 2002-2012FFigure 2.38: Online Penetration of the Canadian Outbound Package Market, 2002-2012FFigure 2.39: Value of the Canadian Domestic Package Market - Online vs. Offline, 2002-2012FFigure 2.40: Value of the Canadian Outbound Package Market - Online vs. Offline, 2002-2012FFigure 2.41: Canadian Online Package Market - Direct vs. Indirect Distribution (%), 2002-2012FFigure 2.42: Value of the Canadian Online Package Market - Direct vs. Indirect Distribution, 2002-2012FFigure 2.43: Canadian Domestic Online Package Market - Direct vs. Indirect Distribution (%), 2002-2012FFigure 2.44: Canadian Outbound Online Package Market - Direct vs. Indirect Distribution (%), 2002-2012FFigure 2.45: Value of the Canadian Domestic Online Package Market - Direct vs. Indirect Distribution, 2002-2012FFigure 2.46: Value of the Canadian Outbound Online Package Market - Direct vs. Indirect Distribution, 2002-2012F

List of Figures

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Executive Summary

> North American Travel Market Overview

2009 to be the first year this decade that a decline in travel expenditure is expected in the region

The value of the North American travel market reached an estimated US$389,376 million in 2008 and a further 16% increase in volume is expect by 2012, but growth has slowed. 2009 is expected to be the first year this decade for a decline in the total value of travel expenditure and we forecast a recovery in 2010.

Fastest growth in Hotel and Cruise sectors

Airlines continue to account for the largest proportion of travel spend, followed by Hotels. In 2008 these sectors accounted for 35% and 25% of the total market respectively. Fastest growth has been in the Hotel and Cruise sectors.

Online penetration of North American travel market reaches 35%

Distribution trends within the North American market reveal some particularly interesting patterns. Whilst offline channels continue to account for the majority of travel spend online channel have been rapidly gaining share. In 2008 the online penetration of the North American travel market reached about 35% of the value. By 2012 we are expecting almost half of travel expenditure to be online. Growth rates of the online channel are expected to be lower than previous years but between 2008 and 2012 a total growth in value of almost 50% is forecast. The online travel market by 2012 is predicted to reach a value of US$201,382 million. That is an additional US$57,498 million annually to be circulated online by the end of 2012.

All growth is online

While the gross travel market experiences a relatively stagnant period, amongst this, the online travel market is showing very healthy growth and continuing to erode offline share. This illustrates the growing importance of online channels and the resilience to the economic downturn.

The Airline sector dominates the online travel market (56%) and online expenditure on Airline products reached US$75,964 million in 2008. The value of the online travel market is forecast to grow in value by 44% between 2008 and 2012.

The Hotel sector accounts for 32% of the total online travel market and US$42,831 million in 2008. Growth by 2012 is forecast to be up by a value of over 50%. The Car Rental sector is the next largest sector accounting for 7.7% and a value of US$10,389 million (2008).

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Growth in the value of the outbound travel market has been higher than the domestic travel market, but in 2009 a decline of 4.8% is expected in the outbound market for the first time. Good recovery is forecast for 2010.

Domestic travel accounts for around 64% of the total online travel market and outbound 36%. Outbound travel products for North American consumers have performed well online and increased in share from 28% in 2002. From 2010 we expect grow in both domestic and outbound online markets to hit double digit figures again.

Canada increases it significance in the North American travel market but US spend more per trip

Canadian travellers accounted for 9.4% of total North American travel trips in 2002 and by 2012 we expect this to increase to 11.3%. Canada has out performed the US from a volume growth perspective. Canada is expected to grow by 1.8% in 2009, while the US experiences a decline of around 1%.

In value terms, the US contributes 90% to the North American market and this is expected to remain relatively consistent during the review period in this report. US travellers have a higher spend per trip than Canadian travellers.

US online travel market valued at US$123,346 million in 2008

The US accounts for 91% of the total North American online travel market. The US online travel market reached an estimated value of US$123,346 million in 2008 and Canada US$12,252 million (CAD $12,869 million). The US online market is slightly more advanced than Canada but penetration is relatively similar. 35.2% of US travel expenditure was online in 2008 against a 31.5% penetration for Canada. By 2012 we forecast 44.8% of all US travel expenditure to be online and 42% of Canadian.

A continuously changing travel distribution landscape

The contrast between the performances of online and offline channels is enormous. Online channels have been remarkably productive and growth rates have remained in double digit figures for every year reviewed in the report – with the exception of 2009 when annual growth is expected to fall to a level of 6.3% (still well above growth levels for the offline market for the entire period). Put alongside offline productivity, the 5.2% decline in the offline market for 2009 makes a very strong statement. The online channels certainly now seem strong despite times of instability.

US outbound travel market is growing

Just under 70% of US travel expenditure is currently on domestic travel. Outbound travel is growing well and at higher rates than the more mature domestic market. 2009 is however expected to result in an estimated 4.8% decline. Mexico and Canada are receiving the most outbound travellers, followed by the UK. Growth has been strongest in Germany

Executive Summary




and Japan. A slightly higher proportion of domestic travel is bought online in comparison to outbound travel, but only marginally.

Canadian travel market reaches US$38,869 million (CAD $40,825 million) in 2008

By 2012 the Canadian travel market is expected to be 73% larger in size than it was in 2002. The Canadian market is very different from the US in that outbound travel accounts for the majority of the Canadian travel market. In 2008 outbound travel contributed around 67% to the total Canadian travel market. Annual growth has generally been higher for outbound travel and a 5.5% CAGR is expected for the 2007-2012 review period.

Canadian online travel market valued at US$1,986 million (2008)

Online channels are also becoming increasingly significant for the Canadian travel market. Online penetration has jumped from 11% in 2002 to around 32% in 2008. Growth is expected to slow but continue to expand and penetrate around 42% of the market by 2012. The online travel market is divided fairly evenly between domestic and outbound markets, despite the domination of the outbound segment in the gross market. The domestic market has a higher online penetration and when in 2012 we forecast that 60% of domestic travel will be purchased online, 33% of the outbound segment will be online. Growth online for both has been remarkable though. Airline products make up a significant 61% of the Canadian online travel market and the data reveals that there is a lot of room for growth for some of the travel sectors.

> Package Sector

Significant room for growth online in the Package market The Package sector accounts for about one quarter of the North American travel market (2008) and a value of US$101,979 million. In 2009 we are expecting a 3.9% decline in the value of the market but expect recovery by 2010. We highlight the need for developments in the online space within this sector. Online penetration in 2008 was 2.1%, up from 1% in 2002. By 2012 we do not forecast much movement and expect just 3% to be online by 2012. Direct distribution dominates the online marketplace for Packages but OTAs are expected to start to become more significant from 2009.

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