All-inclusive on Steroids

Transcription

1 All-inclusive on Steroids Changing the discussion David Redekop October 24, 2012

2 Let s talk more about $ and less about arrivals & market share

3 $2,500 Package Prices Lower than After 9/11 $2,500 $2,000 $1,921 $2,000 $1,500 $1,500 $1,478 $1,000 Average advertised base package price for three time periods, one week, all-inclusive, lowest price, from Toronto to Mexico, Cuba, Jamaica, DR. $1,000-15% Total Price= $1,772-8% $500 $500 $- Winter 2001/02 $- Winter 2012/13

4 Package Prices Lower than After 9/11 Average brochure base package price, for three time periods, one week, all-inclusive, lowest price, from Toronto as of October 2001 & 2012.

5 TUI 14.7b Revenues - 360m Profit *TUI statutory profit before taxes

6 Transat & Thomas Cook also looking for greater margin Transat A.T. Inc. $3b Revenues first 9 months FY $36m Operating loss before taxes Thomas Cook PLC North America 349m Revenues in m loss (segmented result)

7 Canadian Travel Demand Strong SUPPLY EVEN STRONGER 7

8 Mexico & Cuba #1 for 2011/12 Winter Destinations 88%

9 Ranking of Visits Winter Country 1 Mexico 2 Cuba 3 DR 4 Jamaica 5 Bahamas 6 Barbados 7 Panama 8 St. Lucia 9 Cayman Is. 10 Puerto Rico 11 Antigua 12 Bermuda 13 Grenada 14 St Vincent Ranking of Winter 2011/12 Visits Vs. CDN $ Spent per Visit Sources: Statistics Canada and CBoC for averages. Ranking of CDN $ Spent per Visit Country 1 Grenada 2 Bermuda 3 St. Lucia 4 St. Vincent 5 Antigua 6 Barbados 7 Jamaica 8 Mexico 9 Bahamas 10 Panama 11 DR 12 Cayman Is. 13 Cuba 14 Puerto Rico

10 It s a different world Margin trumps market share

11 Drive for margin There is a prevailing trend towards online bookings in all of our source markets and increasing our share of sales made through online channels results in lower distribution costs and higher margins. TUI Our focus is to drive growth organically and reduce net borrowings by improving operating and free cash flow generation, with an emphasis on protecting margin rather than market share. Thomas Cook PLC

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13 All-inclusive Has Changed Competing on price to gain market share not sustainable Shareholders want dividends and higher share prices

14 All-inclusive on Steroids $HOW ME THE $$$$ TIME

15 Tour Operations Changing Cost management ongoing Product mix and concentration has changed

16 Tour Operations Changing Cost Management Moving small margin mainstream destinations to online Leveraging size when purchasing rooms Rationalizing fleet TCX, Transat/CanJet Greater focus on increasing capacity to destinations where there is a higher margin to be made.

17 Margins Driving Capacity (Number of seats to Caribbean/Mexico/S. America from Canada) Seat capacity for winter 2012/13 down by -4.3% Sources: CBoC calculations using OAG & websites for Transat & Sunwing

18 Winter 2012/13 Capacity down to Mainstream 4.3% reduction in overall capacity for Winter 2012/13 Capacity to big four down -5.2% Capacity to some higher margin destinations up 10% or more Costa Rica up +40%, Honduras more than double, Aruba +15%, Martinique +30%

19 Package Prices on the Rise (Winter 2012/13 prices versus Winter 2011/12) Average package price up 5.8% for winter 2012/13 to big four destinations. Price increase expected to hold this time around. Winter 2011/12 Winter 2012/13 Winter 2011/12 Winter 2012/13

20 Tour Operations Changing Product Mix More exclusive hotels to help differentiate (RIU & Signature) Greater focus on experiential and activity based special interest travel -Transat Discoveries Centered on authenticity and flexibility.to allow travellers to enjoy memorable moments in all four corners of the earth.. Travel Industry Today

21 Cuba Mexico Jamaica

22 Sunquest Vacations Bahia & Activity

23 Air Canada Vacations Brochure all about activity

24 Margins Higher on Differentiated Based Products Experiential or activity based travel part of differentiated product. Most purchased onsite but operators taking cue from cruise industry. Will gradually move to mobile. Travel industry playing catch-up to travellers.

25 Cruise Industry Knows How to Sell Activity

26 80% 70% 7 in 10 Package Travellers Plan to Buy Separate Activity this Winter 69% 60% 50% 40% 39% 30% 20% 10% 29% 25% 22% 10% 0% Purchasing activity while on package trip Water activity Adventure Spa Fitness Golf

27 Air Canada Realigns Sales Organization; Zeina Gedeon Appointed Vice President, E-commerce, Product Distribution and Sales Development; AIR CANADA VACATIONS IS FIRST CANADIAN TOUR OPERATOR TO GO MOBILE Selling during more stages of the travel cycle.

28 Improved Margins through Mobile 44% of package travellers carrying smart phone or tablet during winter 2012/13 19% very likely to purchase something while on package trip with smart device 36% to use smart device to research local activities and things to see and do 25% to research local history

29 The Operator s Steroid The TUI mobile strategy is about responding to consumer demands, enhancing customer relations, generating ancillary revenues, improving use of destination content, being closer at each stage of the customer experience

30 Travel Cycle Touch Points Inspire Research Follow-up & sharing Planning trip Travel Stages Return Trip Home Confirming & Closing In Destination activities Travel to Destination Arranging 30

31 Market Share giving way to Margins Driving down costs and increasing margins is the order of the day. Why? Shareholders want dividends & higher stock values

32 Caribbean: Occupancy & rates up Source: STR Global via CHA.

33 $$ Canadians will Spend in Caribbean

34 Average Spent per Visit by Canadians Source: CBoC.

35 1 Yr. for Canadian Outbound to Rebound ( 000 of trips prior to and after global recession) Sources: Statistics Canada, UK ONS, CTO, US OTTI.

36 Outbound Leisure Travel: Average Annual Rate of Growth

37 All-inclusive on Steroids More activity based much like cruise lines Greater segmentation with more exclusive arrangements with large operators Margin driven = happy shareholders