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FORECAST REVISIT FOR THE GLOBAL TRAVEL AND TOURISM INDUSTRY

March 2013

INTRODUCTION

GLOBAL OVERVIEW

TOURISM PERFORMANCE

CATEGORIES

CONSUMER TRENDS

REGIONAL FOCUS

© Euromonitor International PASSPORT 3 FORECAST REVISIT FOR THE GLOBAL TRAVEL AND TOURISM INDUSTRY

Disclaimer

Much of the information in this

briefing is of a statistical nature and,

while every attempt has been made

to ensure accuracy and reliability,

Euromonitor International cannot be

held responsible for omissions or

errors.

Figures in tables and analyses are

calculated from unrounded data and

may not sum. Analyses found in the

briefings may not totally reflect the

companies‟ opinions, reader

discretion is advised.

The travel industry confirmed

its vitality in 2012, recording 4%

growth in terms of international

arrivals. Growth is expected to

continue in the next five years

and beyond, driven by the

growing desire to explore the

world among consumers across

the globe, as well as by the rise

of the middle and affluent

classes in the emerging

economies. The fastest growing

categories include online travel,

low cost carriers, medical

tourism, shopping tourism, rail

transport and private

accommodation.

Scope

INTRODUCTION

Travel and Tourism

Tourism flows and spending

Travel accommodation

Transportation

Car rental

Travel retail

Tourist attractions

Health and wellness tourism

http://www.euromonitor.com/



World tourism

confirms its

vitality

World tourism flows achieved another positive performance in 2012, growing by 4% and

surpassing one billion tourist arrivals during the year. Emerging markets once again

generated the most growth, however, tourist arrivals performed well also in advanced

economies.

Steady growth

to continue

The tourism industry is forecast to maintain its vitality in the next five years and beyond,

benefiting from a growing desire to explore the world among consumers across the globe

as well as from the rise of middle and affluent classes in the emerging economies.

A multi-channel

model for hotel

distribution

The hotel sector benefited in 2012 from the growth in international arrivals, as well as in

domestic tourism in countries such as China, Brazil and India. A growing trend in this sector

is the emergence of a multi-channel model where the mobile channel and meta-search

engines play an important role.

Gulf airlines

and LCCs drive

air transport

growth

Air transport saw healthy 5% growth in 2012 in terms of passengers, with the Middle East

achieving the highest increase. The Big Three Gulf airlines drove traffic growth in the

region and achieved the best performance among world airlines. Low cost carriers

continued to be the most successful category.

Online channel

to expand

globally

Online travel continued its rise in 2012, at the expense of traditional distribution channels.

Advanced economies still accounted for the vast majority of online travel sales, but

emerging markets are expected to play a major role in this sector within five years.

Shopping and

medical tourism

grow fast

Online travel and low cost carriers are the most significant success stories among travel

consumers, and will continue to achieve strong performances in the next five years. Other

rising consumer trends include medical tourism, shopping tourism, mobile travel, rail

transport and private accommodation.

Key findings

INTRODUCTION



INTRODUCTION

GLOBAL OVERVIEW

TOURISM PERFORMANCE

CATEGORIES

CONSUMER TRENDS

REGIONAL FOCUS


World GDP is expected to rise by 3.5% in 2013, up from 3.2% seen in 2012. This growth is the result of a

polarised performance which sees decline or stagnation in the Eurozone and in the UK while emerging

countries continue to record healthy growth rates.

The world continues looking to China and, to a lesser extent, India for strong economic growth in 2013. The

other BRIC nations, Brazil and Russia as well as the MENA (Middle East North Africa) region, will also

show economic progress in 2013.

Western Europe will remain mired in uncertainty, with investor and consumer confidence low. A healthier

economic performance is expected in 2014 for the UK (2%) and in 2015 for the Eurozone (1.5%).

The outlook for the US economy is brighter, following the bipartisan agreement to avoid the fiscal cliff and

thanks to the recovery of the real estate industry and to a rise in investment.

The world in 2013: A polarised performance

GLOBAL OVERVIEW

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8

9

2012 2013 2014 2015 2016 2017

% y

ear-

on-y

ear

gro

wth

GDP % Growth in World Regions 2012-2017 World

China

India

MENA

Russia

US

Brazil

UK

Eurozone

Source: IMF World Economic Outlook




Although the peak of the financial crisis

appears to have passed, austerity measures

are hampering GDP growth in the Eurozone,

resulting in social distress and in the risk of a

prolonged stagnation.

The prospects for the US economy look

much rosier in 2013; however, a large public

debt and trade deficit represent threats to

future growth which need to be addressed.

Sustained growth is expected for China in

the next five years, thanks to the

development of the internal market and to

substantial foreign investment.

The emerging economies will need to shift

their focus onto intra-regional and domestic

markets in order to make up for the weaker

demand from traditional sources in Western

Europe and the US.

The economic outlook is mixed for the

Middle East, with healthy growth expected in

the next five years for oil exporters, while oil

importers remain under strain.

What lies ahead?

GLOBAL OVERVIEW

Eurozone woes continuing

Fiscal threat for the US

Sustained growth in China

Mixed outlook for the Middle East

Emerging markets looking intra-

regionally



INTRODUCTION

GLOBAL OVERVIEW

TOURISM PERFORMANCE

CATEGORIES

CONSUMER TRENDS

REGIONAL FOCUS


The World Tourism organisation (UNTWO)

celebrated the world‟s billionth international

arrival in December 2012, a world record

highlighting the ongoing vitality in tourism.

Global tourism performance is being driven

by emerging markets, notably the BRICs.

Developed countries are, however, also

seeing continued growth in arrivals,

benefiting from growing outbound flows

from emerging markets.

Global arrivals are predicted to continue

their growth in the next five years, matching

GDP increases, as travel continues to

illustrate its popularity. Average spend will,

however, remain stagnant over the same

time period, as a result of continuing caution

and hesitancy amongst European travellers.

Asia Pacific is home to some of the key

countries expected to record significant

growth in arrivals over the next five years,

including Vietnam, Myanmar, Uzbekistan

and the Philippines.

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2012 2013 2014 2015 2016 2017

% y

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Global Economic and Tourism Performance: % Growth 2012-2017

Global GDP International arrivals

Average spend per arrival

Arrivals and spending: Tourism shows vitality

TOURISM PERFORMANCE




Arrivals to Western Europe continue to record growth below the world average, although the performance

in terms of both inbound tourism flows and expenditure was still positive in 2012.

Eastern Europe achieved strong growth of 8% in terms of arrivals in 2012, driven by intra-regional flows.

Growth is expected to be less robust but still healthy from 2013 onwards.

Asia Pacific is showing good growth, although a slight tapering off is expected over the forecast period.

The Middle East and Africa recorded the worst performance among the world regions in 2012, due to

political instability. Its performance is expected to improve in the next five years, as stability returns.

North America is predicted to maintain growth at around 4%, with the US simplifying visa processes to

entice visitors from the fast growing BRICs. Other regions showing healthy growth include Latin America

and Australasia, both of which are benefiting from growing flows from emerging markets.

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2012 2013 2014 2015 2016 2017

% y

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Arrivals by Region % Growth 2012-2017

Asia Pacific

Australasia

Eastern Europe

Latin America

Middle East and Africa

North America

Western Europe

Regional arrivals: Asia Pacific to lead

TOURISM PERFORMANCE




The BRIC nations, with their rapidly growing middle and

affluent classes, are expected to be key drivers of growth

for many tourism destinations in the next five years.

China and India are leading the charge, with CAGRs of

above 10% predicted for the next five years in terms of

both outbound trips and expenditure. Outbound tourism

flows from both countries are mainly to other Asian

destinations. The US is the leading non-Asian destination

for Chinese travellers, followed by Australia and France.

For Indian travellers, the UAE is the favourite non-Asian

destination, followed by the US.

Neighbouring Ukraine and Finland are the main

destinations for Russian travellers. However, Turkey is by

far the favourite destination for package holidays,

accounting for 28% of organised trips. In the last two

years, Turkey and Greece were aided by the decline of

packaged holidays to Egypt, due to political instability in

the country, with Greece replacing Egypt in second place.

Whilst Brazil is showing the least dramatic growth in

spending of the BRICs, average spend for the Brazilian

tourist is high, with shopping abroad a popular pastime,

due to high import taxes at home, and a major driver of

departures to the US, France and Italy.

0 2.5 5 7.5 10 12.5 15

Brazil

Russia

India

China

%CAGR 2012-2017

Outbound Tourism Trips and Expenditure in BRIC Countries

Outbound Expenditure Outbound trips

Outbound tourism flows: Everyone is chasing the BRICs

TOURISM PERFORMANCE

1. US 2. Argentina 3. Uruguay

Brazil

1. Hong Kong 2. Macau 3. South Korea

China

1. Singapore 2. Thailand 3. UAE

India

1. Ukraine 2. Finland 3. Kazakhstan

Russia

BRIC‟s Top Three Outbound

Destinations 2012




Once again, China, Russia and India are expected to

lead among those countries recording absolute

increases in outbound tourist trips of over one million in

the next five years. Rising disposable incomes in these

emerging economies, combined with the relaxation of

visa requirements, have opened up travel to more

consumers.

China, in particular, is forecast to see an increase of

almost 47 million outbound trips over the next five

years.

The expected stronger performance of the US economy

is forecast to drive a substantial 8 million growth in

American outbound tourists over the 2012-2017 period.

Turkey is slowly creeping up the rankings to fifth place

thanks to a stable economy and expanding flight

options encouraging travel, with trips to Greece a

growing trend.

Newcomer Kazakhstan enters the list, with an increase

of over 3 million travellers predicted over the next five

years. A strong economy, boosted by oil revenues and

natural resources, is aiding the development of the

country and enabling its citizens to travel.

0 5 10 15 20 25 30 35 40 45 50

UK

UAE

Australia

Kazakhstan

France

Canada

Switzerland

Japan

Germany

Malaysia

Taiwan

Turkey

US

India

Russia

China

Million departures

Top Countries for Outbound Departures Forecast Absolute

Increase 2012-2017

The million+ departure club

TOURISM PERFORMANCE




Business travel has recorded a healthy rise since the downturn across the globe in 2009 , to reach 212

million arrivals in 2012. Western Europe is the world leader for international business arrivals, with a 37%

volume share, followed by Asia Pacific, with a 29% share.

2013 is predicted to see a 5.9% rise in global business travel spend, according to the Global Business

Travel Association (GBTA).

Business travel has changed, with many companies shifting to video-conferencing for the troubled

established markets in Europe, and spending instead on travel to emerging markets, where growth is more

certain.

In 2012, there were 1.9 billion domestic business trips worldwide, up by 7% on 2011. Asia Pacific is the

world leader in domestic business travel, with a 64% share, followed by North America, with an 18% share.

Business Arrivals in 2012 by World Region

Western Europe

Asia Pacific


Eastern Europe

North America

Latin America

Australasia

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2009 2010 2011 2012 2013 2014 2015 2016 2017

Global Business Arrivals % Growth 2009-2017

% year-on-year growth

Business travel: Back on the road

TOURISM PERFORMANCE



INTRODUCTION

GLOBAL OVERVIEW

TOURISM PERFORMANCE

CATEGORIES

CONSUMER TRENDS

REGIONAL FOCUS


The hotel sector is expected to achieve healthy growth globally in the next five years, driven by increased

demand in emerging countries and a positive performance in the US. Western Europe is expected to record

more moderate growth in terms of value sales, due to intra-regional travellers increasingly turning to budget

options. International hotel chains continue to look to corporate guests for revenue growth. Domestic

business travel in China, India and the US is thriving, and assisting hotels to increase revenues.

A rush of new websites and mobile apps are leading to the clear emergence of a multi-channel model for

hotel bookings. Last minute hotel bookings are now much easier, thanks to apps such as those of Hotel

Tonight , Orbitz, Booking.com and Expedia, which cater to a traveller‟s specific city location, and often

provide discounted rates for a same day booking. Mobile apps are expected to account for two-digit shares

of sales for the main online travel agencies in 2013.

Hotels: Embracing technology and innovation

CATEGORIES

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Asia Pacific Middle East Africa Latin America Eastern Europe North America Australasia Western Europe

%C

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Hotel Value Sales % CAGR by World Region 2012-2107




Global pipeline development for hotels is at full force, with leading hotel chains expected to add over

700,000 rooms in the next five years. The focus for some leading groups, such as InterContinental Hotels

Group (IHG), Hilton, Marriott and Accor, remains their domestic markets in the US and Europe.

However, other hotel chains are firmly focused on the developing countries. With 113,900 rooms in the

pipeline, Wyndham has a strong focus on international markets like China, India and Brazil. In Asia Pacific,

Wyndham plans to open five new Ramada hotels in China by 2013, and build 35 new Howard Johnson

hotels in India by 2017. Although from a small base, four Chinese hotel chains recorded the fastest

absolute value growth globally in the last five years: 7 Days Group Holdings Ltd, China Lodging Group Ltd,

Homeinns Hotel & Management Co Ltd and Shanghai Motel Chain Co Ltd.

Hotels: Strong pipeline for leading brands

CATEGORIES

Total Number of Rooms in the Pipeline for Leading Hotel Chains 2012

Hotel Number of rooms in the pipeline Pipeline focus

IHG 167,485 Americas (45%)

Hilton 161,177 Americas (approximately 63%)

Wyndham 113,900 International markets (53%)

Starwood 95,000 Asia Pacific (64%)

Marriott 90,000-105,000 North America (55%)

Accor N/A Europe (46%)

Hyatt 38,000 International markets (70%)




2012 saw a 5% rise in the number of air passengers worldwide. The Middle East was the best performing

region in the air sector in terms of traffic in 2012, followed by Latin America, Africa and Asia Pacific.

China and Brazil recorded the highest growth in terms of domestic air traffic, of 9.5% and 8.6%,

respectively.

The Big Three Gulf airlines (Emirates, Etihad and Qatar Airways) were the players faring best – together

with low cost carriers – in 2012. They have recently been building networks with other airlines to enlarge

their reach. American Airlines has sealed a code-sharing deal with Qatar Airways, whilst the latter is also

exploring a share in Czech Airlines. Etihad now has a stake in Air Berlin, opening up access to the German

airline‟s large European network. The Big Three Gulf airlines may be involved in more acquisitions in other

world regions in the next five years in order to expand further.

Air transport: Middle East leads growth

CATEGORIES

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Asia Pacific Eastern Europe Latin America Middle East andAfrica

Australasia North America Western Europe

%C

AG

R

Air Value Sales % CAGR by World Region 2012-2017




Low cost carriers were once again the air category to achieve the best performance in 2012, growing

globally by 8% in terms of constant value sales.

In order to face competition from low cost airlines on medium and short haul routes, a number of schedule

airlines are currently embracing a business model which is more similar to the low cost one, either by

launching a low cost brand or by offering cheaper fares. Moves in this direction include Air France‟s Mini

fare and low cost brand HOP!, Lufthansa‟s no-frills Germanwings brand, Iberia‟s Iberia Express low cost

brand, Air Canada‟s Rouge low cost brand and Alitalia‟s new cheaper fares policy.

Air transport: Low cost carriers‟ success story continues

CATEGORIES

0 10 20 30 40 50 60 70 80

Malaysia

Turkey

USA

India

Indonesia

Italy

China

Philippines

Absolute growth in passenger numbers (million)

Low Cost Carriers Forecast Absolute Increase in Passengers 2012-2017




The US and Western Europe remained the

largest online travel markets in 2012, amounting

to US$185 billon and US$170 billion, respectively,

or 38% and 35% of global online travel sales.

They are also the markets expected to grow least

over 2012-2017, as they approach maturity.

The emerging economies have yet to embrace

online travel fully, but they have significant

potential for growth over the next five years.

China, India, Russia and Brazil are all expected to

become major online travel markets, with healthy

online travel value CAGRs of between 10% and

20% over 2012-2017.

0

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15

20

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India China United ArabEmirates

Russia South Africa Brazil Western Europe USA

%C

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Online Travel Value Sales % CAGR in Key Markets 2012-2017

Note: the charts refer to online value sales of transportation, travel accommodation, car rental

and tourist attractions through intermediaries and direct suppliers.

Online travel: Emerging markets catching up

CATEGORIES

Online Travel Value Sales by World Region 2012

North America

Western Europe

Asia Pacific

Australasia

Latin America

Eastern Europe





2012 saw several significant developments in online travel,

which had a significant impact for the whole travel industry.

The success of mobile travel resulted in smartphones and

tablets becoming an increasingly important sales channel, as

well as customer service tools.

The inroads made by technology companies in the travel

market was a second important development in 2012. In

particular, Google‟s position in online travel distribution is

becoming increasingly strong, with the launch of the Google

Flight Search and Hotel Finder meta-search engines, and it is

starting to be perceived as a threat by travel retail companies.

Meta-search engines, such as Kayak and Booking Buddy, are

growing in importance, due to consumers increasingly

searching the web for travel deals.

Moves by technology companies were addressed by the

largest online travel agencies looking for new traffic sources.

Priceline bought Kayak and Expedia acquired a majority stake

in Trivago, two meta-search engines.

Traditional travel operators are increasingly focusing on online

sales, including companies such as American Express, TUI

and Thomas Cook. Another important development is travel

retailers looking to differentiate their products in an

environment where all players have a very similar offer.

Online travel: A fast changing environment

CATEGORIES



INTRODUCTION

GLOBAL OVERVIEW

TOURISM PERFORMANCE

CATEGORIES

CONSUMER TRENDS

REGIONAL FOCUS


0

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Medical Tourism Low Cost Carriers Online Travel Rail Travel Areas of NaturalBeauty

Tourist Receipts onShopping

PrivateAccommodation

Global Fastest Growing Travel Categories: Value Sales % CAGR 2012-2017

% C

AG

R

Medical tourism remains a success story among travel categories, with continued strong growth expected

over the next five years. Consumers are keen to obtain savings on medical treatments, and have increased

confidence in travelling to medical tourism destinations such as India, Thailand and Brazil.

Rail travel continues to grow in value globally, with high speed trains often competing successfully with

short haul flights. China upped the stakes in December 2012 with the opening of a high speed line between

Beijing and Guangzhou, shortening the 2,298 km journey time to eight hours.

National parks and areas of natural beauty are growing in popularity, with consumers seeking a “back to

nature” or green tourism experience.

Private accommodation is also expected to gain ground in the next five years, driven by travel websites for

peer-to-peer sales such as Airbnb , Homelidays and HomeAway.

Low cost carriers, online travel and shopping tourism are other major drivers of growth for the tourism

industry.

Growth categories to watch

CONSUMER TRENDS




Shopping is becoming increasingly important

for the travel industry and is today a major

reason for travelling for large numbers of

tourists.

BRIC nationals are avid shoppers, and the

shopping tourism trend is being driven by their

strong preference for status symbol products

and brands, as well as high import taxes for

foreign luxury products. Brazilians, for

example, are the biggest tourist spenders in

New York City, where goods are often half the

price they are at home.

The US remains the top location for incoming

shopping tourism receipts, with China in

second place and Hong Kong third. France, in

fifth place, is a favourite destination for luxury

shopping, especially for BRIC travellers.

China is leading growth in outbound shopping

spending, with a 15% CAGR forecast over

2012-2017. Asia Pacific countries are

predicted to dominate shopping tourism

growth, with India, Vietnam and Taiwan all

showing significant increases.

0 3 6 9 12 15

Taiwan

Vietnam

Kenya

India

China

%CAGR 2012-2017

Leading Countries for % CAGR in Outbound Tourism Expenditure on Shopping 2012-2017

0 3 6 9 12 15

France

Spain

Hong Kong

China

US

US$ billion

Leading Countries for Incoming Tourism Receipts on Shopping 2012

Shopping tourism: Driven by the BRICs

CONSUMER TRENDS




The introduction of smartphones represents one of the most significant technological developments of

recent years, and it is having a major impact on the travel industry, due to the mobile nature of travellers.

In the mobile travel era, travellers expect real time answers wherever they are and at any time, before,

during and after the trip. These include booking capabilities when on the go.

Moreover , as a result of the intersection between the mobile and social dimensions, and of the creation of

geo-social media – aware of users‟ geographical location – travellers expect a higher level of customisation

of services based on their stored preferences and current location.

Travel companies need to embrace the SoLoMo (social local mobile) trend fully, integrating it in their

strategies and business models in order to benefit from the increasing share of business generated by the

new mobile and social consumers.

The SoLoMo trend: Reshaping consumers in the travel industry

CONSUMER TRENDS

Travel company

Reputation

management

Apps

Mobile

website

Geo-social

media

Mobile

bookings

Mobile alerts

and services




High level of comfort

Top notch service

Status symbol

Privacy guaranteed

Exclusive locations

Luxury travel recorded a significant recovery after the decline experienced in 2009, with luxury hotels and

premium air travel growing by between 5 % and 10% per year over the 2010-2012 period.

Advanced economies still represent the main source of luxury travel worldwide. Luxury travel in these

countries is expected to grow at a 4% constant value CAGR over the 2012-2017 period .

Emerging markets are still much less important for luxury travel; however, they are expected to record the

fastest growth in this category, at a 10% constant value CAGR over the 2012-2017 period.

Luxury travel is evolving, with experiential travel and sustainability becoming increasingly important,

especially in the traditional luxury travel markets, while the classic model of luxury travel is still valid in

emerging markets. However, in some emerging markets, such as Brazil and, to a lesser extent, China, the

new model of luxury travel is also gaining ground.

Luxury travel: From status symbol to experiential travel

CONSUMER TRENDS

Classic model of luxury travel New model of luxury travel

Experiential travel

Authentic experiences

Ecotourism

Multi-generational

Voluntourism

Sustainability




Sustainable tourism is gaining momentum, becoming increasingly important for most businesses,

governments and consumers.

Europe leads the way in sustainability. Scandinavian countries feature strongly in the World Economic

Forum (WEF) sustainable ranking, with Sweden leading the world.

Price, quality, brand and convenience will continue to drive consumers‟ choices, but sustainability will

become a more influential factor in consumers‟ decision making when they choose a product.

LOHAS (“lifestyles of health and sustainability”) is increasingly being recognised as a major new consumer

segment. According to the World Travel Monitor Forum, those interested in LOHAS could be the tourism

industry's new premium customers.

Switzerland is wooing the LOHAS target group with eco-hotels, car-free alpine villages and a growing

number of “biosphere reservations”. Many of the top sustainability countries are also in Europe, with

Scandinavia leading the way, albeit with a reputation for expensive stays.

The importance of sustainable tourism

development for African national parks and

local communities was highlighted in the

Arusha Declaration on Sustainable Tourism in

African National Parks, signed in October 2012

at the first Pan-African Conference on

Sustainable Tourism in African National Parks,

organised by the UN World Tourism

Organization (UNWTO).

Sustainable tourism: The rise in social responsibility

CONSUMER TRENDS



INTRODUCTION

GLOBAL OVERVIEW

TOURISM PERFORMANCE

CATEGORIES

CONSUMER TRENDS

REGIONAL FOCUS


Russian inbound tourists showed solid growth in 2012, up by 13% from 2011 to reach 26 million trips.

However, for a country with vast cultural attractions and tourism potential, the number of inbound visitors

remains disproportionally low, once neighbouring countries are discounted.

Cultural and economic connections with neighbouring countries and former Soviet republics represent the

main driver of growth, while tourism from important outbound markets such as Western Europe and the US

still needs to take off.

Major sports events planned in the country in the next few years may represent important opportunities to

showcase Russia and its tourist attractions to a global audience. These events include the World Athletic

Championships in Moscow 2013, Winter Olympic Games in Sochi 2014, and the FIFA World Cup in 2018.

Russia: Inbound tourism still to develop its potential

REGIONAL FOCUS

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Ukraine Kazakhstan Uzbekistan Finland Azerbaijan Moldova Poland Belarus China Tajikistan Germany

‟000 t

rips

Number of Arrivals to Russia from Top Source Countries 2012/2017

2012 2017




The main goal of a federal

programme launched in 2011, called

Domestic and Inbound Tourism

Development 2011-2018, is to

increase the number of inbound

arrivals in Russia six-fold by 2018,

with a 150% increase in the number

of domestic trips also targeted under

the programme.

In order to achieve these ambitious

goals, the Russian government is

set to invest RUB96 billion from

state funds, with a further RUB25

billion invested by regional and

municipal governments and RUB211

billion expected to be attracted from

private funding sources. The

majority of these funds will be

invested in developing Russia‟s

travel and tourism infrastructure, as

well as undertaking promotions

abroad.

Russia: Issues hampering inbound tourism growth

REGIONAL FOCUS

Bureaucracy in

obtaining visa

Image overseas

Undeveloped

infrastructure

Safety concerns

Quality of tourist

services




With rising disposable incomes and a relatively stable

economy, Russian outbound travellers are growing

year-on-year, up by 9% in 2012 compared to 2011.

The traditional destinations of Ukraine, Finland and

Kazakhstan remain the most popular, due to proximity

and shopping trips, as well as friends and family visits.

However, the top package holidays destinations are

significantly different and are growing in diversity.

Turkey remains the most popular by far, accounting

for 28% of the total. It has benefited in the last two

years from the decline of trips to Egypt due to political

instability in the country. Package holidays to Greece

recorded healthy 25% growth in 2012, placing Greece

as the second favourite destination for organised trips

from Russia. Strong growth was also recorded in 2012

by organised trips to Spain, Bulgaria, Italy, Cyprus,

Croatia and Thailand.

Many countries are trying to attract tourists from

Russia by reducing visa and administrative barriers.

Croatia introduced visa-free travel for Russians from

April to October 2012, while Mexico implemented an

online visa procedure for Russians.

Russia: Outbound travellers exploring new destinations

REGIONAL FOCUS

Country Breakdown of Russian Package Holidays Value Sales 2012

Turkey Greece Egypt Spain Bulgaria

Italy Thailand Cyprus Croatia Other

Source: Association of Tour Operators of Russia (ATOR)




Russian consumers are actively switching from traditional travel retail outlets to the online channel to book

flights, hotels, car rental services and holiday packages. The increasing number of internet users in Russia

and the growing trust in online purchases are important drivers of online travel‟s positive performance. This

has created favourable conditions for the development of online travel retailers and is, moreover, boosting

individual travel over group trips.

Russians actively use a wide variety of local and international social media websites, such as VKontakte,

Odnoklassniki, YouTube, Facebook and Twitter. Social media are becoming an increasingly important tool

for travel and tourism companies to communicate with their customers and organise promotional activities.

Air transportation is the most popular online travel category in terms of actual sales. It recorded 20% value

sales growth in 2012, to reach RUB87 billion.

Russia: Robust performance for online travel

REGIONAL FOCUS

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2012 2013 2014 2015 2016 2017

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Online Travel Categories % Growth in Russia 2012-2017

Air

Hotel

Car Rental

Travel Retail




The Russian rich continue to increase in number, although the growth rate is slowing. By 2017, over 1.7

million households in Russia will have an annual disposable income of over US$100,000.

However, middle class consumers in Russia will become increasingly important over the forecast period,

given their sheer size and the rate at which their real incomes are rising. By 2017, nearly 40% of all

Russian households will have an annual disposable income of over US$25,000.

For the Russian elite, travel is no longer a luxury, but a fundamental part of their lifestyle. For new middle

class consumers, travel abroad is a relatively new concept, and for many a first trip abroad will be to a

relatively familiar neighbouring destination.

Russia: The rise of the middle classes

REGIONAL FOCUS

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

% o

f R

ussia

n H

ousehold

s

% of Russian Households with Annual Disposable Income over US$25,000 2007-2017

Average Price for Package Holidays in Russia in 2012

Below US$600

US$601-1,500

US$1,501-4,000

Above US$4,001

Source: Association of Tour Operators of Russia (ATOR)




Rising incomes in recent years have also driven the birth of more children. However, the fertility rate, 0f 1.7

per 1,000 population, remained below the replacement rate of 2.1 in 2012.

Increasing awareness of the influences of bad habits on health, a growing interest in healthy food and

better accessibility to health services have all been recognised as having an effect on the lifestyles of the

older population, which is predicted to grow substantially by 2020.

Russia's population will rise from 143 million in 2009 to 145 million in 2020, and, with a total annual

disposable income of US$3.4 trillion in 2020, there is enormous potential for expanding consumer

spending.

Russia: Changing population demographics

REGIONAL FOCUS

Russian Population Age Segmentation 2010-2020: '000 people

2010 2015 2020 2010-2020 % growth

Babies/Infants (0-2 years) 5,056 5,168 4,873 -3.6

Kids (3-8 years) 8,557 9,973 10,371 21.2

Tweenagers (9-12 years) 5,136 5,856 6,874 33.8

Teens (13-19 years) 11,260 9,263 10,066 -10.6

People in their 20s (20-29) 24,514 20,818 15,385 -37.2

People in their 30s (30 – 39) 20,864 22,809 24,169 15.8

Middle-aged Adults (40-64 years) 48,244 48,400 47,463 -1.6

Older Population (65+ years) 18,155 18,220 19,969 10.0




Inbound tourism to China is expected to continue its growth in the 2012-2017 period, recording a 2.3%

CAGR, slightly higher than the 2.0% CAGR recorded in the 2007-2012 period.

Hong Kong is by far the largest source of arrivals to China, accounting for 27 million trips, that is 47% of the

57 million total arrivals recorded in 2012. Macau and Asia Pacific countries, such as Taiwan, South Korea

and Japan, are other major sources of inbound tourism flows.

Russia, the US, Australia and Western European countries are still lagging behind in terms of trips, but are

expected to record significant growth in the next five years.

China: International arrivals to continue to rise

REGIONAL FOCUS

0

5,000

10,000

15,000

20,000

25,000

30,000

Hong Kong

‟000 t

rips

Arrivals to China from Hong Kong 2012/2017

2012 2017

0

1,000

2,000

3,000

4,000

5,000

Taiwan Macau SouthKorea

Japan Russia USA Mongolia Philippines Malaysia

‟000 t

rips

Arrivals to China from Other Top Source Countries 2012/2017

2012 2017




The number of outbound trips from China enjoyed strong growth between 2007 and 2012, recording an

11% CAGR. Growth is expected to be even stronger in the 2012-2017 period reaching a 15% CAGR.

This increasing outbound demand is fuelled by ongoing economic growth, rising disposable income levels

and the growing desire to travel abroad. Overseas trips are seen as a reward for hard work throughout the

year, as well as being an important middle class marker.

Hong Kong and Macau lead the ranking of outbound trips, followed by other Asia Pacific destinations, such

as South Korea, Thailand and Taiwan. However, non-Asian destinations are gaining ground. European

destinations, in particular, are expected to grow by over 20% per year in the next five years, while strong

growth will also be recorded by the US, Australia, New Zealand and South Africa

China: Outbound trips seeing double-digit growth

REGIONAL FOCUS

0

20,000

40,000

60,000

80,000

100,000

120,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Outbound Trips from China 2007-2017

„000 t

rips

Country Breakdown of Chinese Outbound Trips in 2012

Hong Kong

Macau

South Korea

Thailand

Taiwan

Singapore

Malaysia

USA

Vietnam

Other




Hotel value sales recorded healthy growth in China in the 2010-2012 period, driven by the rise of the

inbound and, in particular, the domestic tourism market. Growth is expected to continue to be steady in the

next five years.

Despite a rush of luxury hotel building throughout the country, the Chinese hotel industry remains

dominated by budget hotels. Over 90% of properties are budget, with luxury hotels accounting for a mere

2.6% of all stock. In terms of value sales, luxury hotels accounted for 21% of total hotel sales in 2012, while

budget hotels accounted for 55%; however, the luxury segment is expected to achieve the strongest growth

over the 2012-2017 period.

Mid-priced hotels are fighting a battle against luxury and budget hotels, which are successfully acquiring

market share at their expense, with guesthouses similarly affected by the popularity of budget outlets.

China: Luxury and budget hotels gain ground

REGIONAL FOCUS

0

100

200

300

400

500

600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Hotel Sales in China 2007-2017

RM

B b

illio

n

Chinese Hotel Value Sales by Price Platform in 2012

Luxury

Mid-Priced

Budget




China currently has over half a billion internet users, corresponding to over one third of the total Chinese

population, and more than double the number in the US. Internet penetration among Chinese households

increased to 42% by the end of 2012, up from only 4% in 2000. Despite this, most Chinese travellers

continue to book their travel offline, using the internet as a research tool rather than a booking one.

A number of large players, notably internet giants Tencent and Baidu, are positioning themselves to seize a

slice of the increasingly competitive online travel market. The online travel retail market has been very

dynamic in China in recent years, due to increasing competition among the largest players, such as Ctrip,

Qunar and Elong. Flash sales company Tuangou is also playing a significant role in this market.

Rapid growth is also expected in m-commerce, with China overtaking the US in 2011 to become the

world‟s largest smartphone market in terms of units sold.

China: Internet giant

REGIONAL FOCUS

0

100

200

300

400

500

600

700

800

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Number of Internet Users in China 2007-2017

Mill

ion p

eople

0

20

40

60

80

100

120

140

160

2012 2013 2014 2015 2016 2017

Hotels Air Travel Retail

Online Travel Sales in China

2012-2017

RM

B b

illio

n




Rising levels of disposable income have led to the rise of a large middle class in China. By 2017, 14% of

Chinese households, that is 64 million households, are expected to reach an annual disposable income

above US$25,000. This steady growth of disposable incomes is having a very significant impact on

consumption, with an especially sharp rise in discretionary goods and services, benefiting industries such

as fashion, automotive and travel. Initially, wealth was concentrated in the first-tier cities of Beijing,

Shanghai, Tianjin, Guangzhou and Shenzhen. However, it is now spreading to second tier cities, such as

Xi‟an, Chengdu, Zhengzhou, Wuhan and Chongqing.

Social changes in China, particularly in regards to the participation of women in further education and

white-collar and professional employment, have significantly affected consumer behaviour. Demand for

clothing and cosmetics, the rise in holiday-taking and other leisure activities, and increased spending on

premium goods in the babies and infants market can be largely attributed to the changing socio-economic

situations of women in modern China.

China: Social changes deeply affect consumption

REGIONAL FOCUS

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

% o

f C

hin

ese h

ouseh

old

s

% of Chinese Households with Annual Disposable Income over US$25,000 2007-2017




Value for Money

• Many Chinese travellers are looking for value for money. Often, they want to visit as many countries as possible in a European trip in order to make the most of expensive visas.

• They are very price sensitive and appreciate hotel deals, as well as cooking facilities in travel accommodation outlets.

Travel as Status Symbol

• Overseas travel is now a key focus for the middle class Chinese consumer, who sees it as a powerful status symbol.

• The buying of branded luxury goods is a key shopping experience for Chinese tourists. Whether bought for gifts or as souvenirs, they are closely associated with status and prestige, with popular destinations for luxury shopping being New York, Paris, London and Milan.

Arts and Cultural Attractions

• Culture is an important aspect of outbound travel, with popular destinations reflecting both new and old cultural references

• Classic cultural destinations, such as Paris, Rome, London and Barcelona, as well as Mozart‟s birthplace in Austria and Shakespeare‟s birthplace in England are ever popular. Film locations are also influential, as well as music video locations for Chinese pop stars.

China: Key factors influencing long haul travel

REGIONAL FOCUS




Brazil is expected to record strong growth in arrivals during the forecast period, and welcome a total of 7.6

million tourists in 2017. Its cultural pluralism and diversity works as a strong driver of growth, due to the

growing desire for authenticity and experiential travel, a rising trend in today‟s tourism industry.

Visitors to Brazil are predominantly driven by leisure purposes, with the leading source markets being

neighbouring Latin American countries, the US and Western Europe.

In the next few years, the country is hosting two of the world‟s most prestigious sporting events – the 2014

FIFA World Cup and the 2016 Olympic Games – which are known to increase international exposure as

well as potentially the number of arrivals in the years preceding, during and following these events.

Brazil: Inbound tourism taking off

REGIONAL FOCUS

0

500

1,000

1,500

2,000

2,500

Argentina USA Uruguay Germany Italy Chile France Spain Paraguay Portugal

„00

0 t

rips

Top Source Countries for Arrivals to Brazil 2012/2017

2012 2017




Thanks to a strong currency and a growing economy, Brazil has in recent years been a rapidly rising

source market for international departures. Given the high import tariffs in the country, foreign goods are

significantly cheaper abroad, so many Brazilians travel to shop.

The US is the most popular outbound destination for Brazilians, having overtaken Argentina in 2009.

Tourism flows to the US are predicted to show steady growth in the next five years, driven by demand for

shopping tourism. European countries are key destinations for Brazilian long haul trips, due to cultural

connections, as well as artistic attractions and shopping opportunities. Intra-regional travel to Argentina,

Uruguay and Chile is also expected to grow in the 2012-2017 period.

Volatile exchange rates and rising fuel prices, which have led to higher air fares and additional fuel

surcharges, may prove barriers to growth in departures during the forecast period.

Brazil: Where are Brazilians travelling to?

REGIONAL FOCUS

0

500

1,000

1,500

2,000

2,500

2012 2013 2014 2015 2016 2017

‟000 t

rips

Top Destinations for Brazilian Outbound Tourists 2012-2017

USA

Argentina

Uruguay

France

Spain

Portugal

Chile

Italy

Germany




Total investment within travel accommodation is

expected to surpass R$2.4 billion in preparation for the

2014 FIFA World Cup, with over 100 new hotels being

built in 2013 and 2014 in the 12 cities hosting the

matches.

Most Brazilian cities suffer from a limited supply of hotel

rooms. This presents huge opportunities for ongoing

and sustained investment in new travel accommodation

facilities, particularly in the face of growing inbound

tourism and, especially, domestic tourism demand.

Brazil: Hotel openings boom

REGIONAL FOCUS

Key Hotel Openings in Brazil 2013/2014

Hotel City Date

Sheraton da Bahia

Hotel Salvador de Bahia February 2013

Sheraton Reserva

do Paiva Hotel

Recife

March 2014

Hilton Barra Rio de Janeiro June 2014

Fairfield Inn Porto Alegre 2014

0

10

20

30

40

50

60

70

80

90

100

2013 2014

Brazil Hotel Pipeline: New Hotels 2013-2014

hote

l outle

ts

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2013 2014

Brazil Hotel Pipeline: Additional Hotel Rooms 2013-2014

Hote

l ro

om

s




Brazil will be host to the FIFA World Cup in 2014 and the

Summer Olympics in 2016. These events are expected to

favour the take off of the country as a tourism destination.

However, in the past, major sports events sometimes

resulted in a decline in inbound tourism due to the

“displacement effect”, that is by travellers not interested in

the event preferring not to visit the country, fearing

overcrowded hotels and transportation, and higher prices.

For example, in the year of the Olympic Games in Beijing

and Athens, visitor numbers to China and Greece declined,

while in London 2012 they stagnated.

Nonetheless, the impact of mega sport events on inbound

tourism is generally considered positive. The improvement

in travel infrastructure has a positive impact on tourism in

the longer term. In addition, during these events, the

country and the cities hosting the events are in the spotlight

worldwide, and can use this opportunity to display the

beauty and attractions of the country, which can have a

durable positive impact on tourist arrivals. Two successful

examples of events improving the image of the destination

and increasing tourism flows are the Olympic Games in

Barcelona in 1992 and the FIFA World Cup in South Africa

in 2010.

Brazil: World Cup and Olympic Games effect

REGIONAL FOCUS

0% 5% 10% 15%

South Korea 2002

Japan 2002

Germany 2006

South Africa 2010

Country Arrivals % Growth in the Year of FIFA World Cups

% growth

-6% -3% 0% 3% 6% 9% 12%

Sydney 2000

Athens 2004

Beijing 2008

London 2012

Country Arrivals % Growth in the Year of the Olympic Games

% growth




Brazil is expected to be one of the largest consumer markets and a leading global economy by the year

2020. Brazilian consumers are becoming more sophisticated, which is expected to boost demand for

services and high quality products.

If the last decade has been about the expansion of the Brazilian middle class, the coming decade is

expected to be about the ramifications of the country‟s ageing population. The old-age dependency ratio is

set to rise from 10.5% in 2012 to 13.1% in 2120. Higher incomes, better healthcare and improved diet are

leading to higher life expectancy, and Brazil will, for the first time in its history, have a substantial number of

elderly and middle-aged consumers. This is expected to result in more spending on healthcare products

and services.

Brazil: Increasingly sophisticated consumers

REGIONAL FOCUS

0

5

10

15

20

25

30

35

40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

% o

f B

razili

an h

ousehold

s

% of Brazilian Households with Annual Disposable Income over US$25,000 2007-2017




Brazil ranks first in Latin America and fifth in the world in terms of the number

of mobile phone subscriptions and Internet users. As a result, the country is

one of the fastest growing social media markets. According to comScore, more

than 46 million Brazilians were online in 2012, and 97% of those used social

media.

Euromonitor International estimates broadband penetration (including fixed and

mobile) to reach 25% of the population by 2015.

Social media represents an attractive channel for brand building and creating

visibility for companies in Brazil, due to the behaviour of Brazilian consumers,

who trust social media posts from friends and family about what to buy, and feel

they are good sources of word-of-mouth information on brand experiences.

Brazil: Rising importance of social media

REGIONAL FOCUS

0

10

20

30

40

50

60

70

Facebook Twitter Orkut Linked In

Most Popular Social Media Sites in Brazil in 2012

Mill

ion

users




2012 saw some countries in the Middle East region recovering from the effects of the Arab Spring in 2011,

which had caused many tourists to stay away, even from countries within the region that did not experience

civil unrest.

Egypt, in particular, recorded a strong 18% growth in 2012. Its arrivals were, however, still far from the 14

million recorded in 2010.

The overall performance of inbound trips to the Middle East region was, however, again negative in 2012,

recording a 5% drop, mainly due to declines in arrivals to Saudi Arabia, Lebanon and Syria.

On the other hand, international arrivals to the UAE increased healthily in 2012, to reach an estimated 11

million tourists. Over eight million visited Dubai, two million Abu Dhabi, and the rest the smaller emirates.

Neighboring Saudi Arabia is the top source market for UAE inbound tourism, and visitor numbers are

predicted to double over the next five years. The UAE offers a culturally similar but more relaxed tourist

destination for visiting Saudis, and is particularly popular amongst the growing young population.

Middle East: Tourism decline in the region, growth in the UAE

REGIONAL FOCUS

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Saudi Arabia UK India Russia China Kuwait USA Oman Pakistan Bahrain Germany Egypt Lebanon Iran

‟000 t

rips

Country Breakdown of Arrivals to UAE 2012/2017

2012

2017




The prolonged unrest in a number of Middle Eastern and North African countries is continuing to affect

tourist arrivals, although recovery has been seen from the severe drop experienced in 2011, during the

Arab Spring.

In spite of remaining political tension, tourist arrivals to Tunisia and Egypt managed partially to recover in

2012 from the sharp fall recorded in 2011.

The danger remains mainly with the ongoing violence in Syria risking over-spilling its borders to Lebanon

and also to affect arrivals to Jordan.

Libya has vast tourism potential, with its long Mediterranean coast and Roman antiquities, but it has yet to

achieve any progress since the revolution finished in 2011.

0

1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

13,500

15,000

Egypt Tunisia Syria Bahrain Lebanon Libya

Arrivals to MENA Countries Affected by Civil Unrest 2010-2013

2010

2011

2012

2013

„000 a

rriv

als

Middle East: Continued unrest lingering

REGIONAL FOCUS




The Big Three Gulf airlines (Emirates, Etihad

and Qatar Airways) continue to expand their

routes, opening up new tourist sources for

the region, as well as consolidating the global

positioning of their hubs in the UAE and

Qatar. These three airlines account for 54%

of Airbus‟s current order book.

The relative weakness of European traffic

has turned their focus onto emerging

markets.

In particular, the CIS markets are growing

strongly, supported by the boom of Russian

tourists and by growth in the Ukraine market.

The expansion of low cost carriers, such as

FlyDubai and Air Arabia, is contributing to

attract tourists from Eastern European

countries including Azerbaijan, Georgia,

Serbia and Macedonia.

The low cost sector currently represents

around 9% of the total air market in the UAE,

and there is substantial room for growth in

the future.

Middle East: Big Three flying high and opening up new markets

REGIONAL FOCUS

Nov 2012: Ahmedabad

Mar 2013: Washington DC

May 2013: Amsterdam

Jun 2013: Sao Paulo

Oct 2013: Ho Chi Minh City

Dec 2012: Lyon

Dec 2012: Phuket

Feb 2013: Warsaw

Mar 2013: Algiers

Jun 2013: Tokyo Haneda

Jan 2013: Najaf, Iraq

Feb 2013: Phnom Penh

Mar 2013: Chengdu

Apr 2013: Chicago

May 2013: Salalah, Oman




Hotels throughout the Middle East saw an improvement in 2012, as the market has on the whole stabilised,

despite ongoing problems in Syria and Egypt. Hoteliers in Egypt have reduced room rates in order to

stimulate demand and recover from 2011‟s poor performance.

The UAE continues to show the best occupancy rates for the region, due to its continued leisure appeal

and strong MICE sector. Abu Dhabi suffered a slight drop in occupancy rates due to a rush of hotel

openings, which also caused a fall in average room rates. Dubai showed the best performance for the

region, with occupancy and room rates high due to its varied and comprehensive hotel supply, which

continues to be matched by demand.

Medical tourism is becoming an important source of arrivals for the hotel sector in the UAE. 500,000

tourists visited the UAE for medical treatment in 2012, a 15% increase over 2011, with Dubai being the

medical hub in the region.

Middle East: UAE hotels benefit from MICE and medical tourism

REGIONAL FOCUS

0

500

1,000

1,500

2,000

2,500

3,000

UAE Egypt Saudi Arabia Qatar Bahrain Kuwait

US

$ m

illio

n

Hotel Sales in Selected Middle East Countries 2011-2013

2011

2012

2013




Inbound visitors to the UAE spend the most on

accommodation, followed by shopping, with a

total of U$1.5 billion in 2012. The UAE promotes

itself as a luxury shoppers‟ paradise, with

elaborate destination malls, shopping festivals,

no sales tax and lower prices than in many

surrounding countries.

Luxury brands are a focus for incoming tourists

from all over the globe. Many top brands, such as

Louis Vuitton, Gucci, Rolex and Cartier, rely

heavily on their carefully constructed brand

images and global advertising campaigns.

The Gulf States are also keen advocates of

luxury travel, and have wealthy young

populations with high expectations of service and

quality.

Luxury travellers from the Middle East visit

regional destinations, as well as traditional longer

haul luxury resorts in Europe and Asia. Turkey

and Malaysia have seen solid growth in arrivals

from the Middle East, as the close religious ties

and good flight connections make travelling

easier.

Middle East: Luxury remains a major focus for the UAE

REGIONAL FOCUS

0

500

1,000

1,500

2,000

2,500

3,000

2012 2013 2014 2015 2016 2017

US

$ m

illio

n

Inbound Tourism Expenditure Categories in UAE 2012-2017

Accommodation Shopping

Food Excursions

Entertainment Travel Within Country

Other




The UAE is currently the fourth largest producer of oil in the Organization of the Petroleum Exporting

Countries (OPEC), with reserves estimated at 98 billion barrels (10% of world reserves). However, other

sectors have also driven economic growth in recent years, including trade, aviation, tourism, retail, real

estate and construction.

Dubai is expected to be the economic motor of the UAE in 2013, with real GDP growing by 5%, mainly

driven by a reprise in the real estate sector, as well as by growth in travel and tourism.

With the country recovering from the global economic crisis and the collapse of the real estate market in

Dubai, consumer confidence is high. Consumers in the UAE continue to enjoy the highest incomes in the

region, and their spending reflects that.

Middle East: UAE records highest average incomes in the region

REGIONAL FOCUS

0

5,000

10,000

15,000

20,000

25,000

30,000

United Arab Emirates Qatar Bahrain Kuwait Saudi Arabia

Annual Disposable Income Consumer Expenditure

Per Capita Consumer Expenditure and Disposable Income in Selected GCC Countries 2012

US

$ p

er

capita




International arrivals to Italy grew by 1% in 2012, with the traditional markets of Western Europe and North

America still accounting for the vast majority of these trips.

However, emerging markets recorded the fastest growth rates, although from a small base. Among them,

regional markets such as Russia (up by 30% in 2012) and Poland (19%) have started to account for a

significant part of tourism flows, both surpassing one million arrivals. On the other hand, emerging markets

in Latin America and Asia Pacific are still quite modest in terms of absolute numbers.

In 2012, Japan, which is a traditional market for Italian inbound tourism, achieved healthy 12% growth.

Italy: Traditional markets still key, emerging markets growing

REGIONAL FOCUS

0

2,000

4,000

6,000

8,000

10,000

12,000

Germany UK USA France Spain Netherlands Austria Switzerland Belgium Poland

Arrivals to Italy from Leading Countries of Origin 2010-2012

2010 2011 2012

„000 a

rriv

als




International arrivals to Italy are expected to continue to increase during the next five years, to reach 52

million by 2017, driven by the growth expected in the economy and in tourism flows globally.

However, the 2.2% CAGR forecast for arrivals to Italy in the 2012-2017 period is lower than the forecast

global CAGR of over 4%, and also less than the European CAGR of 3%.

Emerging markets are expected to be major drivers of growth over 2013-2017, with Russia and other

Eastern European markets generating the most new arrivals among them in absolute terms. China, Brazil,

India and other emerging markets in Asia Pacific and Latin America are expected to acquire a more

significant position among source markets compared to their minor role in the review period.

Growth is expected to be stronger in the second part of the forecast period, due to a recovery in regional

flows as the economy in Western Europe stabilises.

Italy: International arrivals to continue to rise

REGIONAL FOCUS

0

10,000

20,000

30,000

40,000

50,000

60,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

„000 t

rips

Arrivals to Italy 2007-2017




Outbound trips from Italy were stable in 2012; however, outbound expenditure declined by 2%. Short haul

trips to European destinations recorded the best performance ( up by 5%) favoured by the value for money

they offer compared to several domestic destinations. Trips to long haul destinations, on the other hand,

declined by 7%, due to many travellers opting for less expensive holiday options.

Domestic tourism suffered the most from the recession in the country, recording a decline of 6% in terms of

trips, due to competition from short haul foreign destinations, as well as to many people opting for

“staycations”, due to shrinking family budgets.

Italy: Drop in domestic trips, international departures stable

REGIONAL FOCUS

0

3,000

6,000

9,000

12,000

15,000

18,000

21,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

„000 t

rips

Departures from Italy 2007-2017 Departures from Italy by Country 2012

Spain

France

Germany

UK

Croatia

Greece

USA

Austria

Egypt

Switzerland

Tunisia

Other Destinations




Italy was in recession in 2012, with real GDP declining by 2.4%. The country has been losing in global

competitiveness over the last 10 years, and is characterised by stagnant productivity levels. Among the

factors affecting Italy‟s performance are a lack in innovation in production, a rigid labour market and

inefficiency in public services.

Austerity measures implemented in 2012 to tackle the public debt crisis resulted in a rise in taxation to an

estimated average of 45% of income. The impact of recession and austerity measures on consumer

confidence and spending was significant, with average spending declining significantly in 2012. A recovery

is forecast from 2014, favoured by growth in the Western European markets.

Italy: Decline in consumer confidence and expenditure

REGIONAL FOCUS

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

€ p

er

capita

Per Capita Consumer Expenditure in Italy 2007-2017

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Italian Unemployment Rate % 2007-2017

% o

f w

ork

forc

e




Low cost flights are clearly winning in terms of value growth against schedule airlines in Europe. All the

main European markets are forecast to see healthy growth in low cost flights over the next five years.

In order to remain profitable, many schedule airlines have resorted to using smaller aircraft, reducing the

frequency of many flights and cancelling some unprofitable routes. Moreover, many of them are veering

towards a hybrid model between schedule and low cost airline, adopting several practises typical of no frills

carriers.

After the collapse of Sicily-based Wind Jet in August 2012, there are only two remaining Italian LCCs:

AirOne and Blu Express. These airlines, however, are struggling to compete against the leading European

LCCs, Ryanair and easyJet, which play a major and growing role in the Italian air market.

Italy: Low cost carriers the winning model in Europe

REGIONAL FOCUS

0

1

2

3

4

5

6

7

8

9

10

Netherlands Spain Germany Austria France Norway Turkey Ireland Italy Sweden

%C

AG

R

Schedule and Low Cost Airlines % Value CAGR in Selected European Countries 2012-2017

Low Cost Schedule




Online travel sales grew robustly in Italy between 2007 and 2012, achieving a 17% CAGR. The rise in

internet penetration in the country played an important role, as did increased confidence in the security of

online payments. As the sector becomes more mature, growth is expected to be slower but still strong, with

a 7.5% CAGR between 2012 and 2017.

Booking.com, Odigeo, Expedia and Lastminute.com were the largest online travel agencies operating in

the country in 2012, and were also among the top travel retailers overall in Italy.

Traditional tour operators are currently facing the threat of the increasing popularity of the online channel.

As in other countries, the way forward for them appears to be to embrace new technologies, including the

mobile channel, and to differentiate their products from the offer of competitors.

Italy: Shift to the online channel

REGIONAL FOCUS

0

2,000

4,000

6,000

8,000

10,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Online Travel Sales in Italy 2007-2017

€ m

illio

n

Note: the chart refers to online value sales of transportation, travel accommodation,

car rental and tourist attractions through intermediaries and direct suppliers.




International arrivals to India witnessed

steady growth in 2012, of nearly 11%.

Due to the value of Indian rupee falling

sharply against the US dollar,

accommodation and shopping offered

extremely good value for money for many

travellers, which favoured inbound

tourism.

The US and the UK maintained their

positions as leading source countries.

However, neighbouring countries, such as

Bangladesh and Sri Lanka, witnessed

healthy growth and are likely to continue

this growth, particularly for short visits to

India.

Asian countries such as Singapore, Laos,

Indonesia and Vietnam are expected to

show increased arrivals, due to their

growing economies and aided by the

recent introduction of visa upon arrival

processes. The Indian tourist board is

also heavily promoting Buddhism-related

tourism for travellers from these countries.

0 200 400 600 800 1,000 1,200 1,400

Netherlands

UAE

Pakistan

Italy

South Africa

Germany

South Korea

France

Singapore

Japan

Nepal

Australia

Canada

Malaysia

Sri Lanka

UK

USA

Arrivals to India by Country 2012 and 2017

2017 2012

„000 trips

India: Strong inbound tourism growth in 2012

REGIONAL FOCUS




Hotels performed well in 2012 in India, as occupancy rates finally surged after the Mumbai attacks in 2008.

Budget hotels are showing strong growth, with corporate clients being one of the main reasons. Increased

flight prices in 2012 resulted in companies cutting back on their accommodation expenses, with the majority

of business tourists staying in budget hotels, which provide good services at much more reasonable prices.

Among these budget hotel chains, Lemon Tree, Ginger and Accor Formule1 are performing strongly. In

response to the steady budget demand, luxury hotels were forced to drop their rates in order to attract

domestic business travellers.

Medical tourism is also a major driver of hotel growth, due to India‟s reputation for offering good quality

medical services at low prices. This trend is expected to grow, as medical tourism in general continues to

expand in the next five years.

0

2

4

6

8

10

12

2012 2013 2014 2015 2016 2017

% y

ear-

on-y

ear

gro

wth

India Hotel Sector % Growth for Key Parameters 2012-2017

Hotel Sales

Hotel Online Sales

No. of Hotel Outlets

India: Budget hotels gain ground

REGIONAL FOCUS




0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017

% y

ea

r-o

n-y

ea

r gro

wth

India Air Passengers Carried by Category % Growth 2012-2017

Schedule

Low Cost

Charter

The air transportation sector was extremely dynamic in 2012, and healthy growth is expected to continue

over the 2013-2017 period. The industry also witnessed soaring prices for domestic flights, due to

increased fuel prices and higher airport authority costs.

The grounding of the Kingfisher airline resulted in a gain both for other scheduled airlines – Air India and

Jet Airways – as well as low cost carriers Spice Jet and Indigo.

Indigo maintained its market leader position amongst low cost carriers, followed by Spice Jet. It also

emerged as the largest fleet size airline in India in 2012, adding 19 aircraft, and continues to have

expansion plans in terms of its fleet size for 2013.

The Indian government continued to try and obtain Air India‟s entry into the Star Alliance, which will be

achieved later in 2013, due to the improved performance of the airline.

India: Steady growth forecast for air transportation

REGIONAL FOCUS




The Indian diaspora scattered around

the globe is a huge driver of

international travel, both inbound and

outbound. As well as the estimated 22

million overseas non-resident Indians,

there are numerous second and third

generation foreign residents who

maintain strong ties with their family

homeland.

A recent study by Amadeus estimated

that 43% of Indian travellers cited

visiting friends and relatives as the main

reason for their trip.

This kind of tourism is noticeably

different from other forms of travel.

Accommodation costs are often non-

existent, and trips tend to be longer than

average.

The global nature of the Indian diaspora

has assisted in the development of air

links, with the GCC region particularly

well-served by low cost connections.

Top Locations for Indians Living Abroad: June 2012

Country Population

1. USA 2,245,239

2. Malaysia 2,050,000

3. Saudi Arabia 1,789,000

4. UAE 1,750,000

5. Sri Lanka 1,601,600

6. UK 1,500,000

7. South Africa 1,218,000

8. Canada 1,000,000

9. Mauritius 882,220

10. Oman 718,642

11. Singapore 670,000

12. Nepal 600,000

13. Kuwait 579,390

14. Trinidad & Tobago 551,500

15. Qatar 500,000

Source: Ministry of Overseas Indians Affairs

India: The importance of the Indian diaspora to travel

REGIONAL FOCUS




Niche tourism represents a growing segment of Indian domestic and outbound tourism. The average age of

domestic and inbound travellers is declining, and tourists are now looking for more exciting vacations and

not just relaxation.

Key activities include photography, wildlife, heritage, polo, medical and pilgrim tourism. The latter has long

been popular in India, but new luxury tours have been introduced to attract wealthy religious travellers.

These include the Mahaparinirvana Express, which has recently expanded its run to visit Buddhist sites in

Odisha, as well as those in Uttar Pradesh and Bihar. The train company Indian Railway Catering and

Tourism Corporation has linked up with luxury hotels at Bodh Gaya, Kushinagar, Gorakhpur and Lumbini

(Nepal) to host tourists overnight.

Polo has a rich heritage in India, and is one of the niche tourism sectors supported by the Indian Ministry of

Tourism. The government of Manipur organised the sixth Manipur Polo International tournament between

24 and 29 November 2012, with the aim of promoting polo tourism in the state.

Domestic niche tourism has been helped in recent years by the growing number of DINKs (Double Income

No Kids). These couples have high disposable incomes and are keen to spend on travel, as well as health

and wellness and consumer electronics.

India: Tourism niches growing

REGIONAL FOCUS




Fears about visitor displacement due to

the major events held in the UK in 2012

were well founded, however, visitor

numbers rose although by just 0.3%.

The success of the Olympics and the

Diamond Jubilee did, however, raise the

nation‟s profile on the world stage, but

the exact legacy of the former is yet to be

determined.

European countries remain the most

important source market for the UK, and

continued austerity measures and the

ongoing Eurozone crisis is impacting

arrivals. Visitors from the BRICs and

other emerging countries are becoming

increasingly important, despite current

numbers being relatively small.

Inbound tourism could also be negatively

affected by the further rise in Air

Passenger Duty (APD) in April 2013.

Tourists to the UK pay APD on their

return flights.

0 1 2 3 4 5 6 7 8 9 10

Norway

Japan

Austria

USA

Italy

France

Denmark

Canada

Belgium

Spain

Brazil

Netherla…

Germany

Sweden

Switzerland

Russia

Australia

Poland

India

China

% CAGR

Arrivals to the UK from Top Source Markets % CAGR 2012-2017

United Kingdom: Building on 2012‟s stability

REGIONAL FOCUS




Outbound travel in 2012 remained at the same level seen in the previous year, with just over 55 million

trips. However, spending was up by 5%. The wet weather during the summer caused a rush of bookings to

sunnier climes at the end of August, with travel retailers discounting to attract consumers.

Package holidays remained popular, due to consumer concerns about unexpected costs, as well as

increased flexibility within the packages being provided by retailers. UK travellers are still concerned about

the uncertain economic situation, stagnant salaries, rising inflation and the risk of redundancy, and whilst

overseas travel is still a must for many consumers, caution remains.

The most popular destinations are Spain and France, although a decline in departures to these

destinations is expected in the next five years, due to the growing appeal of less traditional countries.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Spain France USA Ireland Italy Germany Greece Portugal Netherlands Poland

‟000 t

rips

Outbound Trips to Top Destination Countries for UK Travellers 2007/2017

2007 2017

United Kingdom: Outbound travel remains steady

REGIONAL FOCUS




Domestic trips in the UK showed a

minimal decline in 2012, dropping by

0.3% at 132 million trips. However,

expenditure rose by 4%. Trips of less

than three days accounted for two thirds

of all visits.

The “staycation” trend continues to thrive,

due to one of the longest economic

downturn in years. Rising unemployment,

rising inflation and stagnant salaries have

led many people to holiday at home.

In January 2013, VisitEngland launched a

new Facebook app which is named “101

Things To Do Before You Go Abroad”,

which aims to target domestic tourism by

building on the popular “bucket list”

concept. It includes many things which

can be done in England, such as star

gazing in the Europe‟s first International

Dark Sky Reserve in Exmoor‟s National

Park, and climbing Scafell Pike, which is

England‟s highest peak.

Isle of Man

Channel Islands

North Ireland

Northeast

East Midlands

West Midlands

East of England

Wales

Yorkshire

London

Northwest

Scotland

Southeast

Southwest

0 5 10 15 20

% share

Regional % Share of UK Domestic Trips in 2012

United Kingdom: Domestic trips stagnant

REGIONAL FOCUS




UK consumers are increasingly passionate about all things food-related. Food is now more celebrated,

greener, healthier and grown in more urban spaces. Recent scares within the UK food industry, such as the

contaminated meat scandal, have reinforced the importance of traceability and cooking from scratch.

Additionally, the continued rise in obesity levels in the UK is keeping food on the government‟s agenda.

Within tourism, this has translated into gastronomic holidays, both domestic and international, where the

focus of the holiday is food. In the UK, food or culinary tourism is worth an estimated US$8 billion each

year.

Traditional cookery courses whilst visiting the destination country are still popular, but with a growing

emphasis on less familiar ethnic foods. France, Spain and Italy remain favourites, but Morocco, Thailand,

Mexico and China are expanding their culinary tourism offerings.

United Kingdom: Consumer passion for food

REGIONAL FOCUS

0

10

20

30

40

50

60

70

80

90

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

£ b

illio

n

UK Consumer Expenditure on Food 2007-2017




With retail volumes of smartphones twice those of traditional mobile phones in 2012, UK consumers are

clearly choosing smartphones as preferred their handheld device.

Within travel, smartphones offer m-commerce capabilities, as well as the possibility of online interaction

with travel companies. In order to have a successful presence in this rising channel, investment will be

needed to improve customers‟ booking and online experience.

Tourist attractions will be a focus for increased growth in mobile sales, as consumers on the go are often

able to get a better deal online. The mobile channel will also strengthen the role of social media within the

travel accommodation sector, as an increasing number of travellers are expected to use independent UK

consumer review sites via mobile before making their hotel reservations.

0

5,000

10,000

15,000

20,000

25,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

„000 u

nits

Retail Volumes for UK Smartphones and Feature Phones 2007-2017

Smartphones Feature Phones

United Kingdom: The smartphone nation

REGIONAL FOCUS




2011 figures are provisional and based on part-

year estimates. The forecast period under review

covers the period 2011 to 2016, inclusive.

All US dollar data cited in this report, historical and

forecast, at national, regional and global level are

shown at fixed 2011 exchange rates. As such, any

impact from currency and/or exchange rate

volatility are discounted.

Arrivals refers to international tourists visiting

another country for at least 24 hours not exceeding

12 months, and staying in collective or private

accommodation for leisure, business, visiting

friends/family and other (religious, medical,

education etc). Measured in trips.

Incoming tourist receipts are classified as

payments by international inbound tourists,

including fares paid to national carriers for

international transport and any other prepayments

made for goods or services received in the country

of destination.

Departures refers to the number of residents that

travel abroad from their country of residence to

another destination country for leisure or business

purposes. Residents include students residing abroad

for a period of over 12 months. Destination reflects

the main departure destination recorded at the

country of residence. Measured in trips.

Outgoing tourism expenditure is spending on travel

and tourism products and services by outbound

tourists abroad, including their payments to foreign

carriers for international transport.

Definitions for industry-specific and other

terminology/abbreviations used in this report:

CAGR – compound annual growth rate

IMF – International Monetary Fund

MENA – Middle East North Africa

ADR – average daily room rate

RevPAR – revenue per available room

LCC – low cost carrier

OTA – online travel agent

Data parameters and report definitions

REPORT DEFINITIONS




Hotel outlets that provide lodging include

independent and chained operators as well as all

company owned, leased, managed and franchised

outlets. Aparthotels are included.

Luxury: includes luxury, upper upscale and upscale

chained and independent outlets and their

corresponding sales. Includes 4 to 5 stars.

Mid-priced: includes mid-priced chained and

independent outlets and their corresponding sales

that may or may not serve food and beverages.

Includes 3 stars.

Budget: includes budget chained and independent

outlets and their corresponding sales. Includes 0-2

stars.

Tourism expenditure on shopping includes

spending by international and domestic tourists on

food and non-food purchases. Duty-free is

included.

Air transport includes schedule, charter and low

cost carriers. Excludes all transit.

Rail covers travel by passenger train, excluding

freight and car transport. Includes cablecars.

Covers what is spent on rail in that country by both

international and domestic tourists.

Online travel retail sales include traditional travel

retailers including travel agents, tour operators and

exchange service providers that have a web

platform for sales. Also includes online travel

agents, brokers and intermediaries.

Cruise includes sales of cruises through tour

operators and travel agents. Includes flights and

other pre-paid products/services such as spas,

food, drinks, entertainment, excursions etc.

Package holidays include traditional package

holidays which are fixed by tour operators and

travel agents and include transportation,

accommodation along with a choice of food

options. Includes dynamically packaged holidays.

Spas include destination spas, hotel/resort spas,

and others.

Category definitions

REPORT DEFINITIONS




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FORECAST REVISIT FOR THE GLOBAL TRAVEL AND TOURISM … · 2019-07-12 · forecast revisit for the...

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