PANGAEA NETWORK Global Travel Market Research Luxury Market Trends

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1 PANGAEA NETWORK Global Travel Market Research Luxury Market Trends Executive Summary March 1

2 Looking for discounts, travelling less and travelling shorter distances the face of the travel industry in. pangaeanetwork, an international organisation of independent agencies offering consultancy and communication services to the travel and tourism industry, has published the findings of its recent travel market research. A representative panel of 150 international travel professionals was asked for views of and predictions for the travel industry in today s economic climate. The findings identify market trends, statistics, views and predictions, with a specific focus on the Luxury Travel Market. To receive a copy of the full research findings, please atomas@blueroom.es General Industry Trends Most travel professionals believe that the industry has declined over the past 12 months (63%), although 44% believe the decline to be slight. Conversely, 26% believe it has improved. Despite this however, the overall picture is a negative one. The most notable impact of the recession on the travel industry is reported to be that clients are travelling less (32%). Clients who continue to travel are cutting back on spending by taking shorter trips, spending less per trip or by travelling shorter distances (56%). Just 5% have not noticed any impact from the recession. Clients have become more cautious with their spending and there is a clear trend What is the most noticeable impact the recession has had on your business? 35% 3 25% 15% 5% 32. travelling less 15.7% travelling the same amount, but taking 21.1% 19.1% travelling the same amount, but are spending looking for different destinations/ travelling 7.5% 4.8% Other No impact of the recession 2

travel market research. A representative panel of 150 international travel professionals was asked for views of and predictions for the travel industry in today s economic climate.

3 of booking later and spending less, hoping to take advantage of last-minute deals whenever possible. Almost 5 of respondents reported that their clients expect a 10-15% discount, with 23% reporting expectation of an even greater discount. To what extent are your clients expecting to pay less for travel? % 17.4% 14.5% 11.6% 8.7% 25% less 16-25% less 10-15% less Below less Don t know Those still spending on travel are saving money by taking shorter breaks and staying closer to home. Only 17% reported that clients are spending 2 weeks or longer on holiday, with 10 days (33%) being the most popular choice. 78 % of respondents have noticed a change in booking patterns since the recession took hold. Almost half of clients are booking between 2 weeks and a month before travel, with a quarter booking less than 2 weeks before travel. A shorter break of 5 days is the most common period for of respondents. Luxury Travel Market Luxury travel has not escaped the effects of the recession. Many are taking fewer holidays than before, and travelling to less exotic destinations and although some have reduced spend on travel this is not an overall trend. Indeed, price was ranked only 8 out of 12 of important considerations for luxury travellers. Quality of experience remains key to the booking decision and is something that luxury travellers are unwilling to compromise on. Considerations such as quality of accommodation, privacy and reputation are noted as the top three factors influencing choice of holiday in the luxury market. Results indicate that quality of experience (accommodation, gastronomy) is more important than facilities (sports & activities, family facilities). 3

To what extent are your clients expecting to pay less for travel? 6 5 4 3 47.8% 17.4% 14.5% 11.6% 8.

4 What do you think are the most important considerations for luxury travellers when booking their holiday / vacation? Please tick all that apply 76.4% 68.5% 58.3% 56.7% 54.3% 52.8% Quality of accommodation Privacy and exclusivity Reputation surrounding the hotel/destination Gastronomy Experiences Spa facilities 31.5% % 20.5% New product/destination /hotel 6.3% 6.3% While they may not necessarily be consistently looking for lower prices, luxury travelers (in line with most other travelers) are looking for added value they are more demanding, negotiate more on price and are always looking for deals. Will there be permanent changes to the luxury market due to the recession? 28% believe that luxury travel will revert once the recession ends. However, over half believe that this segment will continue to book later or negotiate harder, expecting more value for their money and thus from their holiday. 1 in 5 respondents feel that luxury travellers will broaden their horizons by trying a wider range of experiences, even if they re not as luxurious as usual. Price Sports & activities Family facilities Nightlife options Other Destination and style of holiday Respondents were asked to comment on emerging luxury resorts, destinations and cities. South Africa is the most mentioned destination; possibly influenced by the FIFA World Cup taking place there this year. In the ranking Maldives, India, Brazil, Oman and Morocco follow. Interestingly, while most people commented solely on destinations, Six Senses Resorts are also mentioned. 4

3% While they may not necessarily be consistently looking for lower prices, luxury travelers (in line with most other travelers) are looking for added value they are more demanding, negotiate more on

5 The most on trend' style of luxury holiday by far is the experiential holiday with 6 in 10 respondents identifying it. Fly and flop is still popular with 3 in 10 respondents. Learn a skill is much less popular; just 1 in 10 respondents believe it to be on trend. Responsible Tourism is an increasingly talked about issue in the travel industry today. However, we are not at the stage yet that travelers will allow responsible tourism to be the deciding factor in the purchase of their holiday. Indeed, 61% believe that responsible tourism is a consideration but that it is price that influences the final purchase. In line with this 17% feel that responsible tourism issues were gaining importance but that the recession has put a stop to it. While only 7% feel that responsible tourism is a big consideration and will influence the purchase decision, for the luxury travel sector this figure increased to 18 %. However, 21% of respondents believe luxury travelers do not consider these issues when booking. 5

However, we are not at the stage yet that travelers will allow responsible tourism to be the deciding factor in the purchase of their holiday.

6 Price and value of luxury holiday 33% of respondents feel that luxury travellers are spending less on their main holiday, whilst 4 feel that there is no change in their spend. Almost a quarter believes that there is no overall trend. Whilst nearly 3 in 5 respondents believe the recession to have influenced luxury clients travel; only a quarter believe that it has influenced the level of accommodation they re willing to stay at. This would indicate that luxury travellers are unwilling to compromise on the part of the holiday where comfort could be most important. Predictions for the travel industry for Predictions for do not show a positive picture, with 55% expecting that the industry will not recover until 2011 or beyond. Only 4% expect to see an improvement in the first, with 15% looking for recovery in the third quarter. Please give your prediction of when you believe business will recover from current market conditions: % % % 2.2% 2.2% the first the second the third the fourth not recover until 2011 not recover until 2012 not recover until later than 2012 With travellers being more demanding, negotiating more on price and looking for added value, businesses need to maintain market share more than ever. Respondents cited various activities in order to maintain this market share including offering customers deals and upgrades so that perception of value increases and leveraging differentiation. Marketing is high on agendas with businesses looking to increase online presence and direct marketing and better their customer service levels. 6

Whilst nearly 3 in 5 respondents believe the recession to have influenced luxury clients travel; only a quarter believe that it has influenced the level of accommodation they re willing to stay at.

7 There are mixed expectations for the year ahead. Largely travel bookings are anticipated to increase, however, clients are probably going to continue to book later and be more price-sensitive. Holidays are likely to be shorter and the exchange rate may impact on destination choice. To find out more about the research and the Pangaea Network, please visit: Around 150 international participants from Sweden, United Kingdom, Germany, Italy, France, Spain, India, Mauritius, Maldives, Thailand, Bermudas, South Africa, Canada and the United States of America have completed the survey. A broad range of sectors are represented from hotel operators, tour operators, travel agents and transport companies. Their business size varies from smaller to larger companies: 44% of the respondent s businesses employ less than 30 staff and 43% more than 100 staff members. The latter largely made up of airline, hotel and tour operator companies. The major part of the respondent group consisted of persons between 26 and 55 years of age (82%). 7

com Around 150 international participants from Sweden, United Kingdom, Germany, Italy, France, Spain, India, Mauritius, Maldives, Thailand, Bermudas, South Africa, Canada and the United States of

4 edition. LUxURY TRAVEL TRENDS. march 2014

4 edition. LUxURY TRAVEL TRENDS. march 2014 march 2014 WHO WE ARE p 3 THE STUDY p 4 MARKET p 6 LERS PROFILE CONCLUSION p16 p24 The Pangaea Network Who we are Pangaea Network is an international organization of independent agencies offering consultancy,