CBI Survey: EU Long Haul Tourism Market Focus on Developing Countries

CBI MARKET SURVEY: THE LONG HAUL TOURISM MARKET IN THE EU

CBI MARKET SURVEY

THE LONG HAUL TOURISM
MARKET IN THE EU
Publication date: February 2009

CONTENTS

REPORT SUMMARY 2
INTRODUCTION 4
1 EU OUTBOUND TOURISM 5
2 TRADE CHANNELS FOR MARKET ENTRY 22
3 PRICE DEVELOPMENTS 27
4 MARKET ACCESS REQUIREMENTS 29
5 OPPORTUNITY OR THREAT? 30

APPENDICES

APPENDIX A SERVICE CHARACTERISTICS 31
APPENDIX B INTRODUCTION TO THE EU MARKET 33
APPENDIX C LIST OF DEVELOPING COUNTRIES 34
APPENDIX D OUTBOUND TRAVEL TO DCS BY EU MEMBERS 36

This survey was compiled for CBI by Facts Figures Future.

Disclaimer CBI market information tools: http://www.cbi.eu/disclaimer

Source: CBI Market Information Database • URL: www.cbi.eu • Contact: marketinfo@cbi.eu • www.cbi.eu/disclaimer

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Report summary

Outbound tourism market
Total outbound travel by EU members increased by an average of 2.7% per year between
2003 and 2006 to 327 million. Europe is the main destination with a share of over 80%.
Although non-European destinations make up less than 20% of the trips made by EU citizens,
the numbers of visitors increased much faster than to European destinations. Between 2003
and 2006, the number of arrivals to European destinations increased by an average of 1.7%
per year, while the number of arrivals to non-European destinations increased by an average
of 7.5% per year.

The World Tourism Organisation (WTO) predicts a total number of 164 million long haul tourist
arrivals from Europe in 2020. This is a yearly increase of 6.1% starting from 2000. The most
popular destinations will be the Americas, followed by East Asia Pacific, the Middle East, Africa
and South Asia. Western Europe and Northern Europe are expected to be the most important
originating regions. Although these figures give a projection of the future market, please treat
these forecasts as an indication only, as many unpredictable factors can influence the tourism
market.

The number of European arrivals in developing countries is increasing fast. Compared to 2003,
their number climbed by an average of 10% to 54 million in 2006. Developing countries
performed very well. They managed to increase their market share in the EU outbound tourist
market. Germany, the UK and France were the major markets. All EU countries, except Malta,
showed a positive growth in travel to developing countries, but especially the Baltic States
performed above average.

European DCs attracted the most EU tourists in 2006 and Turkey and Croatia alone were
responsible for over 35%. After Europe, Africa is the most important destination for EU tourists
with over 10 million visitors in 2006. The fastest growing region is East Asia.

Market forecast
Industry experts do not yet agree on the effects of the economic crisis on the European
demand for travel. Some say that travelling is a basic human need nowadays, so if you offer
the right products for the right price, consumers will stay interested. Others expect that the
economic downturn will also affect the European travel industry and already see a decline in
bookings for the summer of 2009.

Market segmentation
The most promising tourist segment to focus on is the so-called ‘global experience seeker’.
This type of tourist is an experienced traveller for whom travel plays an important part in their
life. They like to avoid the well-known tourist destinations and prefer to travel to places that
are untouched and undiscovered. In general, they wish to experience the local culture,
engaging themselves with the local people, and are interested in challenging themselves in a
physical, emotional or mental way. The additional country surveys show additional ways of
segmenting the long haul tourism market.

Trade structure
There are two main final target groups in the travel sector for tourism operators, independent
and inclusive tour travellers. These two groups have corresponding trade channels. In general,
independent travellers make their own arrangements and will mostly book accommodation and
travel themselves. This is opposed to inclusive travellers who will use travel agencies and tour
operators for their holidays. The Internet influences the decision-making process to a great
extent.

In the EU, privately owned giants dominate the tour operator market. They have – in general -
high demands, which are hard to be met by DC tourism operators. Therefore, the most


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common distribution channels for DC tourism operators are inbound tour operators and
specialised (outbound) tour operators who cover destinations not (fully) covered by these
giants. Direct selling is a possibility as well, depending on the level of experience in the EU
market and the quality of both the network and the product offered by the operator.

Trends and opportunities and threats for DC tourism suppliers
A major trend is the ever-increasing use of the Internet as an information and booking
medium. It is estimated that in 2007 over 17% of the European travel market was booked
online. Furthermore, the Internet has become the favourite source of information for
consumers. Online users ask peers for advice and trust users more so than advertisements.
For both tourism operators and support organisations in developing countries it means that
online service is becoming a ‘must’. No longer just a way of free advertising, it has
transformed into a strategic medium which should be used to survive in a competitive
environment. The growing share of seniors travelling the world is also influencing the tourism
market. As a result it is expected that demand for cultural holidays, health and spa tourism,
cruises and more top of the range holidays will increase. Furthermore, general holiday
packages are losing their importance. The trend is to offer individualised holiday packages
more and more, tailor-made for a specific target market. Sustainable tourism is also gaining in
importance. There is a growing willingness among EU tourists to reduce the negative impact of
their visits and they expect tourism suppliers to cater to this desire. Because of decreasing
leisure time in Europe, there is a development towards more, but shorter holidays. Finally,
people are becoming more and more experienced and as a result also more critical. Tourists
are very aware of what they can expect for their money and will shop around to find the best
deal. One trend will form an opportunity for one tourism supplier, but the same trend may
pose a threat to others. Trends should, therefore, always be analysed in relation to your
specific circumstances.


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Introduction

This CBI market survey profiles the long haul tourism market in the EU. The emphasis of this
survey lies on those services, which are of importance to suppliers from developing countries
(DCs). The role of and opportunities for DCs are highlighted. This market survey discusses EU
outbound tourism in general and to DCs in particular.

For detailed information on the selected services please consult appendix A. More information
on the EU can be found in appendix B.

CBI market surveys covering the market in specific EU countries, specific market segments or
documents on market access requirements can be downloaded from the CBI website. For
information on how to make optimal use of the CBI market surveys and other CBI market
information, please consult ‘From survey to success - marketing guidelines’. All information
can be downloaded from http://www.cbi.eu/marketinfo. Go to ‘Search CBI database’ and
select your market sector and the EU.


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1 EU outbound tourism

Worldwide, international tourist arrivals reached 903 million in 2007, up 6.6% on 2006. World
tourism enjoyed its fourth consecutive year of growth in 2007 above the long-term forecast of
4.1% and it even exceeded the 5.5% increases recorded in 2005 and 2006. However, in the
4th quarter of 2008 it showed a sharp slowdown. Arrivals rose by 8.3% in the first quarter of
2008 (even faster than the quarterly averages for the last three years), but by only 2.6% in
the second quarter and by only 1-2% in July and August. September and October also showed
declines in tourism arrivals. As a result, arrivals worldwide are estimated to have risen by
3.8% in the first eight months of 2008 and the United Nations World Tourism Organisation
(UNWTO) is now forecasting an increase of 2-3% for 2008. For 2009, forecasts are a decline of
0-2%. However, experts state that once the economic crisis is over, demand for tourism will
recover quickly. By 2010 international arrivals are expected to reach 1 billion, and 1.6 billion
by 2020.

All regions registered increases above their long-term average, with the Middle East leading
the growth ranking, with an estimated 16% rise to nearly 48 million international tourist
arrivals in 2007. In second place came Asia and the Pacific (184 million) with +10% over
2007. Africa’s international tourist arrivals increased by 7% to 44 million arrivals. The
Americas (+5%) did better than in previous years, achieving over 142 million arrivals. Europe,
the world’s largest destination region, with a share of 54% of all international tourist arrivals,
grew by 5% to reach 484 million.

A breakdown of outbound trips shows that in 2007 a little over half of all trips was concerned
with leisure, recreation and holidays, while business travel increased its share to 15% that
year. The share of visits to friends and relatives, religious reasons and health treatments
increased to 27%.

1.1 EU outbound tourism market

Total outbound travel by EU members increased by an average of 2.7% per year between
2003 and 2006. Europe is the main destination with a share of over 80%. Although non-
European destinations make up less than 20% of the trips made by EU citizens, the numbers
of travellers to these regions increased much faster than to European destinations. Between
2003 and 2006, the number of trips to European destinations increased by an average 1.7%
per year. The number of trips to non-European destinations showed an average annual growth
of 7.5%.

The most important destinations outside Europe are the United States, the Russian Federation
(although also partly Europe), Egypt and Tunisia. In Table 1.1 the total outbound trips 1 by EU
members have been displayed per region with a top 4 country list. Over half of the countries
that can be found back in these top 4 countries is a DC. More information on travel to DCs is
described in Section 2.

Table 1.1 EU outbound travel*, 2003-2006, in millions
Trips abroad by resident visitors to countries of destination
2003 2004 2005 2006 CAGR**
’03-‘06
Total 302.67 304.84 324.80 327.91 2.7%
Europe 253.74 248.21 264.41 267.20 1.7%
Spain 44.57 45.70 48.24 49.95 3.9%
Italy 31.64 27.95 27.06 29.82 -2.0%
France 38.45 38.06 35.19 29.11 -8.9%
UK 15.59 17.48 19.03 20.58 9.7%

1
Refer to Appendix A for an explanation on how these volumes have been calculated.


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2003 2004 2005 2006 CAGR**
’03-‘06
Americas 15.94 17.87 19.20 18.92 5.9%
United States 8.15 9.15 9.72 9.50 5.2%
Canada 1.68 1.98 2.15 2.11 7.9%
Brazil 1.39 1.65 1.89 1.78 8.7%
Dominican Republic 1.20 1.22 1.32 1.34 3.6%
Africas 9.70 10.62 11.53 11.60 6.2%
Tunisia 2.61 3.19 3.57 3.63 11.6%
Morocco 1.80 2.23 2.52 2.93 17.6%
South Africa 1.24 1.21 1.22 1.28 1.1%
Mauritius 0.44 0.45 0.48 0.48 3.2%
East Asia / Pacifics 7.67 9.43 10.67 11.54 14.6%
Thailand 1.94 2.24 2.32 2.81 13.0%
China 1.10 1.81 2.34 2.61 33.2%
Australia 1.14 1.17 1.23 1.27 3.6%
Hong Kong 0.47 0.72 0.85 0.93 25.3%
Middle East 7.38 9.55 9.11 9.08 7.1%
Egypt 2.99 4.21 4.41 4.38 13.5%
Cyprus 1.97 2.04 2.14 2.05 1.4%
Israel 0.49 0.71 0.93 0.84 19.8%
Oman 0.13 0.23 0.34 0.50 55.9%
Russian Federation 5.56 5.82 6.52 5.77 1.2%
South Asia 2.68 3.33 3.34 3.79 12.3%
India 0.83 1.11 1.26 1.47 21.1%
Singapore 0.78 0.94 0.98 1.04 10.0%
Maldives 0.39 0.42 0.27 0.40 0.5%
Pakistan 0.18 0.26 0.33 0.36 26.7%
Source: World Tourism Organisation (2009)
* Basis: arrivals in destination countries
** Compound Annual Growth Rate

Many countries attracted a fast growing number of EU tourists (between 2003 and 2006). In
general, it can be concluded that the number of travellers to DC countries is growing much
faster than to developed countries. In Appendix D you can find an overview of all DC countries
with the number of EU travellers to their country between 2003 and 2006 and the growth rate.
The fastest growing markets per year between 2003 and 2006 were: Oman (+55.9% per
year), Lesotho (+47.6%), Central African Republic (+45.1%), Bhutan (+38.5%), Paraguay
(+35.5%) and China (+33.2%). Of the developed countries, the fastest growth markets per
year were Latvia (+26.4% per year), the Virgin Islands (+24.2%), Lithuania (+22.1%) and
Israel (+19.8%).

1.2 EU outbound tourism to DCs

Between 2000-2007, the market share of DCs grew to 40% of worldwide international arrivals
(up from 34% in 2000). DC international tourist arrivals increased to 360 million in 2007, an
average annual growth of 6%. The 50 least developed countries experienced an average
annual growth of 11% per year. The UNWTO expects international tourist arrivals to continue
its positive growth, but at a moderated rate of 4.1% annual growth through to 2020.

In 2006, EU citizens made more than 327 million outbound trips. 54 million had a DC as
destination, leading to a market share of 16.7%. In Table 1.2, destinations and volumes are
shown for each individual EU country. The EU countries with the largest number of travellers to
DCs were Germany, the UK and France. The top 10 EU countries are together responsible for
74% of all EU travel to DCs. All EU countries, except Malta, showed a positive growth in travel
to DCs. The Baltic States performed above average. This can partly be explained by the large
rise in income in the Baltic States as a result of EU accession in 2004.


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Table 1.2 EU outbound travel to DCs*, 2006, in 1,000, CAGR ’03-‘06
Trips abroad by resident visitors to countries of destination
Africa America East Asia Europe Middle South Total CAGR
/Pacific East Asia '03-'06
EU27 10,977 7,008 8,068 20,177 5,901 2,596 54,727 10%
Germany 1,335 976 1,477 5,431 1,226 321 10,766 5%
UK 1,613 1,602 2,022 1,951 1,654 1,266 10,108 14%
France 3,990 977 1,191 1,213 579 272 8,222 14%
Italy 1,058 842 481 1,701 859 226 5,167 6%
Netherlands 375 434 590 1,247 270 106 3,023 8%
Spain 747 1,141 283 313 182 77 2,743 21%
Austria 162 80 204 1,259 177 54 1,936 6%
Belgium 427 142 207 563 173 47 1,560 11%
Sweden 158 112 558 471 185 51 1,535 18%
Bulgaria 23 4 31 1,232 16 3 1,309 6%
Slovenia 3 4 5 1,044 12 2 1,069 2%
Poland 183 47 89 503 203 20 1,047 18%
Czech 162 17 34 729 5 10 957 2%
Republic
Denmark 88 69 281 318 69 38 863 13%
Portugal 257 392 84 45 14 18 811 11%
Hungary 81 16 32 510 42 8 690 6%
Greece 36 29 61 491 56 11 683 7%
Finland 62 48 228 102 36 27 504 19%
Ireland 103 51 124 130 54 22 484 15%
Romania 50 8 38 311 31 4 442 15%
Slovakia 39 6 8 274 1 2 330 8%
Cyprus 4 1 6 174 21 1 207 15%
Lithuania 2 3 8 76 0.4 2 92 55%
Estonia 2 1 4 27 27 3 64 54%
Latvia 0.3 1 12 47 0.4 2 63 64%
Luxembourg 11 3 7 10 5 1 37 10%
Malta 7 0.4 3 5 2 1 18 -2%

Most popular DC destinations
Between 2003 and 2006, total EU outbound travel to DCs increased by an average of 10% per
year, which can be seen from Table 1.3. In Appendix D you can find a complete overview of all
EU arrivals per DC 2 .

The most popular destinations are the European countries Turkey and Croatia. In 2006, they
attracted almost 11.4 million and over 7.5 million EU visitors respectively. This is, however, a
decrease in comparison to 2005. The European countries showing the fastest annual growth
between 2003-2006 were Montenegro (+32.1% per year), Armenia (+28.5%) and Albania
(+20.3%). European DCs succeeded in attracting an average of 7.6% per year more EU
travellers between 2003 and 2006. Although the share of European DCs in total DC
destinations declined somewhat, European DCs remained the most important destination
region with a share of almost 37%.

On average, the number of EU travellers to African countries increased by an average of 8.7%
per year between 2003 and 2006. Tunisia, Morocco and South Africa are the most popular
destinations. The African countries showing the fastest annual growth between 2003-2006
were Lesotho (+47.6% per year), Central Republic Africa (+45.1% per year) and Madagascar
(+30.0% per year). After Europe, African DCs attracted the most travellers from the EU
(20.1% of total).

2
Please realise that the data provided by WTO does not discuss all tourist destinations. For example,
data on Mexico is not available. For an overview of discussed tourist destinations, please refer to
Appendix A.


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The number of travellers to East Asia and the Pacific increased by an average of 17.6% per
year between 2003 and 2006. East Asia and the Pacific received 14.7% of all EU travellers to
DCs in 2006. Thailand, China and Malaysia attracted the most EU visitors to their countries and
China also realised the fastest annual increase between 2003 and 2006 (+33.2% per year).
Other fast growing destinations were Mongolia (+29.3% per year) and Cambodia (+22.3% per
year).

Analysing the figures from the Americas, it becomes apparent that Brazil, the Dominican
Republic and Cuba attracted the most EU visitors. The number of visitors to the Americas
increased by an average of 6.7% per year between 2003 and 2006. EU arrivals increased the
most to Paraguay (+35.3% per year), Uruguay (+20.0% per year) and Venezuela (+19.1%
per year) between 2003 and 2006. The Americas received 12.8% of all EU travellers to DCs in
2006.

On average, the number of EU visitors to the Middle East increased by 15.4% per year
between 2003 and 2006. The Middle East attracted 10.8% of all EU travellers to DCs in 2006.
Egypt, Oman and Bahrain attracted the most EU travellers to their countries. The largest
annual increase was shown by Oman (+55.9% per year), Yemen (+26.2% per year) and
Jordan (+20.9% per year).

The number of visitors to South Asia increased by an average of 13.2% per year between
2003 and 2006. South Asia attracted 4.7% of all EU travellers to DCs in 2006. India, the
Maldives and Pakistan attracted the most EU travellers to their countries. The largest annual
increase was shown by Bhutan (+38.5% per year), Pakistan (+26.7% per year) and India
(+21.1% per year).

Table 1.3 Most popular DC destinations for EU travellers*, 2003-2006,
in 1,000, CAGR ’03-’06
2003 2004 2005 2006 CAGR
'03-'06
Total 41,126 48,862 54,295 54,727 10.0%
Africa 8,553 9,430 10,463 10,977 8.7%
Tunisia 2,606 3,189 3,565 3,627 11.7%
Morocco 1,800 2,227 2,522 2,926 17.6%
South Africa 1,243 1,207 1,222 1,284 1.1%
America 5,775 6,450 7,035 7,008 6.7%
Brazil 1,389 1,655 1,890 1,783 8.7%
Dominican 1,203 1,222 1,321 1,338 3.6%
Republic
Cuba 879 909 971 930 1.9%
East Asia 4,965 6,368 7,316 8,068 17.6%
Thailand 1,944 2,238 2,321 2,808 13.0%
China 1,103 1,815 2,341 2,610 33.2%
Malaysia 339 460 549 597 20.8%
Europe 16,196 19,004 21,537 20,177 7.6%
Turkey 8,771 11,018 12,915 11,407 9.2%
Croatia 6,748 7,152 7,583 7,593 4.0%
Albania 162 187 229 282 20.3%
Middle East 3,844 5,364 5,732 5,901 15.4%
Egypt 2,994 4,210 4,413 4,376 13.5%
Oman 133 234 345 504 55.9%
Bahrain 240 308 330 396 18.1%
South Asia 1,792 2,246 2,213 2,596 13.2%
India 828 1,107 1,258 1,469 21.1%
Maldives 393 420 268 399 0.5%
Pakistan 178 261 327 361 26.7%


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Number of trips per capita
In Table 1.4, the number of trips per capita can be found. In 2006, on average 1 out of 10
Europeans took a trip to a DC. Comparing the number of trips to DCs, Slovenians topped the
list in 2006. On average, one out of two Slovenians travelled to a DC in 2006. Cyprus and
Austria followed with an average of approximately one out of four inhabitants and followed by
the Netherlands (one out of five). The average number of trips to DCs is largely influenced by
the geographical closeness to some DCs (for example, Slovenia to Croatia). Cheap all-inclusive
holidays in Turkey and Egypt are also an important influence. Furthermore, visiting friends and
relatives by immigrants originating from, for example, Tunisia and Morocco also account for a
large part of total trips to DCs. Comparing total foreign travel, the Dutch, Luxembourgers and
the Irish travelled the most on average. Per capita 1.68, 1.56 and 1.54 foreign trips
respectively were undertaken in 2006.

Table 1.4 Number of foreign trips per capita in 2006
DC Worldwide
EU27 0.11 0.67
Slovenia 0.53 0.72
Cyprus 0.27 0.80
Austria 0.23 1.04
Netherlands 0.19 1.68
Sweden 0.17 0.99
Bulgaria 0.17 0.29
United Kingdom 0.17 0.98
Denmark 0.16 1.12
Belgium 0.15 0.92
Germany 0.13 0.96
France 0.13 0.60
Ireland 0.12 1.54
Finland 0.10 0.88
Czech Republic 0.09 0.32
Italy 0.09 0.47
Luxembourg 0.08 1.56
Portugal 0.08 0.37
Hungary 0.07 0.44
Spain 0.06 0.34
Greece 0.06 0.25
Slovakia 0.06 0.28
Estonia 0.05 0.60
Malta 0.05 0.33
Poland 0.03 0.29
Latvia 0.03 0.31
Lithuania 0.03 0.43
Romania 0.02 0.15
Source: WTO and Eurostat (2009)

Short term market forecast
Over the last 25 years, international tourist arrivals have tended to grow about 1% point faster
than world real GDP. However, they have also tended to fluctuate more than GDP, with higher
peaks in the ‘good’ years and deeper troughs in the ‘bad’ years. According to the IMF, the
financial downturn affecting the globe is set to continue through 2009, with world economic
growth to slow to 3.9% in 2008 and 3.0% in 2009. At the moment, it is as yet unsure what
the impact of the crisis in all global markets will be. Each market and each segment is
performing differently depending on its local economic conditions, currency shifts, marketing
activities and airline capacities. According to the UNWTO, there is great uncertainty about the
economic situation and the travel industry and there is a lot of contradictory information. A
great deal of reporting does not take account of the fact that tourism has proved incredibly
resilient in the past and if the downturn is expected to be dramatic, the recovery could prove
to be even more so.


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As stated before, industry experts do not yet agree on the effects of the economic crisis on
European demand for travel. Some think that travelling is a basic human need nowadays, so if
you offer the right products for the right price, consumers will stay interested. International
travel is no longer seen as a luxury, it is seen as a ‘right’. Lifestyle factors that are perceived
as ‘absolutely necessary to live properly today’ now include ‘sufficient leisure time and means
to enjoy it’, ‘ability to go out with friends and family’ and the opportunity ‘to take at least one
holiday a year’. A study done by the European Travel Monitor under outbound travellers in 14
European countries (representing 80% of the European travel demand) showed that 48% of
the respondents said that they would definitely travel in 2009 and maybe more often than in
the last 12 months; 32% said yes, they would travel as often as in the last months; 14% said
yes, but maybe less often; and 6% said they would rather not travel.

More pessimistic experts say that they already see a decline in bookings for the summer of
2009 and expect a stagnation or decrease of 2% in 2009. More optimistic experts think that
the economic crisis will not last longer than 12 to 18 months. They expect to see a strong
recovery of travel and tourism in 2010, accelerating to new records in 2011 and 2012.
However, both the negative as well as the positive experts agree that once the economic crisis
is over, demand for tourism will recover quickly, as people will make up for their postponed
trips.

According to the UNWTO, it is not whether the current economic downturn impacts the desire
to travel so much, but whether one can afford to travel or what one wants to spend on travel,
given the uncertain economic situation. Until the economic downturn comes to an end, it is
expected that some of the following trends will be seen:
• Travel to destinations closer to home, including domestic travel, is expected to be favoured
as opposed to long haul travel.
• Instead of a decline in overall volume, a decline in the average length of a stay and
expenditure is expected.
• As price becomes a key issue, destinations offering value for money have an advantage.
Consumers are expected to pay special attention to quality now and will choose their
holidays very carefully to ensure that they will get the best value for their money.
• As uncertainty leads consumers to delay decision making and wait for special offers, late
booking is expected to increase. A lot of people are in a ‘wait-and-see-mode’: if their next
door neighbour is not going to travel, then they aren’t either.
• Travellers visiting friend and relatives, repeat visitors as well as special interest and
independent travellers are expected to be more resilient to the economic crisis.

Airline sector
The airline sector has been hit the hardest by the crisis, suffering from soaring fuel prices and
falling demand. The global capacity of winter airline schedules was down by 5.3%, removing
46.3 million seats, with the US accounting for almost half. British Airlines has lowered fuel
surcharges in response to the recent downturn in oil prices, hoping to stimulate demand as
advanced bookings are drying up. Consolidation is increasing: British Airlines is expected to
merge with Iberia; the new Italian company CAI has taken over Alitalia and Air One. It is
expected to negotiate a partnership with Lufthansa and Air France/KLM, who are both in the
bidding for Austrian Airlines; Jet Airways and Kingfisher in India have merged; Ryanair
announced plans to launch a new transatlantic budget carrier, taking advantage of companies
going bankrupt and cheaply buying up long haul aircraft.

Another survival strategy of airlines is to cut capacity on under-performing routes. For
example, Virgin Atlantic Airways has reduced flights from London to Mumbai and the
Caribbean. British Midland Airways has rescheduled some routes and plans to use smaller
aircrafts to cut costs.

However, the outlook for the global airline industry is positive, due to the cost-cutting
measures of airlines in recent years, combined with the recent capacity cuts and decreasing oil
prices.


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Hotels
Hotel occupancy rates in general are falling and there are signs of trading down in
accommodation by consumers and business travellers. Budget hotel operators are expected to
benefit from this trend.

Tour operators
Tour operators are focusing on their core business to deal with the economic crisis. For
example, TUI is selling off its shipping division Hapag-Lloyd, to focus on its tourism operations.
Tour operators are also paying more attention in their marketing campaigns to the advantages
of package holidays (security guarantee).

Travel agencies
Travel agencies are offering customised packages to corporate clients in response to declining
travel budgets.

Other important factors affecting demand for travelling
Other important factors which will continue to affect world tourism are:
• International oil prices – falling from their historic heights in 2008
• Relative exchange rates – large changes in 2008, especially the US dollar/Euro and the
British Pound Sterling/Euro.

Oil prices
The volatility of oil prices, and hence airline fuel prices, had a major influence on demand for
air travel in 2008. The economic downturn resulted in decreasing demand for oil which helped
to push prices down. Experts say that a 1% increase in oil prices will tend to decrease arrivals
in each region by different amounts (no information on Asia available):
• Western Europe: 0.04%
• Eastern Europe: 0.59%
• North America: 0.08%
• Latin America: 0.18%
• Middle East: 0.07%
• Africa: 0.04%

The current low oil price is interesting for air travellers and airlines. However, many airlines are
locked into prices well above the current levels when hedging for the future after prices soared
in the first few months of 2008.

Exchange rates
Exchange rate fluctuations have a strong impact on demand for travel and tourism. The US
dollar and the British Pound Sterling have fallen sharply against the Euro. This means that it
has become more interesting for Europeans to travel to the US and to other countries where
they can pay in US dollar and that it has become less interesting for the British to travel to
Europe.

Useful sources
• European Travel Monitor / IPK International - http://www.ipkinternational.com
• UNWTO World Tourism Barometer - http://www.unwto.org

1.3 Market segmentation

In the CBI market surveys covering the market in individual EU countries, a market
segmentation has been made based on the different types of holidays the inhabitants in the
country under discussion are most likely to take. In this section, we focus on the most
important type of person who is most likely to take a holiday in a DC and what characteristics
they usually have. This market segmentation is based on studies from several tourism boards
and has been specifically adapted to travellers to DCs. There are, however, many different
segmentations available in the industry, so it is also wise to consult other available materials.


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Based on this or another market segmentation, you can adapt your marketing and/or
communication strategy accordingly.

The global experience seeker
In general, it can be concluded that DCs should target people answering to the profile of ‘the
global experience seeker’. This type of person can be found in all geographic locations, all age
groups and, in general, in above average income levels. Global experience seekers have many
similarities in attitude to travel, personal development and everyday life.

Profile
Global experience seekers fit the following profile:
• Travelling is a big part of their lives. As experienced travellers they are often interested in
travel for travel’s sake and see it as an important aspect of their lifestyle and well being.
• Compared to the average long haul traveller, global experience seekers want to get off the
beaten track and interact with local people to make friends, develop personal relationships
and engage in the lifestyle.
• They long for self-discovery and education when travelling. Besides observing, they also
want to personally experience cultures and lifestyles different from their own. Exposure to
such experiences results in a deep sense of personal fulfilment, meeting their desire to
grow as an individual.
• They look to challenge themselves physically, emotionally and/or mentally. By learning
about different cultures and challenging themselves, the opportunity for self discovery is
enhanced.
• They are drawn to destinations that are ‘yet to be discovered’ or away from the standard
tourist trail. To be able to experience the true natural and cultural surroundings, they have
a preference for locations that are untouched rather than stylised tourist destinations.

What do they want during their trips?
• Authentic personal experiences;
• Social interactions – making friends and developing personal relationships;
• Meet and interact with the locals;
• Experience something different from their normal day-to-day life;
• Understand and learn about different lifestyles and cultures;
• Participate in the lifestyle and experience, rather than observing it;
• Challenge themselves – physically, emotionally and/or mentally;
• Visit authentic destinations that are not necessarily part of the tourist route.

Be aware that in general this type of person is very selective in their media consumption
preferring media which is personally relevant and motivating.

Between the different ‘global experience seekers’ one can make a distinction between
travellers really looking to challenge themselves, mainly travelling independently, travellers
looking for unusual destinations, but not willing to compromise on comfort and fun-seeking
young people, mostly part of a group, just beginning to discover the world. Also refer to the
sources mentioned in Section 1.9.

1.4 Forecasts EU long haul tourism

Long-term forecasts for EU long haul tourism 3 are positive. The WTO predicts a total number
of 1.6 billion international arrivals by the year 2020. Of these worldwide arrivals, 378 million
will be long-haul travellers. During this time, periods of fast growth will be alternated with
periods of slow growth. This also includes some non-developing country destinations; please
refer to Table 1.5 for an overview of destinations in 2020.

3
Including both developing and developed countries.


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Table 1.5 Forecast EU long haul tourism 2000 – 2020
International tourist arrivals by receiving sub region
(in 1,000 and average annual growth in %)
Forecasts Annual
2000 2010 2020 growth (%)
2000-2020
Total long haul 50,369 92,829 164,380 6.1%
Africa 7,982 12,694 19,621 4.6%
North 4,211 6,060 8,888 3.8%
West 800 1,113 1,545 3.3%
Central 94 120 146 2.2%
East 1,637 2,729 4,226 4.9%
Southern 1,239 2,671 4,816 7.0%
Americas 21,306 38,282 65,500 5.8%
North 14,836 25,116 40,422 5.1%
Caribbean 3,031 6,016 11,161 6.7%
Central 538 1,080 2,015 6.8%
South 2,901 6,070 11,903 7.3%
East Asia/Pacific 13,309 25,419 47,623 6.6%
North-East 5,496 10,776 20,880 6.9%
South-East 6,077 11,399 20,829 6.4%
Australasia 1,446 2,714 4,973 6.4%
Mela/Micro/Polynesia 290 530 941 6.1%
Middle East 5,134 11,044 21,726 7.5%
South Asia 2,638 5,390 9,909 6.8%

Long haul travel will grow above average and as a result, the EU-share of the total long haul
travelling market will grow to 23% in 2020. All long haul destinations will show large growth:
the Middle East (+7.5%, annual average 2000-2020), South Asia (6.8%), East Asia/Pacific
(6.6%), the Americas (5.8%) and Africa (4.6%).

Causes for this expected growth are primarily an increased number of one-person households,
an overall high level of prosperity and leisure time and an increase in the ageing population in
most of Europe. A strong Euro makes travelling outside Europe even more attractive to
Europeans. Although these figures give a projection of the future market, please use these
forecasts as an indication only, as many unpredictable factors can influence the tourism
market.

EU regions of origin
Western Europe is by far the most important sub region within Europe with an expected 72
million long haul tourists in 2020. The long haul market in Western Europe will increase on
average by 5.9% on a yearly basis within the period 1995–2020. This is somewhat lower than
annual growth in the Eastern Mediterranean region (+6.2%), Central and Eastern Europe
(+8.2%), and higher than the growth in Northern Europe (+5.6%) and Southern Europe
(+5.7%). Some Eastern and Central European countries, in particular, register the highest
future demand for international tourism. These are Montenegro (+9.9% in the period 2006-
2015), Croatia (+7.8%) and the Czech Republic (+7.2%).

Relatively speaking, travellers from the Eastern Mediterranean region are the most long haul
orientated within Europe. 40% of tourists from this region will be travelling long haul in 2020.
Second is Northern Europe with a market share for long haul travelling of 31% in 2020.
Southern Europe is ranked third with a share of 24%, followed by Western Europe (21%) and
Central/Eastern Europe (13%). When considering the preferences for destinations,
geographical reasons play a role in the choice of a final destination. Furthermore, South Africa,
the Southern Americas, the Caribbean and the Middle East are generally expected to be the
destinations most in demand for tourists from Europe.


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1.5 Tourism expenditure

In 2007, 25 countries together generated almost 75% of all international tourism expenditure.
Of these countries, over 50% were European, Asia/Pacific accounted for 32% and America for
8%. 51% of total tourism expenditure was spent in Europe, although, its increase in
expenditure (+4%) was not as large as the increases in Africa (+10%) and Asia and the Pacific
(+9%).

In 2007, Germany was the biggest European spender in international tourism, amounting to
€60.6 billion. Compared to 2006, German expenditure slightly increased. See Table 1.6 for an
overview of tourism expenditure and the annual growth between 2004 and 2007 of the top 10
EU countries. Please note that the original results are in US dollars and are, therefore,
influenced by the exchange rate between the euro and the US dollar.

Table 1.6 International tourism expenditure, top 10 EU countries,
2000-2007, € billion *
2000 2004 2005 2006 2007 CAGR
’04-’07
(%)
Germany 57.5 57.6 59.9 59.6 60.6 1.7%
UK 41.7 45.5 48.0 49.9 52.9 5.2%
France 19.3 23.2 24.6 24.9 26.8 4.9%
Italy 17.0 16.5 18.0 18.4 20.0 6.6%
Belgium 10.2 11.3 12.0 13.7 12.6 3.7%
The Netherlands 13.2 13.2 13.0 13.6 14.0 2.0%
Spain 6.5 9.8 12.2 13.3 14.4 13.7%
Sweden 8.7 8.2 8.7 9.2 10.2 7.5%
Austria 9.2 6.7 6.8 7.4 7.7 4.7%
Denmark 5.1 5.9 5.2 5.6 6.4 2.7%
Source: World Tourism Organisation (2007 & 2009)
* original expenditures were in $, exchange rates that have been used are 1.085, 0.805, 0.805, 0.797
and 0.731 respectively.

1.6 The role of the Internet

The use of the Internet for online booking is growing very fast in Europe. It was estimated that
in 2007, over 18% of the European travel market was booked online. This was an increase of
22% compared to 2006. In 2007, more than 30% of hotel bookings in Europe came from
direct web booking. The European online travel market is expected to continue increasing. Also
refer to Figure 1.1 for an overview of the (expected) development of online travel sales in
Europe.

As in all preceding years, the UK was still the largest online travel market in 2008 (30%).
Germany followed in second place (19%), whereas France (14%) was third. All together, these
markets make up about 63% of all online expenditure in Europe. The French online travel
market has been growing at a faster pace than Germany and the UK. The Nordic countries
(Scandinavia and Finland) account for 11%, the Southern countries (Italy, Spain, Portugal and
Greece) account for 14%, the Benelux, Austria and Ireland account for 9% and Eastern Europe
for 3%. Although representing only a small share of 3%, the Central and Eastern European
countries account for the highest growth figures.


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Figure 1.1 Online travel market Europe, 1999-2009, € billion

80

70 66.9

58.4
60

49.4
50
sales in billion €

39.7
40

30.2
30

20.8
20
13.9
8.9
10
5
2.5
0.8
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Centre for Regional and Tourism Research (January 2008)

In 2007, direct sellers (online tour operators) accounted for 65% of online sales in the
European market and intermediaries for 35%. More than half of all online bookings concern air
travel (57%), followed by accommodation (17%) and package tours (14.5%). Of total online
sales, 28% consisted of budget airline bookings. Highly-educated Europeans are almost seven
times more likely to consult travel related websites than Europeans with a low educational
level.

In response to the substantial growth of online sales, ‘traditional’ tour operators are also
heavily investing in online services. TUI, for example, expects about 50% of its business to be
generated online in 2010. Although a significant part of marketing and PR budgets is still spent
on traditional advertising, other tourism companies also expect more investments in online
promotion campaigns in the future.

Use of the Internet as information source
The Internet is becoming the favourite source of information for consumers. Online users ask
peers for advice and trust users more than that they trust advertisements. The effect of social
networking is increasing rapidly, especially through blogging and online video. It appears that
travel agencies also consult these kind of sites for advice. TripAdviser, IgoUgo and YouTube
are the sites most used by business travel agencies and leisure travel agencies to review hotel
ratings before passing on advice to travellers. About 40% of them indicated that they use
review sites when making bookings. Research by Forrester revealed that one third of leisure
travellers changed their hotels based on what they had read on blogs or other travel related
community sites. It is therefore of the utmost importance that you monitor what is written
about you. Moreover, you should take the opportunity to add content to such platforms as
well!

At this moment, the most important international platforms are:
• Flickr – http://www.flickr.com - picture sharing platform
• TripAdvisor – http://www.tripadvisor.com – online travel community
• YouTube – http://www.youtube.com – video sharing platform

Some other important international platforms are:
• BootsnAll - http://www.bootsnall.com
• Gusto - http://www.gusto.com
• IExplore - http://www.iexplore.com
• IGoUGo - http://www.igougo.com
• Iloho - http://www.iloho.com
• Matador Travel - http://matadortravel.com


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• Realtravel - http://realtravel.com
• TravelBlog – http://www.travelblog.org
• Traveldodo - http://www.traveldodo.com
• Travellerspoint - http://www.travellerspoint.com
• Travel Rants – http://www.travel-rants.com
• WAYN - http://www.wayn.com
• World66 - http://www.world66.com
• Zoom and Go - http://www.zoomandgo.com
• Zoover – http://www.zoover.com

Practical tip: how to make use of the Internet
Younger travellers, especially, make use of these very sources to gain inspiration for their travel plans.
Many refer to online communities like Facebook, Hyves and MySpace.com. In these online communities
groups are formed based on different interests, like South America or diving. Travel experiences are
shared and these inspire many others.

Another possibility is searching YouTube to get an idea about possible activities at a future travel
destination. Bigfoot Hostels in Nicaragua takes full advantage of this and has placed a promotion film on
the site. They show how they take their guests up a volcano and how they go surfing down the volcano
on a board. It has been watched on average over 400 times a month. In the category ‘travel and events’
you can also add your promotion movie. Carefully choose your keywords and at the very least add your
country name and most important activity.
Source: interviews Facts Figures Future (2008)

For detailed information on e-business, refer to the CBI Export Manuals ‘Eguide Tourism’ and
‘How to promote your website in the EU’. Both manuals can be downloaded from
http://www.cbi.eu/marketinfo.

Innovative forms of travel
The use of the Internet and travel networking is leading to fast developments in innovative
forms of travel, such as hospitality tourism and home exchanges. Hospitality tourism and
home exchanges existed previously, but only had a limited appeal to niche audiences. The
latest web developments have allowed them to become more important nowadays.

Hospitality tourism
With hospitality tourism, travellers receive free hospitality. Websites such as HospitalityClub
(http://www.hospitalityclub.org) and CouchSurfing (http://www.couchsurfing.com) bring
together travellers with locals willing to offer free hospitality and socialising opportunities.
Especially in the present negative economic climate in Europe, this form of tourism is
increasing. However, saving money is not the main goal. The core objective is the intercultural
exchange opportunities. Travellers are able to see how locals live, discovering a new country
and its culture from an insider’s perspective. Conversely, locals who offer free hospitality have
the opportunity to meet people from different cultures and exchange their views and
experiences.

Home exchange
With a home exchange, travellers swap houses to spend their holiday. The number of
travellers interested in home exchange has increased enormously over the last few years. This
trend is being fuelled by the popularity of online booking and travel-focused websites alongside
travellers’ desire to blend in with the locals. Several companies, such as Home Exchange
(http://homeexchange.com), Intervac (http://www.intervac.com) and HomeLink
(http://www.homelink.org) are active in this sector, offering members the possibility to
exchange homes via the Internet for a small fee. In the case of home exchange, the money-
saving element plays a more important role than in hospitality tourism, yet the desire to enjoy
an authentic experience is the same.

More technological developments
Together with the Internet other technological developments will also play an increasing role in


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the travel industry. Global Positioning System (GPS) and other mapping services will increase
pre-visit knowledge and also influence tourists’ expectations. Another trend is the increasing
use of programmes like ‘Google Earth’ to pre-research a destination.

1.7 Trends

The tourism industry is lively and is continuously changing. Some main developments and
trends, especially for DCs, are found in this section. These trends could support policy makers
in their long-term strategies. The trends are based on desk research, analysis and studies of
the European Travel Commission, Pro Poor Tourism, the World Tourism Organisation and
interviews with industry experts.

Time rich seniors exploring the world
In Europe, the older age group will continue to grow. The baby boomers have just reached
retirement age or will do so shortly. Seniors are healthier than they have ever been, have
more money to spend than ever before 4 and are interested in exploring the world. Moreover,
they have no time constraints on their ability to travel. Travelling seniors can be found in every
country and are interested in almost all activities, but they are specifically interested in health
and spa tourism, cultural tourism, cruises and more top of the range holidays. However, in the
longer term there is likely to be a decline in the value of pensions and a rise in retirement
ages.

The main consequence for the tourism sector of this growing number of senior tourists will be:
• Increasing demand for quality, convenience and security.
• Increasing demand for easy and comfortable transportation, shorter distances.
• Increasing demand for more relaxing entertainment facilities (e.g. golf courses and spas).
• Increasing demand for one-person products and services (e.g. in the accommodation
sector or activities).
• More off season demand, due to the lower prices and the availability of leisure time.
• As regards marketing, less emphasis should be put on age and more on comfort.

Increasing importance of the Internet
The Internet is increasingly used to book holidays. It is estimated that in 2007, over 18% of
the European travel market was booked online. Moreover, the Internet is increasing in
importance for the European traveller as regards finding reviews from other travellers, pre-
researching new destinations and gaining inspiration.

Tailor-made and personalised holidays
As a result of the increasing demand for individualised holidays, an increasing number of
European tour operators are choosing to design their holidays for a specific audience. General
holiday packages are slowly disappearing. Young people, for example, like ‘extreme’
experiences, whereas families with children would prefer a tailored holiday with child-care
services and the retired would like a holiday in a resort where they can relax, play golf, eat out
and at the same time can join organised tours throughout the country, for example, to a major
city or a safari. Demand for flexible holidays based on individual combinations of different
modules such as flights, hotels and rental cars is increasing.

Shorter trips throughout the year
Leisure time for working people in Europe is coming under pressure more and more. As a
result, they are increasingly willing to spend more money in order to save time. A decrease in
leisure time is leading to shorter breaks, taken more frequently throughout the year and, in
general, closer to home. Moreover, it is expected that demand for holidays outside the
traditional summer seasons will continue to increase. Summer destinations during the winter
season are also becoming more popular.

4
Some industry experts expect that seniors will be hit harder by the economic slowdown.
Seniors are more concerned with the loss of their income as a result of the economic crisis.


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Growing demand for dynamic packaging
A clear trend is the change in demand from traditional packages towards more flexible holidays
based on individual combinations of different modules such as flights, hotels and rental cars.
However, flight tickets still represent the largest single booking form. Low-cost carriers have
influenced European consumers; not only do they offer cheap travel across Europe, they have
also made consumers aware of how to organise their holidays independently of travel
agencies. Online booking of dynamic packages is easy, quick and often a lot cheaper than
buying traditional tour packages.

Superior experiences
The demand for authentic experiences is increasing. During their holidays a growing number of
tourists are looking for an experience that matches their normal everyday life as little as
possible. They want to visit new destinations that have not yet been influenced by the Western
world. There is also a growing trend towards ‘sabbatical’ holidays. People tend to save up time
in order to take a longer trip once in a while. These trips often feature personal challenge or
self-development, including long-distance walking or cycling, taking painting or photography
classes or visiting remote long-haul destinations. Even the traditional beach holidays need to
incorporate educational or cultural elements nowadays. Travellers are turning towards direct
forms of interaction between others in the form of online travel communities in search of more
authentic travel experiences and connections.

Furthermore, tourists today are much more likely to have already experienced the wider world.
Their experience also means that they have a better understanding of quality and value for
money. It is very important that your promotional material matches the experience your
services provide. If you use the words like “modern, spacious or friendly”, it better be this,
otherwise the experienced traveller will complain. They will not only complain during their stay,
but will also make their discontent known on online travel communities.

For more information on online travel communities, please refer to section 1.6 and the CBI
Export Manual ‘Eguide Tourism’. This manual can be downloaded from
http://www.cbi.eu/marketinfo.

Growing environmental awareness
Growing awareness for the environment has many consequences for the tourism business.
Firstly, it is probable that following Sweden and the Netherlands, other EU member states will
also introduce charging emission taxes on flight tickets. This will increase the total price of a
holiday. It is not yet known what effect this will have. Secondly, demand for eco-tourism is
increasing. Tourists will demand more and more information on sustainability and which
measures the tourism supplier has taken to minimise negative impacts on the environment. It
also works the other way around. The tourism supplier should also make unconcerned tourists
aware of their impact on the environment and persuade them to limit it. Tour operators in the
EU are also taking sustainable holidays more and more seriously and some tour operators have
started to use different marks in their brochures to indicate the level of sustainability. Usually,
being able to offer services which ensure sustainability will also lead to getting a better price.
Thirdly, the demand for travel to unique, unspoilt destinations – before it is too late - is
increasing. On the homepage of the Federation of Tour Operators (http://www.fto.co.uk) you
can download a handbook with supplier sustainability guidelines. Go to ‘responsible tourism’
and click on sustainability guidelines.

Practical example: Taste of Borneo holiday
“Our holiday has benefited local people and the local economy. Overall the impact on the environment
was reasonably well managed, but I am concerned about the impact on the environment of Turtle
Island. The first reason is that too many people live in a small area. The second reason has to do with
snorkelling. Our guide proposed going to the adjoining island, because snorkelling was better there.
However, during the visit, the tide fell considerably. When departing, the boat driver was not able to find
a passage out of the coral. The men in the boat had to push and pull the boat over the coral until we got
beyond the reef. The coral was definitely damaged by this action. However, neither the boat driver nor
the guide were too bothered about it. I think that such a situation is not tolerable. In the future, there
should be a buoy anchored beyond the coral”.
Source: ‘Responsible tourism and the market’, H. Goodwin, November 2005


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The website of the World Tourism Organization (http://www.unwto.org) contains a lot of useful
information. You can, for example, order the book ‘Tourism in least developing countries’.
Pages 146-161 contain very practical checklists and guidelines. Secondly, other studies can be
ordered about the demand for responsible tourism in France, Germany, Italy, Spain and the
UK. These are called ‘Ecotourism Market Study Series’. More sources can be found in
Subsection 1.6.

Increasing demand for wellness holidays
EU consumers’ health consciousness will continue to increase. This will not influence the
volume of demand, but it will certainly influence the decision-making process regarding
destinations and behaviour during holidays. Demand for sun holidays will decrease, whereas
active or activity holidays will increase in popularity, along with demand for facilities that
correspond to this type of holiday. Particularly in the well-developed EU countries, demand for
‘wellness’ products will increase, including spas and fitness centres. In particular, the demand
for medical and beauty holidays to countries with a good health care system will rise.

Younger age group trips more and has more money
The youth market accounts for over 20% of global tourism. The young are increasingly earning
higher incomes and the growth of single-person households and the trend towards older
parenting are all leading to more travel among the 16-35 age group. As a result, the demand
for more active holidays will continue to increase.

Conditions to attract tourists
DCs naturally have a lot of favourable conditions to attract European tourists to their country. Mostly
situated in the (sub)tropical zone, it can be summer 365 days a year. Moreover, the warm coasts, the
unaffected landscapes, volcanism, high mountains, the different flora and fauna and the diversity of
species of the tropical rain forests, attract European tourists. As a result, European tourists can
undertake activities that are scarcely or not at all possible in Europe: dipping or diving in the coral
reeves, trekking in the Himalayas or climbing the Kilimanjaro, going on safari in one of Africa’s national
parks or hiking through the South American rain forests. Besides, the European tourist is interested in
visiting cultural sites like rice terraces, temples, bazaars or historical places and experiencing the
authentic culture of the destination.

Nevertheless, further conditions for tourism must be created. Those are above all accessibility, political
stability, safety and reducing health risks to a minimum. Tourism destinations must have at least one
airport, a good, weather-resistant road system, appropriate public means of transport and a reliable
energy and water supply. Besides, acceptable quality accommodations and restaurants and guides to
undertake specific activities must be present in the country. These companies should all have trained
personnel with good foreign language knowledge. Furthermore, the country should have a good
infrastructure to minimise situations that could jeopardise the safety of tourists like political unrest and
terror attacks.
Source: Pro-Poor Tourism and Facts Figures Future (2008)

1.8 Opportunities and threats

The trends and market developments discussed above offer opportunities and threats to DC
tourism suppliers. A given trend can be a threat to some and an opportunity to others at the
same time. The following trends should, therefore, always be analysed in relation to your
specific circumstances. The main opportunities and threats for DC tourism suppliers are the
following:
+ EU outbound travel increased by an average of 2.7% per year between 2003 and 2006.
The number of EU trips to DCs increased rapidly (an average 10% per year) between
2003 and 2006. This is much faster than total EU outbound travel.
+ Growth of EU long haul tourism is expected to continue in the future. Between 2000 and
2020, it is expected that EU long haul travel will increase its share of total outbound trips
to 23%.
+ Not only are more and more European tourists using the Internet as a source of
inspiration, they are also placing more and more bookings via Internet. The Internet
reduces the distance between the EU tourist and DCs. Having a good quality website, and


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listing products and services in other third party websites is very important for DC
tourism suppliers.
+ The EU baby boomers are all reaching retirement age. The retired have never been so fit,
have never been so wealthy and many are interested in exploring the world. If the
services you offer are suitable for EU seniors, this could mean a lot of new customers in
the future.
+/- It is unclear what the results of the economic crisis will be for the travel industry. Some
say that consumers will continue travelling, while others expect a decline in bookings.
+/- Over 83% of trips are made to European destinations. However, the numbers of EU
visitors to non-European destinations increased much faster than to European
destinations. Between 2003 and 2006, the number of trips to European destinations
increased by an average of 1.7% per year, while the number of trips to non-European
destinations showed an average annual growth of 7.5%.
+/- The most important destinations are Turkey and Croatia, making up over 35% of all EU
arrivals to DCs.
+/- The increasing demand for shorter holidays means an opportunity for nearby destinations
and tourism suppliers who are able to offer short packages. Packages should appeal to EU
tourists and include major, region-specific highlights (“I have seen Tanzania in 8 days”).
+/- Environmental awareness is growing among EU tourists. Tourism suppliers who offer
sustainable tourism will be able to attract more tourists (and usually also for a better
price).
+/- The youth market is growing and has more to spend. As a result, demand for active
holidays is increasing.

1.9 Useful sources

• ETC New Media - http://www.etcnewmedia.com/review - statistics about the online travel
market and use of the Internet for travel and tourism on a country-by-country basis.
• European Travel Commission - http://www.etc-corporate.org - trends, news, statistics,
links.
• Tourism Australia - http://www.tourism.australia.com - data on worldwide and EU
outbound markets, statistics, Tourism Facts Sheets.
• Travel trade fair World Travel Market – http://www.wtmlondon.com – Global Trends
Reports
• Travel trade fair ITB Berlin – http://www.itb-berlin.com – World Travel Trends Report
• World Tourism Organization - http://www.unwto.org - news, statistics, publications

Sustainable tourism
• Community-based tourism in Asia Pacific - http://www.community-tourism.org
• Green Travel Market - http://www.greentravelmarket.info - B2B marketing service for
sustainable tourism, offers suppliers and tour operators a new and exclusive tool for
receiving up-to-date information.
• International Centre for Responsible Tourism -
http://www.theinternationalcentreforresponsibletourism.org - good practices, examples,
publications.
• Pro-Poor Tourism - http://www.propoortourism.org.uk – gives examples of and
publications on sustainable tourism.
• Responsible Travel – http://www.responsibletravel.com – site with responsible eco
holidays.
• Tour Operators' Initiative for Sustainable Tourism Development -
http://www.toinitiative.org - news, events and good practices.
• United Nations Division for Sustainable Development - http://www.un.org/esa/sustdev -
guidelines, data per country, success stories and more.

Also refer to the CBI market survey ‘The EU market for Community-Based Tourism’. This
survey can be downloaded from http://www.cbi.eu/marketinfo.


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Useful partnerships

Responsible Tourism Partnership (http://www.responsibletourismpartnership.org) is a non-profit
company that works in partnerships to improve destinations for local people and their visitors. They
bring together tourism businesses in originating markets and destinations to work with local
communities and national and local government to create better places for local communities to live in
and for tourists to visit. They develop strategies in destinations in partnership with both local
communities and the tourism industry to ensure that the tourism product has a route to market. On
their website, there are links to African and Asian associations which support local tourism (click on
‘business partnerships’ and ‘destination partnerships’).

International Tourism Partnership (http://www.tourismpartnership.org) extends the collective reach and
expertise of its members by forging unique partnerships between the private sector, government,
academia and non-governmental organisations. These partnerships inspire the practical solutions
necessary for strategic and front-line management of the travel and tourism industry on relevant socio-
economic and environmental issues. Membership of the International Tourism Partnership is open to
businesses in the hotel, travel, transport and tourism sectors. The International Tourism Partnership
embraces tour operators, airlines, hotels and also extends to suppliers to these sectors through
partnership opportunities.
Source: Responsible Tourism Partnership and International Tourism Partnership (2008)


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2 Trade channels for market entry

2.1 Trade channels

Holidays and trips can reach the final consumer in various ways. Figure 2.1 displays the most
common trade structures for operators of DCs. The thick lines display - in general terms - the
most relevant ones for operators from DCs. This general diagram gives an overview of the
current situation. Individual situations may differ.

Figure 2.1 Trade structure tourism

Transport Accommo- Other
(airlines) Attractions
dation (e.g.catering)

Inbound tour
operators

Member Outbound Specialised
organisation tour tour
operators operators

Travel
agencies

Inclusive tour Independent
travellers travellers
Source: Facts Figures Future (2009)

The most important trade channels for the long haul tourism market are inbound tour
operators (local agents) and outbound tour operators. In addition to consumers who will book
at tour operators and travel agencies, there is a small group who will turn to modular self
arrangements for travel and shop around for best buys. DC suppliers are recommended to
target inbound tour operators and specialised outbound tour operators.

Internet is very important!
As previously stated, the Internet influences the decision-making process to a large extent. It can
generate 30-40% of direct business. Consumers are not only able to compare prices and pre-research
destinations; they use it as a medium to book holidays as well. In fact, the Internet plays a role in every
link in the chain.

Inbound tour operators (local agents)
Inbound tour operators are the vital link between DC tourism suppliers and EU outbound tour
operators. Inbound tour operators represent local tourism suppliers, like hotels, bus companies
and organisers of activities and promote and sell travel packages to outbound tour operators
and travel agencies. According to interviews with EU tour operators, almost all bookings take
place through the intervention of an inbound tour operator. Moreover, when an EU outbound


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tour operator is interested in a new location, in 99 of the 100 cases the tour operator will
contact the local agents (inbound tour operators) in that country. The local agents can provide
a wide range of services to the EU outbound tour operators, including advice on the product,
price and availability, coordination of travel arrangements and payments, and supervision of
product delivery.

The advantages for DC tourism suppliers to being represented by one or more local agents are
among other things:
• They provide access to EU tour operators and indirectly to EU tourists
• They provide volume business
• They offer extensive knowledge on international consumer needs
• They act as an extension to the marketing department, reducing the need for overseas
marketing
• They offer access to a network of overseas offices and representatives and guarantee
payment over and over again once the tourism product has been delivered.
Moreover, they might be present at important trade fairs in the EU. As such, it is highly
recommended that DC suppliers be represented by a local agent.

Interview with market specialist from PromPerú

At the “Vakantiebeurs 2008” (the most important tourism trade fair in the Netherlands) we met with Mrs
Florián, the market specialist from PromPerú (export promotion organisation in Peru).

She recommends that DC tourism suppliers first research which markets are the most appropriate for
their services. Is it the Dutch market, the German or the Spanish for example, and do you need to aim
at one special target market (for example, seniors) or can you target general experience seekers in that
country.

PromPerú, for example, started with their promotional activities in Spain, because of the low language
and cultural barriers. After having visited Fitur (the Spanish tourism trade fair) several times, they
started visiting other trade fairs like ITB in Berlin, the World Travel Market in London and Vakantiebeurs
in Utrecht. Mrs Florian thinks it was very important for them to visit European trade fairs. It gave them
the opportunity to meet with EU outbound tour operators, but at the same time to experience the EU
market and its consumers.

Once you have decided which markets you want to target, you need to find a local agent who can
represent you on that market. You should also make yourself known to the tourist board in your country.
In Peru, the tourist board maintains a website (http://www.peru.info) with a lot of information on Peru,
but also with a database with all known tourism suppliers in the country. PromPerú has experienced that
more and more EU tourists consult the website, looking for information on Peru, but also to book (part
of) their holidays.

Besides this, you should develop your own website. It should be a professional website with attractive
(and realistic) pictures and information in one or more European languages. The website will not only
give an impression of your possibilities to EU outbound tour operators, but it can also attract EU tourists
wishing to book their holidays independently. Also refer to ‘From survey to success – marketing
guidelines’ for more tips.
Source: interview Facts Figures Future (2008)

Outbound tour operators
In general, an outbound tour operator offers a complete package to the inclusive tour traveller,
consisting of transport (airline seats), accommodation (hotel), excursions and more. The
outbound tour operator, therefore, cooperates with an inbound tour operator in the destination
country who selects elements such as accommodation, catering and excursions. The outbound
tour operator offers the product via travel agencies or directly to consumers through the
Internet. It is becoming increasingly common that packages can be composed of individual
modules that the traveller can select him or herself.


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Major and specialised tour operators
In general, two kinds of tour operators can be found: major tour operators and specialist tour
operators. Major tour operators generate most of their volumes through popular, standardised
mass-market products (sun, sea, sand). In the EU, a small number of mainly German and
British players dominate the tour operator market. Some examples are TUI (http://www.tui-
group.com), Thomas Cook (http://www.thomascook.com), Rewe/LTU (http://www.rewe-
touristik.com), First Choice (http://www.firstchoice.co.uk) and Kuoni (http://www.kuoni.com).

Specialised tour operators concentrate on niche markets currently not being served by the
major operators. However, the tourism market is changing and major operators realise that
they will have to meet individual consumer demand to keep their clients. Some large tour
operators have set up specialised branches as well, operating under separate trade names, to
serve special segments in the market. Big and smaller players are all fighting for their market
position, resulting in fierce competition and, moreover, an increasing number of consumers are
looking for lower prices.

The majority of holidays are booked through major tour operators, either via travel agencies or
directly. Most of the major tour operators work with a small number of preferred suppliers or
inbound tour operators. It is difficult for inbound tour operators from DCs to meet their
demands and to work with them on a profitable basis. Of course, there are exceptions. In
general, however, inbound tour operators from DCs would be better off aiming at smaller tour
operators who offer special tours and packages not covered by the larger companies. Table 2.1
gives some general characteristics of major and specialised tour operators. It could help
tourism suppliers to determine which type of tour operators would suit their own situation
best. The CBI sector surveys covering the market in individual EU countries include examples
and Internet sources that provide access to these smaller tour operators.

Table 2.1 Characteristics of major and specialised EU tour operators
Major tour operators Specialised tour operators
High volumes, low margins Small volumes
Make destinations in DCs more available to more Aim at less common destinations for an increasing
customers number of tourists that demand high quality and
custom-made holidays
Aim marketing strategies at destinations where they Have distinguished themselves from the large tour
are currently operating operators by specialising in niche products
Continue to sell mainly on price. Makes loyalty to Offer more complex products and are, therefore,
inbound tour operators very low more dependent on local suppliers
Customers are highly price-sensitive and spend little Serve consumers who are less price-sensitive and
who are willing to spend more, as they are
interested in special destinations and their products
Sell via travel agencies that they prefer to own Profit from emerging direct sales channels (the
Internet) and use independent agencies
High negotiating and buying power Generally pay higher prices to local suppliers due to
purchasing lower volumes
Offer relatively standardised and basic products, Clients know where to find them
with little interest in destination specific products.
However, this is changing somewhat.
Are mostly in full control over their demand and Directly sell to public
supply structures due to vertical integration
Destinations have little influence Know how to contract niche markets
Source: Pro Poor Tourism (2003)

Changing roles
Tour operators’ roles have changed in the last few years. They used to have a wholesaling
role, offering an inclusive holiday package and other services to the travel agency. The travel
agency was the final step to the consumer, bringing together the consumer and supplier. More
and more tour operators and accommodations, however, are offering their products directly to
the consumer. The Internet has lowered the barriers for consumers to order their holidays and
airline tickets online. As a result, the importance of the travel agency in the chain has


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decreased and more and more travel agencies are closing down. At the same time, integration
is taking place within the chain; tour operators increasingly own their own travel agencies.

Member organisations
Another potential channel consists of member organisations, acting as tour operators. There is
an increasing tendency among organisations, clubs, sporting teams and/or more organised
parties to organise holiday trips and offer them to their members. They book all foreign
accommodation themselves and act as tour operators for their members. Another possibility is
to cooperate with a tour operator specialised in their field of interest.

Examples are clubs of mountaineers that go climbing together, diving clubs that travel to the
Antilles and fishermen who organise foreign fishing holidays together. Loyalty organisations,
such as the Dutch ‘Airmiles’, can also be included in this channel.

Direct booking
The third main channel for DC tourism operators consists of independent travellers who do
most or all of their own booking. They do not use intermediaries but use the Internet to gain
inspiration and make bookings. The Dutch, for example, are often ‘do-it-yourself’ travellers,
using travel guides such as Lonely Planet, Rough Guides, Capitol, Guide du Routard and others
to make arrangements on the spot. Besides this, they also approach an inbound tour operator
in the destination country. This company then offers a tailored package by selecting e.g.
accommodation and excursions.

Consortia
Practical experience teaches that most individual companies (hoteliers, attraction parks) find it
difficult to attract overseas customers. Moreover, most tourism operators in DCs are relatively
small players and have to deal with giant European tour operators. In these cases, forming
consortia can be beneficial in the long term. By joining forces, accommodation, catering,
airlines and tour operators could offer more attractive packages to the EU client. In some
South American DCs, the government is stimulating this form of clustering.

Role of airlines
Airlines are important allies for operators from DCs. Besides being a sales channel, they are a
prior condition, since a long haul tourism destination firstly needs to be accessible by air. It is
crucial for a country to have one or more airlines to connect it to other regions and continents.
The more (intercontinental) airlines include the destination within their network, the more the
country is connected to the rest of the world.

Another role airlines could play is inviting trade press to make trips to a particular destination,
so-called ‘fam trips’. Most airlines have a wide network and have good contacts with
journalists. As airlines also profit from positive adverts and free publicity, all parties involved
could invite the right journalist to make a trip to a destination about which he would be
expected to write positively. An airline can of course put more pressure on a journalist to write
an article than a small operator, due to their long-term relationship.

Moreover, some airlines act as tour operators as well, integrating their activities and thus
controlling more and more of the travel chain. Examples are Spanish airline company Iberia
that has set up its own tour operator business under the name of Mundicolor, and Orchid
Holidays, which is owned by Thai Airways.

A real-life case
The Dutch specialised tour operator SRC (http://www.src-cultuurvakanties.nl) includes a long haul
destination in their programme after having perceived an increased demand for that destination and/or
increased media attention.

SRC’s most recent new destinations are Ethiopia and Madagascar. Expectations are high but cautious;
only time will tell whether these countries are profitable for them. A destination has to meet some of the
following criteria:


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• The country has an interesting culture and nature;
• The country has a sufficiently or well maintained infrastructure;
• The country is safe and can more or less guarantee safe transport within its borders;
• The quality of hotels is reasonable to good, with mainly en-suite bathrooms.

When SRC is interested in a new destination, they will contact several local agents (inbound tour
operators) in that country. Contact is often made at one of the large European fairs, such as ITB or
WTM. The first selection is based on criteria such as level of professionalism, trust, track record and
experience. In addition, the agent should have a good command of English and understand what the
tour operator is looking for. After having received some offers, the final selection is made on the basis of
value for money, the quality of the local parties involved and common business feeling. The latter is
based on promotional tools such as a professional website and brochure.

Large tour operators most probably work a little differently. Thomas Cook, for example, mainly includes
a new long haul destination after having received information from an airline that they plan to fly to a
new destination. To select tourism operators in the new destination country, large tour operators will
also contact local agents.
Source: interview Facts Figures Future (2007)

2.2 Price structure

Generally, the price of a package roughly consists of airlines (35-40%), local arrangements,
such as accommodation and excursions (35-40%), and margins for the EU tour operator (20-
30%). This price structure is more or less the same for both major and specialised tour
operators. However, this is only a general indication, as margins vary widely, depending on
several factors, among which are:
• Supply side considerations. For example, the destination country may have a positive or
negative effect on margins. Additionally, the exchange rate may also influence margins.
• Demand side considerations. Average margins may vary from country to country,
depending on the local competitive environment.
• Product side considerations. For one thing, standard packages have lower margins than
specialised packages and sustainable tourism like eco-tourism and community-based
tourism. Furthermore, the type of agreement (number of tourists, length of the contract,
flexibility of the contract and so on) will influence the price.

2.3 Useful sources

Some examples of available general sources to find clients:
• European Tour Operators Association - http://www.etoa.org - pan-European trade
association with more than 400 members, mostly tour operators, online intermediaries,
including hotels, coach operators and tourist attractions – click on ‘Membership Directory’.
• Group of National Travel Agents' and Tour Operators' Associations within the EU -
http://www.ectaa.org – click on ‘Membership’.
• Attendance at tourism fairs, such as ITB Berlin (http://www.itb-berlin.com), WTM London
(http://www.wtmlondon.com) and FITUR (http://www.ifema.es/ferias/fitur/default.html) –
search the exhibitors list.
• Pro-Poor Tourism - http://www.propoortourism.org.uk – gives examples and publications
about sustainable tourism.


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3 Price developments

3.1 Price developments

In general, prices in the industry have been decreasing for years now. Industry experts expect
this declining trend to continue, certainly for long-haul destinations. On average, prices will go
down by an average of 2-5% a year. One of the main reasons is declining air fare prices, which
account for a considerable part of the price of a package. Some other reasons include fierce
competition on European markets, increasing volumes that are supplied, “from… prices”
(tickets contain only flight and accommodation and e.g. dinner or other activities are
supplementary) and trips to “cheap” and all-inclusive countries such as Turkey.

The strong Euro is having a significant impact on the choice of destinations and type of
holidays for travellers from all key markets. EU residents like to travel outside the Euro zone.
Demand for outbound travel closely follows exchange rate shifts, although a certain delay of
several months has to be taken into account.

Pricing EU tour operators
EU tour operators consider several elements in order to set a price. It gives the DC tourism
supplier an idea of how a price is built up by an EU client.

Season pricing
Package holidays in particular are usually organised in two seasons, i.e. summer (May to
October) and winter (November to April). In summer, more people wish to go on holiday in
August than in May. However, tour operators need to keep their planes as full as possible
throughout the year. This is done by price variation. As only a fixed number of beds and
aircraft seats is available, prices must rise in peak periods.

Margins
EU tour operators state that the average margin on package holidays is low. They aim to earn
between 2-3% profit. They claim that they have to manage risks, as, for example, most
holiday prices are set one year ahead. EU tour operators often find it difficult to protect
themselves against fluctuations of e.g. fuel prices. This is partly because under EU law it is
forbidden to surcharge clients. There are more elements that influence pricing, such as flight
times, aviation fuel, accommodation occupancy and also exchange rates of local currencies.
More information can be found on the website of the Federation of Tour Operators
(http://www.fto.co.uk). Click on ‘operators fact file’ and ‘pricing and profit’.

Differences per country
In general, the margins of tour operators will not vary much in major EU countries. However,
in Italy and Spain they may be a little higher. This is because in these countries people tend to
book their holidays quite late in the season. This increases the risk, as a result of exchange
rate fluctuation and fuel surcharges, for tour operators in these countries.

Receipts per arrival
To give the reader an idea of the amount of money spent per visit, receipts per arrival per
continent can be given. Although it is a rough estimate, it offers interesting information.
Developments during the last five years have been displayed in Table 3.1. Average spending
per arrival worldwide was €690 in 2007 and showed an annual increase of 1.1% since 2003.
However, compared to 2006, average expenditure remained stable. In the different regions,
only Asia and the Pacific succeeded in increasing the average expenditure in 2007 compared to
2006 (+2.7%), while all other regions faced a stabilisation or even a decrease.

In 2007, receipts per arrival were highest in the Americas, with an average receipt of €880,
however this was 2.2% lower than what was spent per visitor in 2006. In second place came
Asia and the Pacific with €750. Receipts per arrival annually grew by 3.2% on average in the


Page 27 of 38

CBI Survey: EU Long Haul Tourism Market Focus on Developing Countries

CBI Survey: EU Long Haul Tourism Market Focus on Developing Countries

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