Use of the Internet for Travel and Tourism Extract of the European Internet Travel Monitor 2000 & Summary of other research results Introduction The internet is revolutionising the distribution and sales of travel and tourism information. It provides direct access to end consumers, but is also a tool for business to business communication. The internet and its protocol (TCP/IP) have created a universal platform for communication and presentation. The cost of access to the internet is decreasing and the speed of access is increasing. This and other factors are driving the growth in usage. The internet will increasingly be accessed from different types of equipment television, mobile devices, in-car technology, terrestrial phones, kiosks, computer games, consoles, etc. The web is becoming more useful in terms of functions and content as well as more userfriendly. From 1995 to 2000 the number of internet users worldwide grew by close to 830% to 413 million. Between 2000 and 2006 growth is expected to reach 220%, according to etforecasts. This will take the total number of internet users to over 1.3 billion. The USA leads the market by a very wide margin with 148 million users forecast at year-end 2001. Japan is in second position in the world ranking with 48 million users, followed by China (38 million), Germany (24 million), South Korea (24 million) and the UK (21 million). In terms of numbers of internet users as a share of the total population, the market rankings are somewhat different. The leaders, in order of importance, are Sweden, Iceland, Canada, Denmark and Norway. 1
Forecasts vary as to the expected growth in internet usage in different parts of the world but all point to Asia Pacific as the leading growth region. Internet user forecasts by world region (Jupiter) W orldw ide Internet Users by Reg ion 2000-2003 (in m illio n ) 180 171 160 140 120 126 139 112 North America W estern Europe 100 80 72 65 A sia-p acific Middle East Latin America 60 40 20 0 2 14 9 2 9 2000 2003 38 24 6 Eas tern Eu rope Africa Source: Jupiter Communications, 2000 quoted by emarketer Top 15 markets in terms of number of Internet users per 000 popln Internet users per 1,000 people at Year-end 2001 600 500 546 546 545 540 532 521 516 499 498 467 464 447 410 400 395 385 300 200 100 0 Sweden Ice lan d Canad a Denma rk Norw ay USA F inland Sing apo re S outh Korea Switzerland Australia Netherlands New Zeala n d Aus tria Taiwan Source: etforecasts (www.etforecasts.com), July 2001 2
Internet User Profile In whichever region they live internet users tend to be relatively wealthy, well educated, and interested in independent travel. A very high proportion of international travellers from the major markets are, or will soon be, internet users. The profile will change as usage increases and new access channels emerge. But how many of them will buy online? IDC research indicates that online consumer spending should increase sixfold by 2005. The number of people buying online is forecast to increase from 143 million in 2001 to 446 million in 2005. Expenditure is forecast to increase from US$634 billion to more than US$5 trillion over the same period. E-commerce is closely related to internet usage. Travel's Share of the Online Market Travel is already the single largest category of products sold over the internet. It is still primarily a source for researching and planning travel, although travel's share of online market spending increased from 7% in 1997 to 29% at the end of 2000. Jupiter Communications forecasts that between 2000 and 2003, the growth of travel purchases will gain significantly over other types of products. Consum er O nline Spending by Product Line: Europe 2000-2003 7,000 6,000 Million 5,000 4,000 3,000 2,000 1,000 0 2000 2001 2002 2003 Books Music Software Hardware Travel Other Source: Jupiter Communications 3
Jupiter research shows that air travel sales accounted for some 80% of total online travel sales in 1998 followed by hotel (13%), car rental (7%) and cruise and tour business (less than 1%). By 2003 air travel's share will fall to a projected 59%, while hotel sales will increase to 25%, car rental to 12% and cruise and tour sales to 4%. Revised Forecasts for European Online Business In the light of the events of 11 September, the online travel market will hit 88% of the level forecast in 2001, 84% in 2002 and 85% in 2003. Online travel will make up 15% of the travel business in 2002 not 14% as originally projected. This effectively means that online business will be put back by two to three months. However, budget airlines showed a substantial and unexpected increase in business in September 2001. The Internet as a Source for Travel Planning The internet is now the preferred source for researching and planning travel, according to Concierge. It has overtaken travel agents and is well ahead of guidebooks and newspapers/magazines. Internet: Source for researching and planning travel Consulting First W hen Choosing or Planning a Vacation (USA) 30% 25% 20% 15% 10% 26% 22% 11% 10% In te r n e t * Travel Agents Guide Books 5% Newspaper/M agazines 0% * Am ong Internet users this rises to 64% Source: Concierge, 2000 4
The Concierge data correlates with the results of research conducted by the Travel Industry Association of America and also by the MORI e-tracker Survey in the UK market. Use of different sources for researching and planning travel Source: MORI e-travel Tracker Survey, April 2001 However, the UK survey indicates that consumers also consider the internet the most complete source of information on travel and tourism, while Americans are more sceptical of the information they obtain through the internet. Best source for researching and planning travel Source: MORI e-travel Tracker Survey, May 2000 5
The European Internet Travel Monitor IPK International's European Internet Travel Monitor is the only pan- European survey of internet usage in existence. In 2000, the second year of its operation, the survey results indicated that 26% of European outbound travellers used the internet, whether to obtain information to assist in travel planning or to book travel online. These 26% of travellers were divided into: Information seekers (19%) people who use the internet simply to obtain information, and then book off-line E-bookers (7%) people who research and book on the internet Some 74% do not use the internet at all for travel purposes. Use of the Internet for Travel Information and Booking The Internet Travel Monitor results show that there were 59.0 million travellers who used the internet for travel information and/or booking in 2000, containing 12.7 million e-bookers of travel. These figures represent 17% and 4% respectively of all trips taken abroad by Europeans. European e-travel by area of origin 2000 e-travel in mn trips share in %** e-travel intensity* Total Western Europe 57.5 97% 20% Northern Europe 24.3 41% 27% Western Europe 28.1 48% 18% Mediterranean Area 5.1 9% 12% Total Eastern Europe 1.5 3% 3% Eastern Part 1.3 2% 5% CIS 0.2 1% * Total Europe 59.0 100% 17% Source: European Travel Monitor 2000, IPK International * e-travel in % of all trips; **deviations from 100% due to roundings 6
The respective figures for Western Europe alone were 56.8 million and 12.3 million or 20% and 4% in terms of market share of total trip volume. For total Europe and Western Europe this means that the rate of conversion of internet usage to travel booking is around 22%. Somewhat more than every fifth travel-related internetcontact leads to an e-booking. e-travel in mn trips e-booking in mn trips e-information in mn trips Total Western Europe 57.5 12.3 45.2 Northern Europe 24.3 3.5 20.7 Western Europe 28.1 6.8 21.2 Mediterranean Area 5.1 1.9 3.2 Total Eastern Europe 1.5 0.4 1.2 Eastern Part 1.3 0.4 0.9 CIS 0.2 0.0 Total Europe 59.0 12.7 46.3 Leading E-travel Source Markets The UK is the largest e-travel market in Europe followed by Germany and the Netherlands, according to the survey. In contrast, the Scandinavian markets are generally avid internet users when it comes to travel planning or booking. For example, e-travel's share of the Danish and Norwegian total travel markets is 66% and 64% respectively. 7
Clearly the share varies from one market to another. Interestingly, in contrast to the size and intensity of internet use for travel, the conversion rate is highest in the Mediterranean-bordering countries, followed by East European markets. Italy, France and Ireland show the highest conversion rates ie e-booked trips as a percentage of total e-travel usage. The UK comes almost at the bottom of the list and Germany in tenth position. This phenomen is due to the higher information intensity of British and German Internet Users. Travel Conversion Rank Country of origin rate % e-travel in e-booker thousand in thousand Book to look 1 Italy 2,982 1,484 50% 2 France 4,620 1,900 41% 3 Ireland 790 323 41% 4 Czech Rep. 730 278 38% 5 Switzerland 2,942 1,090 37% 6 Belgium 2,574 919 36% 7 Norway 2,956 796 27% 8 Denmark 4,206 1,064 25% 9 Austria 1,604 393 25% 10 Germany 8,974 2,056 23% Source: European Travel Monitor 2000, IPK International 8
E-booking Germany is the most important e-booking market in Europe in other words, it accounts for the highest number of travel bookings through the internet. However, the 2.1 million trips it generates represent a mere 3% of total outbound trip volume from Germany. The share is even lower for the UK, in eighth position in the ranking, while the level of e-booking in Denmark and Norway represents a 17% share of total trips. E-travel by Destination Taking a view at the share of e-travel with respect to the preferred destinations a quite interesting picture emerges: In terms of market size, short haul travel destinations clearly dominate e-travel. But, with some 25% the e-travel counts an increasing share of all long haul travel in 2000, ie every fourth trip to a long haul destination in 2000 used the internet in any manner. The leading e-travel destinations are Spain, France (14% market share each), Italy, Germany, the USA and the UK. The destination for which travellers show a marked preference for e-travel is the USA. This is not surprising given the wealth of information online on US travel destinations and products Use of Different Travel Websites The websites most used by West European e-travellers are airline sites, followed by the destination sites of cities and states/regions/countries. East Europeans, on the other hand, are more likely to choose special interest sites. Purchase of Online Travel Products Accommodation and airline travel are the most likely products for purchase by Europeans followed by package tours. 9
Mode of Transport As one might expect people who travel by plane are much more likely to use the internet as part of their trip planning process than those who opt for private car travel. 80% 60% 40% 32% 26% Outbound Travel in 2000 by Mode of Transport 43% 60% 20% 0% 8% 11% 6% 5% 6% 3% Car Plane Train Coach Others Non e-travel e-travel Source: European Travel Monitor 2000, IPK International Travel Expenditure The European Internet Travel Monitor results supplement and underpin some results of research conducted by other organisations, not least in the area of expenditure on travel. Internet users, or e-travellers, tend to be higher spenders than those who do not use the internet for travel planning. S h a r e 30 25 28 o f 20 t r i p s % 15 10 13 17 19 17 15 14 10 16 13 9 10 i n 5 0 Less 250 250-499 500-749 750-999 1000-1499 6 1500-1999 5 3 2000-2499 6 2500 m o re Spending per trip in Euro In te rn e t Non-Internet Source: European Travel Monitor 2000, IPK International 10
Organisation of Travel Some 52% of all e-travellers book their travel whether online or offline through the travel trade. This compares with 46% of travellers not using the internet. A further 36% (23%) of trips are booked directly with suppliers such as airlines and hotels, and 12% (31%) involve no pre-booking at all. Outbound Travel in 2000 Organisation of Trip 60% 50% 46% 52% 40% 30% 23% 36% 31% 20% 10% 12% 0% Via Trade Booking Non Trade Booking No Pre-Booking Non e-travel E-travel Source: European Travel Monitor 2000, IPK International Profile of E-travellers Around 58% of European e-travellers are male as against 54% of outbound travellers overall. A larger share are also in active work 78% as against 65% of travellers generally. E-travellers also tend to have higher levels of education, to be from higher socio-economic groups, and to earn more money. Living in a big town or city does not appear to influence use of the internet for travel planning or booing purposes but, as might be expected, e- travellers tend to be younger than travellers in generall. More than 30% of them are between the ages of 25 and 34. 11
Trends in Internet Usage, 2000-01 Preliminary results for the first eight months of 2001 suggest that internet usage for travel purposes has grown by some 38% over 2000's level. The number of trips involving the internet for travel planning, or to obtain information only, has increased by 33%. Meanwhile, although they still only represent a modest 7% of total trip volume, the number of trips actually booked through the internet has risen by 54%, according to the Internet Travel Monitor. The Main Players in the Online Travel Industry Many of the early players in the online industry were from the technology sector people who realised the opportunities, but generally knew little about the travel Industry. Large amounts of money were invested in such businesses, with no regard for returns in the short and medium term. They seemed to think it was enough simply to build up a large customer base, overlooking the fact that internet customers have little brand loyalty. With the exception of some airlines and two of the global distribution systems (GDSs), the traditional players in travel and tourism were slow to react to the internet. However, as the two leading online players Expedia and Travelocity started to demonstrate the revenue potential, other traditional players got the message and began investing heavily in some cases too heavily in their own sites. The airlines were followed by hotels and, more recently, tour operators. With the change in the climate of investment in dot.com companies, most of the companies that had started up since 1995 consolidated, were taken over by traditional players offering them an easy route into the online world or went out of business. Thus the traditional travel and tourism companies now dominate, either using their own brands, or as owners of the online brands. Most of these large companies have their own resources to invest in the internet and e- business. 12
In the case of the tour operators, it is unlikely that they will enjoy a large direct return on such investment, essentially because customers will prefer to book high-cost, complex products through a human intermediary. Airline seats and hotel beds are commodities that can be sold easily online but the human back-up via a call centre or directly from the supplier is generally regarded as essential even in these cases. The tour product is much more complicated and the customer s need for reassurance is much greater. Nevertheless, for tour operators, the internet can play a vital role in stimulating consumer interest in their products and in providing rich, indepth information about them. This should help to increase sales offline as well as online, and also reduce the extent of demand on travel agents and company call centres. For travel agents, the internet does pose a real threat, but there is the opportunity for them to provide a greatly enhanced service to their customers. They can become experts in the use of the information resources of the internet, and selling the wider range of products that is accessible across the internet. The Use of New Channels Increasingly, companies will have to think in terms of multi-channel distribution making their products available to consumers through interactive television, kiosks, mobile devices and PCs, as well as call centres and travel agents. Indeed, in the future, customers will wish to be able to move seamlessly between channels during the course of one enquiry eg from interactive television to web to call centre. 13
Advice to NTOs re Future Activities with the Internet National tourism organisations (NTOs) should be thinking now about a fully integrated approach to the use of the internet. This means designing systems for use not just by consumers, but also by the travel trade, travel media, conference buyers, information centres, call centres, tourism suppliers within the destinations, and the NTOs' own stakeholders and for access through different channels. Such systems should have common databases that are used by everyone. The data may be presented differently: For different user groups consumers, conference buyers and call centre staff each require reservations facilities presented in a different way For different channels the design of screens for the user of interactive TV must be different from screens for the PC user. Where there are lots of different users accessing the databases frequently, the weaknesses in the data will be exposed quickly and should be resolved. With systems designed for multiple users and multiple channels, life will become more complex a good reason for NTOs to use expert advice to address the challenges and opportunities. If you are interested in the European Internet Travel Report please contact IPK International. Besides detailed market size of e-travel, both for source markets and destination countries this report shows in detail the travel behaviour and target profile of internet users. Moreover, the differences between e-travelers and non e-travelers as well as between e-bookers and e-information seekers are pointed out. The regular market price for the European Internet Travel Monitor 2000 is 2.485,- Euro per copy. Subscribers will get the detailed report with the content. A more detailed overview without subscription is not possible. We invite you to share this highly interesting report: No future report will show such dramatic changes in booking and information behavior as the travel year 2000 report. 14
Letter of content A. Introduction... 1. Our Objective... 2. Travel Monitor Database... 3. Definitions... B. Key Results... 1. e-travel outbound markets... 2. e-travel behaviour... 3. e-traveler profile... 4. e-travel: Present realities and future trends... C. European E-travel oubound Markets 2000... 1. Internet Involvement in European Outbound Travel... 1.1 Market size and intensity of e-travel... 1.2 Market size and intensity of e-booking... 1.3 Market size and intensity of e-information seeking... 1.4 Transformation Level... 2. Internet Outbound Travel User in different European Markets... 2.1 e-travel by country of origin... 2.1.1 e-travel market size... 2.1.2 e-travel intensity... 2.2 e-booker market of the most important countries of origin... 2.2.1 e-booker market size... 2.2.2 e-booker intensity... 2.3 e-information seeker market of the most important countries of origin... 2.3.1 e-information market size... 2.3.2 e-information intensity... 2.4 Transformation level... 15
3. Internet Travel User by Destination... 3.1 Short Haul Destination... 3.1.1 e-travel market size and intensity by short haul destination... 3.1.2 e-booking market size and intensity by short haul destinations... 3.1.3 e-information seeker market size and intensity by short haul destination... 3.2 Long Haul Destination... 3.2.1 e-travel market size and intensity by long haul destination... 3.2.2 e-booking market size and intensity by long haul destination... 3.2.3 e-information market size and intensity by long haul destination... 3.3 Destination Country... 3.3.1 e-travel market size... 3.3.2 e-travel intensity... 3.3.3 e-booking market size... 3.3.4 e-booking intensity... 3.3.5 e-information market size... 3.3.6 e-information intensity... D. E-travel sites 2000... 1. Preferred Sites by the Europeans... 2. Preferred Sites by the largest European markets... E. e-travel products 2000... 1. Preferred Products by the Europeans... 2. Preferred Products by the largest European markets... F. E-travel Behaviour in 2000... 1. Preferred destination areas... 1.1 Destination Area: e-travel / non e-travel... 1.2 Destination Area: e-booker / e-information seeker... 1.3 Destination countries: e-travel / non e-travel... 1.4 Destination countries: e-booker / e-information seeker... 2. Purpose of Trip... 2.1 e-travel compared with non e-travel... 2.2 e-booker compared with e-information seeker... 3. Type of Accommodation... 3.1 e-travel compared with non e-travel... 3.2 e-booker compared with e-information seeker... 16
4. Type of Holiday... 4.1 e-travel compared with non e-travel... 4.2 e-booker compared with e-information seeker... 5. Length of Stay... 5.1 e-travel compared with non e-travel... 5.2 e-booker compared with e-information seeker... 6. Mean of Transport... 6.1 e-travel compared with non e-travel... 6.2 e-booker compared with e-information seeker... 7. e-travel Spending... 7.1 e-travel compared with non e-travel... 7.2 e-booker compared with e-information seeker... 7.3 e-travel compared with non e-travel... 7.4 e-booker compared with e-information seeker... 8. Travel Season... 8.1 e-travel compared with non e-travel... 8.2 e-booker compared with e-information seeker... 9. Travel Organisation... 9.1 e-travel compared with non e-travel... 9.2 e-booker compared with e-information seeker... G. e-travel Target Groups 2000... 1. By Gender... 1.1 e-traveler compared with non e-traveler... 1.2 e-booker compared with e-information seeker... 2. By Age... 2.1 e-travel compared with non e-travel... 2.2 e-booker compared with e-information seeker... 3. By Household... 3.1 e-travel compared with non e-travel... 3.2 e-booker compared with e-information seeker... 4. By Work Status... 4.1 e-travel compared with non e-travel... 4.2 e-booker compared with e-information seeker... 17
5. By Education... 5.1 e-travel compared with non e-travel... 5.2 e-bookers compared with e-information seekers... 6. By Income... 6.1 e-travel compared with non e-travel... 6.2 e-bookers compared with e-information seekers... 7. By Social Status... 7.1 e-travel compared with non e-travel... 7.2 e-bookers compared with e-information seekers... 8. By Urbanity... 8.1 e-travel compared with non e-travel... 8.2 e-bookers compared with e-information seekers... 9. Typical e-profiles in 2000... 9.1 e-traveler profile... 9.2 e-booker Profile... 9.3 e- Information Seeker Profile... 18