GLOBAL TRAVEL AND TOURISM

Following three years of uncertainty, 2004 was a pivotal year in the recovery of the global travel and tourism industry, according to Euromonitor Research. Global arrivals showed strong growth, up 10*^0 on the previous year to 770 million, while incoming receipts (payments made by international inhound tourists for prepaid goods or services received in the destination country) grew at an annual rate of n\ reaching $621bn (356bn). This was underpinned by sound economic growth and rising prices. The latest figures mark a sharp turnaround for the industry, which suffered in the aftermath of 11 September 2001 and the ensuing glohal economic downturn, the SARS epidemic and war in Iraq. Natural disasters such as the tsunami in December 2004 had a limited impact on global arrivals. This was partly because only a few major tourist areas were affected and tourists continued to travel to help sustain local economies. Global scourge Al-Qaeda's terrorist activities continue to be a real threat to the global travel and tourism industry, as witnessed by the attacks on London's transport network and the bombings in Sharm el-Sheikh, an Egyptian tourist resort, killing both civilians and tourists, in July 2005. Past atrocities provide some insight into the short-term impact on tourist flows. The train bombings in Madrid 2004 had a negligible effect in terms of arrivals, with Spain continuing to be the second most popular destination worldwide (after France), with 53 million
brand strategy September 2005

visitors. The country achieved growth of 2% over 2003-2004. However, the outcome for the UK is not so positive, with the World Travel and Tourism Council (WTTC) expecting recovery in 2007; this may be postponed following the second wave of attacks in London, as consumer confidence is reduced to an all-time low. It is hoped the latest bombings in Egypt will not inflict long-term damage to its tourism economy Asia rebounds strongly Despite the SARS crisis, AsiaPacific was the most dynamic region in terms of arrivals, growing by half hetween 1999-2004 to account for 124 million visitors in 2004. China, Malaysia and Hong Kong quickly rebounded from the crisis, with the latter two almost doubling visitors since 1999. supported by strong marketing campaigns. China continued its steady upward climb, overtaking Italy to become the fourth most visited
Arrivals by region 1999-2004
400 350

country worldwide. By 2008, Euromonitor International expects China to push the US off tbird position, when it hosts tbe Olympic games in Beijing. Businesses that are well positioned to benefit from China's future influx of visitors include Intercontinental Hotels Group and Marriott International; they rank second and third in the Chinese accommodation market. Expansion to the East Eastern Europe's performance was most consistent between 1999-2004. The region benefited from a return to stability after the Balkans conflict, EU accession hy eight countries, the low risk of terrorist attacks, coupled with rising disposable incomes, increased investment in infrastructure and the rise of budget airlines. The region therefore hosts some of tbe most dynamic growth countries: Croatia, Slovenia and Serbia Montenegro. Serbia Montenegro is the fastest growth country for

1999 ^ ^ ^ H H H 1 _ ^ ^ ^ 2004 % period growth 1999-2004

300 250 a) 200 S 150 10 0

3 0

1:
^
-50

H I

H-+
H ^

Source: Euromonitor International

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RESEARCH

inbound arrivals between 1999-2004. These countries are considered to be attractive destinations not just because of their geographical location, cultural heritage and natural beauty, but also because of their affordability. particularly in times of economic uncertainty. The increased activity of lowcost carriers has been critical to the region's growing success, with operators including Wizzair (Poland) and Smartwings (Czech Republic) operating alongside European heavyweights, Ryanair and Easyjet.

for architecture; 'The World' is a property development made up of 250-300 artificial islands. Countries such as Oman and Qatar are also earmarked for success, with many leading global hotel chains, such as Hilton International and Marriott International, planning new four- and five-star openings in the region.

The online travel revolution The global travel and tourism industry has changed significantly since the late 1990s with the emergence of the online travel agent. The importance of this sector is indisputable; it continued to grow Gulf opportunities for hotels aggressively even during the postThe Africa/Middle East region offers huge potential for hotel oper- 11 September slump. Over 1999-2004. ators, where luxury destinations the online sector increased five-fold, such as Dubai (United Arab Emi- reaching $85bn (48.7bn). amountrates) were promoted through ing to 16 "0 of travel retail sales, cheap long-haul deals and sup- with no signs of abating. ported by massive government Expedia has pioneered dynamic investment in infrastructure. packaging, allowing the consumer Dubai received 6.4 million visitors in 2004 and has become a wordclass tourist destination with a plethora of luxury hotels and restaurants. It has raised the bar
Most visited countries worldwide (mlUions of people) Arrivals by county of origin
France Spain 1999

consumers greater price transparency across companies, thereby exposing traditional travel retailers' inflated costs and opening the web up to independents. This is a challenge for traditional travel retailers, already in a downward spiral because of cuts in commissions, and it has prompted further outlet closures in a highly fragmented Industry. Companies have had to innovate. Traditional travel retailers, such as Thomas Cook and Thomson, have developed their own online web platforms and dynamic packaging to counter the threat. The corporate landscape has irrevocably changed with Expedia (owned hy lAC/Interactive Corp) reaching sixth position with 2.8% share of global travel retail sales in 2004. Despite restructuring by traditional travel retailers, their response has not been fast enough to prevent share erosion with leading players. Companies including American Express. Carlson Wagonlit Travel and JTB Corp are losing out; TUI and Thomas Cook are. however, staying ahead.

to have complete flexibility in combining travel components, rather than being constrained by a fixed package. At the same time, many search sites have emerged, allowing

Global travel and online sales 1999-2004

700 600
I Online travel retail I Travel retail

2004 76.1
53-A
-2

73-1

46.8 18.5
273 31.9 25.4 16.8 17-5 19.0 17-1

500 400 300 200 100

U5A
China Italy

34.4 33-5 25.9 20.7 20.1 197

UK
Russia Austria Mexico Germany

19.6

1999

2000

2001

2002

2003

2004

Source; Euromonitor International

Source: Euromonitor International brand strategy September 3005

RESEARCH

Acquisitive behaviour In response to heightened competition in the travel and tourism industry, increased concerns about profitability and the need to exert control over inventories, there has heen a move towards consolidation. The sector has witnessed a multitude of mergers and acquisitions over the past five years. In air transportation, the merger of Air France and KLM catapulted the company into first position, ahead of the global leaders American Airlines and Japan Airlines Co. Others opted for the route of vertical integration, exemplified hy the highly acquisitive Cendant Corp. Its brands now encompass Avis and Budget and global distribution system Galiieo. It has recently acquired the Ramada International. Ebookers. Orbitz and Gulliver's Travel/Octopus Travel brands, marking its entry into the lucrative online sector A positive future Euromonitor International projects that world tourist arrivals will hit one billion by 2009. equating to incoming receipts of $782bn (448bn). The main global threats to the industry include terrorism, natural disasters, rising oil prices and disease epidemics such as Asian bird flu. Ashakeout in the airline industry is afoot with more casualties expected, but the future for low-cost carriers is bright as they push the boundaries of budget travel to longhaul destinations and emerging regions. The relaxation of openskies regulations may provoke further M&As in tbe highly fragmented air transportation sector
brand strategy September 2005

Top hotel groups worldwide (retail value % breakdown) Hotels

Hilton Group 200 35 3-4 2.7 2.5 2-3 1-7 1.4 1.4 0.9 0.9

Top airline companies worldwide (retail value % breakdown) Airlines Air France
AMR UAL

2003
3.8 51

2001:1
5-7 4.9

Marriott international intercontinental Hotels Group Accor Group Starwood Hotels & Resorts Worldwide Best Western international Choice Hotels international Cendant Corp Prince Hotels
Carlson Cos

British Airways Delta Airlines

Japan Airlines

4 3-9

39 3-8 3-3 2.8

3.3
2.7 2.6 2.5 2.1

Deutsche Lufthansa All Nippon Airways Northwest Airlines Qantas Airways

a.5
2-5 2.3

Source: Euromonitor International

Source: Euromonitor International

Travel retail global sbares (% value aoo^) 2.6 2.4

32 TUI 4.0 4.6

American Express Thomas Cook Carlson Wagonlit Travel lapan Travel Bureau lAC/lnteractive Corp MyTravel Others

5-2

74.8

Source: Euromonitof International

There are many opportunities for online travel and tourism, not just for intermediaries but also for direct suppliers as they slowly adapt to tbe challenge, with online sales and industry consolidation continuing apace as seen by the recent acquisition of Lastminute by Travelocity. Technology will continue to be important for differentiation in terms of customer bookings and services, coupled with specialist tailored service for ever-demanding consumers. China will impress when it takes centre stage during the 2008

Olympic games; its importance as an outbound market cannot be underestimated. Key fast-growth countries will include Dubai. Qatar. Venezuela. Croatia, Slovenia and Vietnam, supported by investment in infrastructure and promotion abroad. But travel and tourism will no longer be restricted to the confines of Earth; scheduled space travel from fu-ms such as AERA Corp (US) is on the itinerary from 2006. Caroline Bremner is travel and tourism manager at Euromonitor International. Caroline.Bremner 'it Euromonitor.com
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