PhoCusWright

1
PhoCusWright

• The Applied Travel Intelligence Company

North American Online Travel Marketplace Focus
on Canada Research Study October 2007
2
Agenda

• Introduction Overview
• Market Sizing
• Total Market Global Comparisons
• Online Travel Agencies
• Air
• Land Products Lodging, Rental Car Rail
• Packaged Travel
• Cruise
• Consumer Survey
• Defining the Population Online Canadians /
  Online Travelers
• Trip Behavior
• Last Vacation Characteristics
• Travel Shopping Purchasing Behavior Drivers
• Online Traveler Demographics

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Research Objectives

• This study addresses questions such as
• What is the total size of the Canadian online
  leisure and unmanaged business travel market?
• What are the likely growth trends?
• What prompts channel and destination choice when
  booking leisure travel online?
• How are travelers booking tours and packages?
• Who are the key players and potential new market
  entrants?
• What elements motivate or inhibit online
  planning, shopping and purchasing behavior?
• What current and future technologies will be
  driving the changes?

Through results of the research, partners will be
able to prioritize their investments in the
online channel to meet likely consumer behavior.
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Ideal Outcomes

• Understand the differences among various
  demographic groups (e.g., do young people
  purchase differently than older travelers? How
  many sites do they look at before they buy?)
• Why do people shop online but purchase offline
  (such as from a local agency)? What role does
  brand play in this decision? Is there still fear
  of putting credit card numbers online?
• How do online travelers decide what to buy, where
  to buy, how to buy (make travel decisions)
  overall?

5
Key Findings

• Market Sizing
• Canadian online leisure and unmanaged business
  travel market projected to almost double from
  C6.5 billion in 2006 to C11 billion in 2009
• Online penetration reaching one third of total
  travel market
• 27 of all bookings made online in 2006, reaching
  39 by 2009
• Total travel market in 2006 at C24.4 billion,
  reaching C28B in 2009
• Canada is second largest online travel market
  worldwide in terms of online penetration
• Supplier Web sites dominate online travel
  segment, representing two thirds of all online
  leisure and unmanaged business travel bookings
• Air represents a disproportionate percentage of
  the online travel market due to its accessibility
  and simplicity to book online (73 online versus
  42 of total market).
• Almost half (47) of C10.2 billion air market
  booked online in 2006 strong growth projected
  through 2009 when nearly 70 of all flights will
  be booked online

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Key Findings

• Market Sizing
• Online penetration of hotel, car segments far
  behind air at 11 and 18, respectively, in 2006
• Fixed (ITC) packages dominate the C4.9 billion
  packaged travel market at 84 in 2006, but will
  decline to 79 in 2009 as FIT and dynamic
  packaging grows
• 13 of packages booked online 2006 projected to
  reach 22 in 2009
• U.S. dominance of the online travel agency market
  (roughly two thirds) will continue as several
  Canadian companies crowd the marketplace but few
  gain significant traction
• Canadian players have pursued distinctly Canadian
  leisure agency model, focusing on tour operator
  packages, but are now moving into components and
  dynamic packaging
• U.S. players have pursued U.S. OTA model but are
  adapting to Canadian tastes, introducing more
  tour operator packages
• Suppliers continue to gain share on online travel
  agencies

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Key Findings

• Consumer Survey
• Cost of trip is not a deterrent to purchasing
  online
• A third of travel dollars spent online for last
  trip percentage increases for longer trips
• Two thirds of offline buyers interested in
  purchasing online
• Travel agencies edge suppliers overall as
  purchasing method, but not online, where
  travelers clearly prefer supplier Web sites for
  air, hotel and rental car
• Shopping online but purchasing through retail
  travel agency is significant (and unique to
  Canada)
• Old habits die hard, as number one reason for
  purchasing offline is lack of willingness to
  change past behavior
• Credit card payments not a significant deterrent
  to purchasing online
• Online Web sites not perceived as providing good
  customer service suppliers overall loose in this
  category

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Market Sizing
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Canadian Online Travel(Leisure/Unmanaged
Business)
Note 2007-2009 projected
10
Canadian Online Travel Penetration (Nearly) One
third of Total Travel Market in 2007 (CM)
Note 2007-2009 projected
11
Canada Total and Online Travel Markets
Composition by Product, 2006
Online Travel Market (Leisure/Unmanaged Business)
Total Travel Market
12
Online Travel Agencies in Canada Nearly Triple in
Growth Between 2004-2009
Note 2007-2009 projected represents
transactions completed online only
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Online Travel Agencies vs. Suppliers in Canada
2004-2009 (CM)
Note 2007-2009 projected represents
transactions completed online only
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With Huge Package Opportunity, Canadian Leisure
Retail Model Shifts Online

• Packaged Travel (ITC, FIT and Dynamic Packaging)
  Almost 20 of Total Travel Market in 2006
• FIT and Dynamic Packaging Growing at Expense of
  ITC
• Expect major tour operators to make limited
  entries into the flexible market
• Offerings in Europe, U.S. destinations that build
  on existing component-based business and do not
  cannibalize core sun/beach destinations
• Classic ITC Packages Dominate Online Sales
• Expedias shift to incorporate ITC in packages
  reflects significant of the product in Canadian
  marketplace
• Direct online sales with tour operators could
  reach 10 by 2009
• Expect incremental efforts to grow online direct
  distribution while trying not to alienate
  all-important agency channel
• Numbers currently skewed by a few direct sellers
  (e.g. GoTravelDirect)

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Web Just a Drop in the Ocean Less than 1 of
Cruises Booked Online (CM)
Note 2007-2009 projected Based on net cruise
fares (excludes onboard spending, flights, fees
and other pass-throughs) of cruises fully booked
online
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Consumer Survey
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Methodology

• Online panel email survey through Ipsos-Reid
• December 2006-February 2007
• Projectable Canada sample (/-2.8 _at_ 95
  confidence)
• Online Canadians N 5066 total
• Online Travelers N 1458 total min. 200 per
  region
• Regional Analysis British Columbia, Alberta,
  Prairies, Ontario, Quebec Atlantic

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Trip Behavior
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Higher Incidence and More Frequent Trips Taken
Within Canada
Pleasure/Personal Trips, Past 12 Months
Trips Inside Canada
Trips Outside Canada
Any Trips Taken 84
Any Trips Taken 73
9
7
18
27
39
Mean 3.8 trips
Mean 2.1 Trips
One
Four or More
Three
Two
Dont Know/Refused
None
Base Online travelers who took pleasure/personal
trip(s) in last 12 months Note (T3) In the last
12 months, how many pleasure or personal trips
did you take inside and outside of Canada? Note
Totals may not equal 100 due to rounding Mean
excludes 0 Source PhoCusWrights Canadian
Consumer Travel Trends Survey
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Seven in 10 Travel Domestically for Leisure, But
U.S. is 1 Region Visited
Countries/Regions Visited, Past Year
Canada vs. Non-Canada Travel
Geographies Visited
Incidence
Base Past Year Pleasure/Personal Trip Travelers
94 of Online Travelers Note (T26) In the past
12 months, what countries or regions have you
visited for your pleasure or personal
trips? Source PhoCusWrights Canadian Consumer
Travel Trends Survey
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Last Vacation
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Long Vacation of Almost Seven Nights Most
Frequently Taken Last Trip
Type Length of Last Pleasure/Personal Trip with
Hotel/Motel Stay
Type of Trip
Length of Trip
Mean 6.6 nights
60
of Nights Away
Base Online travelers who took pleasure/personal
trip(s) in last 12 months Note (T4) Now just
thinking about your last pleasure or personal
trip In the past 12 months that involved a
hotel/motel stay, how many nights were you away
from home on that trip? Note Totals may not
equal 100 due to rounding Dont Know/refused
responses excluded Note Quick getaway 1-2
nights Long weekend 3 nights Short vacation
4-6 nights Long vacation 7 nights Source
PhoCusWrights Canadian Consumer Travel Trends
Survey
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Increased Spend a Function of Trip Length
Mean Spend of Last Pleasure/Personal Trip With
Hotel/Motel Stay (C)
Significantly more spent on vacations
Long Vacation
3,549
Short Vacation
Mean Spend
Long Weekend
Quick Getaway
1,661
977
Mean Spend 1,925
483
Nights Away from Home
Base Past Year Pleasure/Personal Travelers Note
(Q.5) Still thinking about this last
pleasure/personal trip in the past 12 months that
involved a hotel or motel stay, what was the
total amount you/your household spent on this
last trip? Note Mean excludes 0 Source
PhoCusWrights Canadian Consumer Travel Trends
Survey
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One Third of Last Trip Travel Dollars Purchased
Online
Online Percent of Total Spend, Last Trip
Online Spend
35
Offline Spend
Dont Know/ Refused
Base Total leisure travelers whose last trip was
a long weekend trip Note (T7) Of the total
amount spent on this last trip, how much was
spent online? Note Percentages based on mean
spend including 0 Source PhoCusWrights
Canadian Consumer Travel Trends Survey
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Travel Purchases
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Hotel Air Purchased at More Than Twice the Rate
of Prepackaged Vacations
Past Year Travel Purchase Incidence (1)
Four in ten purchased some type of packaged
vacation in the past year
Base Online travelers who took pleasure/personal
trip(s) in last 12 months Note (T8) In the past
12 months, how many times, if any, have you
purchased/rented/reserved? Note Includes
pre-packaged vacations and combination/self-packag
ed vacations Source PhoCusWrights Canadian
Consumer Travel Trends Survey
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Quebec, Ontario East Significantly Less Likely
to Purchase Air
Past Year Air Travel Purchase Incidence (1)
Average 73
Eastern
Western
Atlantic
Quebec
Ontario
Prairies
Alberta
British Columbia
Base Online travelers who took pleasure/personal
trip(s) in last 12 months Note (T8) In the past
12 months, how many times, if any, have you
purchased air travel? Source PhoCusWrights
Canadian Consumer Travel Trends Survey
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Because Significantly More Likely to Purchase
Pre-Packaged Vacations
Past Year Pre-Packaged Purchase Incidence (1)
Average 31
Eastern
Western
Atlantic
Quebec
Ontario
Prairies
Alberta
British Columbia
Base Online travelers who took pleasure/personal
trip(s) in last 12 months Note (T8) In the past
12 months, how many times, if any, have you
purchased packaged vacations? Source
PhoCusWrights Canadian Consumer Travel Trends
Survey
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Travel Shopping Purchase Behavior
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Leisure Travelers More Reliant on Dual Channels
for Leisure Purchases
Channel Used to Purchase Personal/Pleasure
Travel, Past Year

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Base Online travelers who took pleasure/personal
trip(s) in last 12 months Note (T9) In the past
12 months did you purchase your pleasure or
personal travel exclusively online, exclusively
offline or both online and offline? (T10) What
was the usual method you used in the past 12
months to purchase your pleasure or personal
travel? Note Totals may not equal 100 due to
rounding Source PhoCusWrights Canadian Consumer
Travel Trends Survey
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Quebec More Reliant on Offline While Western Uses
Both Channels
Channel Used to Purchase Personal/Pleasure
Travel, Past Year
Exclusively Offline
Both Online Offline
Eastern
Eastern
Western
Western
Atlantic
Atlantic
Quebec
Quebec
Ontario
Ontario
Prairies
Prairies
Alberta
Alberta
BC
British Columbia
Average 27
Average 48
Base Online travelers who took pleasure/personal
trip(s) in last 12 months Note (T9) In the past
12 months did you purchaser your pleasure or
personal travel exclusively online, exclusively
offline or both online and offline? (T10) What
was the usual method you used in the past 12
months to purchase your pleasure or personal
travel? Note Significant difference vs.
British Columbia, Alberta Prairies
Significant difference vs. Eastern region Source
PhoCusWrights Canadian Consumer Travel Trends
Survey
32
Online is Usual Channel, But Two Thirds of
Offline Users Interested in Online
Usual Channel Future Interest in Purchasing
Personal/Pleasure, Next 12 Months

Usual Channel Used (1)
Level of Future Interest (2)
14
21
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68
Base (1) Online and offline travel purchasers
(2) Those who exclusively or usually purchased
pleasure/personal travel offline in past 12
months Note (T10) What was the usual method you
used in the past 12 months to purchase your
pleasure or personal travel? (T11) How interested
would you be in buying your pleasure or personal
travel online in the next 12 months? Note Totals
may not equal 100 due to rounding Future
interest among past year offline
purchasers Source PhoCusWrights Canadian
Consumer Travel Trends Survey
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Four Web Sites Typically Used Before Travel
Purchase
of Web Sites Typically Used
Mean Canada 4.3 Web Sites UK 4.7 Web
Sites France 4.4 Web Sites Germany 5.1 Web
Sites
Base Those who exclusively or usually purchased
pleasure/personal travel online in past 12
months Note (T12) How many Web sites do you
typically look at before making your pleasure or
personal travel purchase? Note Dont know and
refused responses not included. Mean derived
from 2005 study data Source PhoCusWrights
Canadian Consumer Travel Trends Survey
PhoCusWrights European Online Travel Study Key
Markets (2005)
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Purchase Methods by Travel Component
35
Suppliers Own Individual Components
marketWhile OTAs is Top Choice for Complex Travel
Usual Online Purchase Method, by Component
Base Usual online travel buyers Note (T17)
How do you usually purchase your pleasure or
personal travel online? Note Totals may not
equal 100 due to rounding Combine air, hotel
and/or car to create own package Source
PhoCusWrights Canadian Consumer Travel Trends
Survey
36
Pricing Drives Online Purchasing While Habit
Service Drive Offline Buying
Primary Reasons for Using Buying Method
Base Online travelers Note (T16) What is the
primary reason why you usually purchase your
pleasure or personal travel through this
method? Note Excludes other mentions
representing less than 3 incidence Source
PhoCusWrights Canadian Consumer Travel Trends
Survey
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Online Traveler Demographics
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Online Traveler Age Distribution Parallels All
Canadians Majority 35-44
Age Disposition
Canadian Online Travelers
All Canadians
Base Online travelers Note (S2) Into which age
category do you belong? Note Reflects 20 to 24
year olds for all Canadians only due to method
of tracking Source PhoCusWrights Canadian
Consumer Travel Trends Survey, Statistics Canada
(updated 10/26/06)
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One Third Have 100K Household Income with
Disposable Income to Travel
Household Income (C)
Mean Household Income 82,458
Base Online travelers Note (S5) Which of the
following broad categories best describes your
annual household income? Source PhoCusWrights
Canadian Consumer Travel Trends Survey
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Key Insights

• Customer conversion, not acquisition, is priority
• Canada offers competitors dichotomous opportunity
  to capitalize on market niches
• Spend is not a deterrent to purchasing online,
  therefore long vacations and packages just as
  likely to be purchased online once other hurdles
  (generational, technical) are overcome
• Aggregating independent hotels represents largest
  online opportunity
• Perceived level of customer service will vastly
  improve online purchasing

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Q A