DEMAND AND SUPPLY TRENDS IN TOURISM PROF. Dr. N VANHOVE DEMAND TRENDS HIGH GROWTH RATE Region 1980 2003 2009 Annual growth Market share rate2003-2009* (%) 1980 2009 World 286.0 692.8 880.4 4.9 100.0 100.0 Africa 7.3 31.4 48.1 2.6 5.5 Americas 61.3 113.2 139.6 8.9 4.3 21.5 15.9 East Asia/Pacific 21.5 105.9 170.5 10.0 7.5 19.4 Europe 186.1 405.9 459.7 2.5 65.1 52.2 Middle East 7.5 30.0 52.5 2.6 6.0 South Asia 2.2 6.4 10.0 11.8 9.2 0.8 1.1 *Based on (1 + (r)/100)n or compound annual growth rate. Source: WTO. 4 Expansion incessante du tourisme international ã Arrivées internationales par région, 1950-2003. 800 700 500 400 300 Moyen-Orient Afrique Asie/Pacifique Amériques Europe 200 100 20 00 19 90 19 80 19 70 19 60 0 19 50 millions 600 • De 25 millions en 1950 à 694 millions • Moyenne de croissance 1990-2003 : 3,3 % / an • Moyenne du taux annuel de croissance : –1950-1960: 10,6 % –1960-1970: 9,1 % –1970-1980: 5,6 % –1980-1990: 4,8 % –1990-2000: 4,2 % 5 6 Growth: 2000-2020 -WTO Receiving Arrival Arrival region 2010 2020 (mln) (mln) Europe 527 717 EAsia/Pac Americas Growth rate 2000- 20102010 2020 3.1 3.1 195 397 7.4 6.5 190 282 4.0 3.8 Africa 47 77 5.1 5.5 Mid.East 36 69 6.7 6.7 S.Asia 11 19 5.8 6.2 1006 1561 4.5 4.1 Total 7 THE MAIN DETERMINANTS • • • • • • • • • ECONOMIC FACTORS COMPARATIVE PRICES DEMOGRAPHIC GEOGRAPHIC SOCIO- CULTURAL ATTITUDES TO TOURISM MOBILITY GOVERNMENT/REGULATORY MEDIA COMMUNICATIONS INFORMATION AND COMMUNICATION TECHNOLOGY 8 ECONOMIC FACTORS • DISPOSABLE AND DISCRETIONARY INCOME • 30 COUNTRIES OF ORIGIN ACCOUNT FOR OVER 90% OF WORLD TRAVEL • INCOME ELASTICITY OF DEMAND: THE MARKET IS JUDGED TO BE ELASTIC • INCOME DISTRIBUTION • EXPECTATIONS • MARGINAL DISCRETIONARY SPENDING 9 COMPARATIVE PRICES • PRICE OR PERCEIVED PRICE OF A DESTINATION IS VERY IMPORTANT • EXCHANGE RATE ( SEE RATES $ TO £ OR €) • COMPARATIVE LEVEL OF INFLATION IN THE DESTINATION AND COUNTRY OF ORIGIN • PRICE OF OIL 10 • • • • • • • • • • • • DEMAND TRENDS GLOBALISATION FRAGMENTATION GROWING IMPORTANCE OF ECO-TOURISM CHANGED VALUES CHANGING LIFESTYLES (E.G. BOURGEOIS BOHEMIAN) MORE INDEPENDENT TOURISTS AS OPPOSED TO MASS TOURISM NEW TYPES OF HOLIDAYS AND SPECIAL INTEREST QUALITY-CONSCIOUSNESS (VALUE FOR MONEY) MORE EXPERIENCED AND EDUCATED HOLIDAYMAKERS MORE FLEXIBLE TOURISTS FROM PRODUCTS TO EXPERIENCE ENOUGH IS ENOUGH 11 THE IRREVERSIBLE PROCESS OF GLOBALISATION • GENERIC TERM • THREE BASIC ELEMENTS : – GEOGRAPHICAL – CONVERGENCE IN WORLD TASTE – INTERNATIONALLY SIMILAR PRACTICES 12 Int. Tourist Arrivals- Long Haul(%) • RECEIVING REGION Receiving region World Africa Americas E-Asia/Pacific Europe Middle East South Asia 1995 2020 18 43 23 21 12 58 75 24 35 38 19 15 63 85 WTO 13 Part du tourisme de longue distance dans le nombre total des arrivées du tourisme international, 1995-2020 85% 1995 75% 2020 63% 58% 43% 38% 35% 24% 23% 18% 21% 19% 12% Monde Asie Merid. MoyenOrient Afrique Amériques AOP 15% Europe 14 15 Ranking country destinations World share in % 1950 1970 1990 2000 2008 Top 5 destinations 71 43 39 36 31 Rank 6-10 17 22 19 15 14 Rank 11-15 9 10 10 10 10 Other destinations 3 25 32 38 45 Total Million arrivals 3 166 466 686 922 16 THE MORE DEMANDING CONSUMER • MORE AFFLUENT • BETTER EDUCATED • MORE HEALTHY AND MORE INTERESTED IN ACTIVE PURSUITS • OLDER • MORE TRAVELLED • MORE EXPOSED TO THE MEDIA AND INFORMATION • MORE COMPUTER LITERATE • MORE HETEROGENEOUS AND INDIVIDUALISTIC • MORE CULTURALLY DIVERSE IN TERMS OF ETHNIC ORIGIN 17 STAGGERING OF HOLIDAYS • WHY? – CONSUMER INTEREST – SOCIAL ASPECT – PUBLIC EXPENDITURE – EMPLOYMENT – INEFFICIENT USE OF TOURISM ASSETS – ECOLOGICAL FACTORS • WHY CONCENTRATION? – CLIMATE – SCHOOL-HOLIDAYS ( MOST IMPORTANT FACTOR) – ORGANIZATION ANNUAL LEAVES IN BUSINESS – PSYCHOLOGICAL FACTORS 18 19 20 HOW TO SOLVE CONCENTRATION? • GERMAN ROLLING SYSTEM • COMPLEMENTARY MEASURES – PROMOTION OFF SEASON – PRICE POLICY – ACCOMPANIED MEASURES IN THE TOURIST CENTRES • FINAL CONSIDERATIONS – EUROPEAN SOLUTION? – STAGGERING AND PRICE 21 SUPPLY TRENDS MORE PURPOSE BUILT ATTRACTIONS • TYPE: – PRIMARY NATURAL ATTRACTIONS – PRIMARY MAN-MADE ATTRACTIONS – PURPOSE- BUILT ATTRACTIONS • SCOPE: – LONG STAY OVER – TOURING CIRCUIT – STOPOVER • DEGREE OF PERMANENCY – SITE ATTRACTIONS – EVENT ATTRACTIONS 23 SUPPLY COMPONENTS -UNWTO • • • • • • ATTRACTIONS PUBLIC AND PRIVATE AMENITIES ACCESSSIBILITY HUMAN RESOURCES IMAGE AND CHARACTER PRICE 24 SUPPLY TRENDS • • • • • • • • • • • MORE DESTINATIONS NEW TYPES OF ATTRACTIONS CONCENTRATION MARKET STRUCTURES – OLIGOPOLY MOVEMENTS IN THE HOTEL SECTOR THEME PARKS TIMESHARING INDOOR RESORTS ALL INCLUSIVE RESORTS BRANDING TECHNOLOGICAL EVOLUTION AFFECTING T. 25 Typology of markets Number of buyers number suppliers one one a few bilateral monopoly a few many monopoly oligopoly many monopsony oligopsony competition 26 MARKET STRUCTURES AND PRICING 27 TOURISM SUPPLY AND MARKET STRUCTURE • PERFECT COMPETITION • MONOPOLY • MONOPOLISTIC COMPETITION • OLIGOPOLY 28 OLIGOPOLY • SMALL NUMBER OF PRODUCERS DOMINATE THE INDUSTRY ( e.g. INTERNATIONAL AIRLINE INDUSTRY). • EACH FIRM HAS SOME CONTROL OVER ITS PRICE AND OUTPUT DECISIONS AND THERE ARE SOME BARRIERS TO ENTRY AND EXIT. • THE KEY CHARACTERISTIC IS THE INTERDEPENDENCE BETWEEN PRODUCERS SO THAT EACH FIRM’S PRICE AND OUTPUT DECISIONS DEPEND, IN PART, ON THOSE OF ITS COMPETITORS. • THE PREVAILING MARKET PRICE IS THE PROFITMAXIMIZING PRICE FOR THE FIRM 29 30 MARKET STRUCTURES AND ACCOMODATION • GREAT DIVERSITY – LARGE CHAIN HOTELS BUT HOLIDIDAY TOURISM IS MOSTLY FRAGMENTED – WIDE RANGE IN QUALITY (CAMPING, TIMESHARE) • FIXED CAPACITY: – HIGH FIXED COSTS DRIVE OPERATORS TO ATTAIN HIGH OCCUPANCY RATES THROUGH SUCH DEVICES AS DIFFERENTIATION AND SEGMENTATION. THESE CHARACTERISTICS TEND TO INVOLVE ELEMENTS BOTH MONOPOLY AND OLIGOPOLY (e.g; LUXURY) 31 MARKET STRUCTURES AND TO • IN USA AND IN EUROPE THERE ARE SOME LARGE PLAYERS; THEY CONTROL A LARGE SHARE OF THE MARKET • LOW ENTRY COST • FIERCE COMPETITION, LOW MARGINS • ECONOMIES OF SCALE AND SCOPE • THE DEGREE OF CONCENTRATION OF MARKET SHARE IN THE PACKAGE HOLIDAY SEGMENT SUGGESTS AN OLIGOPOLISTIC STUCTURE (REALITY IS MORE COMPLEX; NICHE PLAYERS) 32 MARKET STRUCTURES AND TA • RELATIVE HIGH CONCENTRATION - FIRM WITH MULTIPLE OUTLETS ( IN UK 5 CONTROL A THIRD) SOME ARE INTEGRATED WITH TOS OR CARRIERS • LOW ENTRY COSTS • ECONOMIES OF SCALE AND SCOPE • LOCATION IS IMPORTANT • OLIGOPOLISTIC AND COMPETITIVE SITUATIONS 33 MARKET STRUCTURES AND AIRLINES • AIRLINES ARE HIGH FIXED COST ENTERPRISES WITH FIXED CAPACITIES - HIGH PAYLOADS • SHORT-HAUL FLIGHTS ARE RELATIVELY MORE EXPENSIVE THAN LONG-HAUL CARRIAGE ( FEWER HOURS IN THE AIR) • TO MAXIMIZE THE PAYLOAD THE AIRLINES APPLY ‘YIELD MANAGEMENT’ (IS AKIN TO PERFECTLY DISCRIMINATING MONOPOLY PRICING) • MORE CONCENTRATION IS LIKELY- HIGHER PRICES • OLIGOPOLISTIC MARKET; SOMETIMES MONOPOLY POWERS 34 CONCENTRATION MOVEMENT • AIR CARRIERS – AIR FRANCE - KLM – BRITISH AIRWAYS - IBERIA – UNITED – CONTINENTAL • AIRLINE ALLIANCES – STAR ALLIANCE – SKY TEAM – ONEWORLD • TOUR-OPERATING • HOTEL SECTOR 35 TYPES OF ALLIANCES • COMPLEMENTARY ALLIANCES • PARALLEL ALLIANCES 36 ALLIANCES AND IMPROVING THE EFFICIENCY AND SERVICES OF AIRLINES • • • • • JOINT PROCUREMENT JOINT OPERATIONS JOINT BACK OFFICE CO-MARKETING CO-SERVICES 37 ALLIANCES AND COST-REDUCTION OPPORTUNITIES • • • • FINANCE AND UTILIZATION AIRLINE OPERATION EXTERNAL ( e.g. AIRCRAFT MANUFACTURERS) RISK-SHARING 38 ALLIANCES AND CONSUMERS • ‘SEAMLESS’ TRAVEL (SERVING A LARGE NUMBER OF CITIES) • ITINERARY AND ROUTING CHOICES • FREQUENCY AND CONVENIENCE OF CONNECTING • CONSUMERS CAN BENEFIT FROM LOWER FARES 39 MOVEMENTS IN THE HOTEL SECTOR • GROWING CONCENTRATION • FRANCHISING/INCREASING CHAIN PENETATION: TOP TEN BRAND COMPANIES YEAR HOTELS ROOMS (1000) 1970 1996 2003 2008 4.987 20.048 29.638 33.811 503 2.403 3.522 4.127 40 TOP SEVEN HOTEL GROUPS- 2008 (x 1000 ROOMS) Intercontinental HG IHG UK 620 Wynham Worldwide- (Cendant) USA 593 Mariott Int. USA 561 Hilton Hotels Corp USA 546 Accor Fr 479 Choice Hotels International USA 473 Best Western International USA 305 41 FRANCHISING • • • • DEFINITION ADVANTAGES FRANCHISEE ADVANTAGES FOR THE FRANCHISER TYPICAL FRANCHISERS 42 FRANCHISING • DEFINITION: “FRANCHISING CAN BE DEFINED AS A CONTRACTUAL BOND OF INTEREST IN WHICH THE FRANCHISOR, WHICH HAS DEVELOPED A PATTERN OR FORMULA FOR THE MANUFACTURE AND/OR SALE OF GOODS/SERVICES, EXTENDS TO OTHERS ( THE FRANCHISEE) THE RIGHT TO CARRY ON THE BUSINESS, SUBJECT TO A NUMBER OF RESTRICTIONS, CONTROLS AND CONSIDERATION “ ( T HUDSON) • “ FRANCHISING CAN BE DESCRIBED AS THE SELLING BY THE FRANCHISOR OF THE RIGHT TO MARKET A PROVEN PRODUCT…; FRANCHISING MUST BE LOOKED AT AS A TWO-WAY STREET: THE FRANCHISOR PROVIDES CERTAIN SERVICES AND CONVEYS CERTAIN RIGHTS TO THE FRANCHISEE, AND THE FRANCHISEE IN TURN HAS CERTAIN OBLIGATIONS TO THE FRANCHISOR”( GRAY & LIGOURI) 43 FRANCHISING - CHARACTERISTICS • DEFINITION: IT IS A LICENSE FOR A SPECIFIC PERIOD OF TIME TO TRADE IN A DEFINED GEOGRAPHIC AREA UNDER THE FRANCHISER’S NAME AND TO USE AN ASSOCIATED TRADE MARK OR LOGO • FORMULA HAS ALREADY BEEN TRIED AND TESTED • THE FRANCHISER PROVIDES THE ENTIRE BUSINESS CONCEPT - MANUAL • THE FRANCHISER EDUCATES THE FRANCHISEE • THE FRANCHISER PROVIDES BACK UP SERVICES - E.G. ADVERTISING • THE FRANCHISEE IS EXPECTED TO MAKE AN INITIAL INVESTMENT AND TO PAY A ROYALTY TO THE FRANCHISER 44 FRANCHISING - CONT’D • REMUNERATION – DIFFERENT FORMS: BASIC FEE, FIXED AMOUNT PER OCCUPIED ROOM, % ON ROOM SALES, OPTIONS….. • FINANCIAL ADVANTAGES – LESS RISK – EASIER ACCESS TO LOANS • PROTECTION FRANCHISEE – WORKING IN A DEFINED GEOGRAPHIC AREA 45 FRANCHISE SERVICES • METHOD OR OPERATIONL PROCEDURE – MANUAL – TRAINING OF STAFF • TECHNICAL ASSISTANCE – RESEARCH POTENTIAL LOCATIONS – ARCHITECTURAL SERVICES, INTERIOR DESIGN – FINANCING – FURNITURE AND EQUIPMENT • MARKETING – NAME – RESERVATION SYSTEM – PROMOTION ( E.G. JOINT ADVERTISING) 46 OBLIGATIONS FRANCHISEE • “ TO MEET THE STANDARDS OF THE CHAIN” – SIZE OF THE ROOMS; FURNITURE, PARKING, SWIMMING POOL, SIZE OF THE BEDS ETC. • OPERATIONAL-QUALITY STANDARDS – – – – – – – RATES CHARGED CHECK-OUT TIMES CLEANLINESS POLITENESS OF STAFF QUALITY OF SERVICE CHANGING OF LINEN USE OF IDENTITY ITEMS 47 MOVEMENTS IN THE HOTEL SECTOR (2) • MANAGEMENT CONTRACTS • HOTEL COMMERCIALISATION • BUDGET HOTELS • PS: MICE TOURISM AND HOTELS – SUCCESS CAPITAL CITIES DEPEND ON MANY FACTORS 48 BRANDING • • • • • • POSITIONING AND BRANDING MANY BENEFITS SINGLE-BRAND PHILOSOPHY RANGE OF BRANDS THE TEN BIGGEST HOTEL BRANDS DESTINATION BRANDING – CORPORATE IDENTITY 49 BIGGEST HOTEL BRANDS 2008 BRAND BEST WESTERN HOLIDAY INN HOTELS & RESORTS MARRIOTT HOTELS & RESORTS HILTON HOLIDAY INN EXPRESS HAMPTON INN COMFORT INN DAYS INN SHERATON HOTELS & RESORTS SUPER 8 1000 ROOMS 305 250 193 186 174 160 153 153 143 131 50 TECHNOLOGICAL EVOLUTION AFFECTING TOURISM • TRANSPORTATION – AIR TRANSPORTATION – RAILWAY – CRUISES • INFORMATION TECHNOLOGY – COMPUTER RESERVATION SYSTEMS – THE INTERNET • THE ONLINE TRAVEL AGENCIES • DYNAMIC PACKAGING • E-MARKETING 51 NEW TYPES OF ACCOMODATION AND ATTRACTIONS • • • • • • TIMESHARING CRUISES ALL INCLUSIVE RESORTS INDOOR RESORTS MODERN SPAS THEME PARKS 52 TIMESHARING • DEFINITION: “TIMESHARE, SOMETIMES REFERRED TO AS INTERVAL OWNERSHIP, IS A FORM OF MULTI-OWNERSHIP OF PROPERTY OF WHICH EXAMPLES CAN BE FOUND IN THE BUSINESS SECTOR, AS WELL AS IN THE LEISURE SECTOR. IT IS THE PERIODIC RIGHT OF USE OR OCCUPATION WHERE PROPERTY IS DIVIDED ON A TEMPORAL RATHER THAN PHYSICAL BASIS. IT CONFERS ON A NUMBER OF PURCHASERS THE RIGHT TO THE EXCLUSIVE AND FULL USE OF PROPERTY AND FACILITIES FOR PREDETERMINED PERIODS OF YEAR. IN PRINCIPLE THIS RIGHT IS RECOGNISED AS TRANSFERABLE” ( GOODALL & STABLER) • FORMS: – REAL PROPERTY RIGHT – A CONTRACTUAL RIGHT ( E.G. CORPORATE SHARE, HOLIDAY CREDITS OR POINTS) • GROWING MARKET - MAJOR HOSPITALITY COMPANIES ENTERED THE TIMESHARE INDUSTRY 53 TIMESHARING - ADVANTAGES • FOR THE DESTINATION – ABOVE AVERAGE PER HEAD EXPENDITURE (JOACHIMSTHALER) – QUALITY ACCOMODATION – STABLE LEVEL OF EMPLOYMENT – HIGHER OCCUPANCY – LESS SEASONAL • FOR THE DEVELOPER ( RETURN ON INVESTMENT) – EARLY CAPITAL PAYBACK – NEW MARKET AWAY FROM THE PACKAGE HOLIDAY NORM (LOW RETURN IN HOLIDAY HOTELS, DUE TO PACKAGES - PRESSURE T0S) 54 TIMESHARING - ADVANTAGES • FOR THE CONSUMER – ADVANTAGES • GOOD ACCOMODATION, • LIKED RECREATIONAL FACILITIES.. – DISADVANTAGES • LINKED TO A DESTINATION (BUT EXCHANGE OPPORTUNITIES) • HIGH OPERATIONAL COSTS (MAINTENANCE FEE) 55 TIMESHARING -CONT’D • EUROPEAN TIMESHARE REGULATION – HARD SELLING PRACTICES – EU DIRECTIVE ( COOLING-OFF PERIOD) • SOME POWERFUL BRANDS ARE NOW ACTIVELY INVOLVED IN TIMESHARE DEVELOPMENT - IMPACT ON THE CREDIBILITY (MARRIOTT , WALT DISNEY COMPANY, HILTON RESORTS..) • THE EXCHANGE COMPANIES – ACT AS A TOUR OPERATOR FOR TIMESHARE OWNERS • RCI ( RESORT CONDOMINIUMS INTERNATIONAL) • II ( INTERVAL INTERNATIONAL) – HAVE PROVIDED A MUCH-NEEDED RESERVOIR OF ADVICE AND INFORMATION FOR WOULD-BE TIMESHARE RESORT DEVELOPERS 56 THEME PARKS • DIFFERENCE BETWEEN CUTURAL/HISTORIC ATTRACTIONS AND LEISURE AND THEME PARKS • THEME PARK: CHARACTERISTICS (G RICHARDS & B RICHARDS) – – – – PRIMARILY AN OUTDOOR ATTRACTION A VISITOR DESTINATION IN ITS OWN RIGHT BASED ON RIDES; A SINGLE MANAGEMENT UNIT AN ADMISSION CHARGE OR ALL INCLUSIVE CHARGE (PAY-ONEPRICE - POP) – CONSTRUCTED AROUND THE NEEDS OF VISITORS, – FOCUSSED ON ENTERTAINMENT RATHER THAN EDUCATION (EURO DISNEY) • POTENTIAL VISITOR CATCHMENTS • REVENUES • POTENTIAL MARKET IN EUROPE (REF. TO USA) 57 58 CRUISES • TOTAL CAPACITY 2010 – 417.000 PASSENGERS – 254 SHIPS • BIG CONCENTRATION – CARNIVAL GROUP REPRESENTS NEARLY 50% • VERY HIGH GROWRH RATE • LARGER SHIPS 59 ALL-INCLUSIVE RESORTS • DEFINITION: “ THE ALL-INCLUSIVE CONCEPT REFERS TO HOLIDAYS WHICH INCLUDE VIRTUALLY EVERYTHING IN THE PREPAID PRICE FROM AIRPORT TRANSFERS, BAGGAGE HANDLING, GOVERMENT TAXES, ROOMS, ALL MEALS, SNACKS, DRINKS AND CIGARETTES TO USE ALL FACILITIES, EQUIPMENT AND CERTIFIED INSTRUCTORS. EVEN GRATUITIES AND NIGHTLY ENTERTAINMENT ARE INCLUDED”( POON) • MAJOR ALL-INCLUSIVE CHAINS: – CLUB MED -ALLEGRO RESORTS - ROBINSON CLUBS - CLUB VALTUR - SUPERCLUBS - CLUB ALDIANA -etc • DIFFERENT MARKET SEGMENTS ( SEE SANDALS) • PERFORMANCE: RELATIVE GOOD; SUCCESS BASED ON: – THEIR APPEAL TO TRAVEL AGENTS – PSYCHOGRAPHIC MARKET SEGMENTATION/- AGGRESSIVE MARKETING – PRODUCT QUALITY CONTROL/- GUEST SATISFACTION 60 HEALTH TOURISM • TRADITIONAL HEALTH SPAS AND MODERN “HEALTH AND FITNESS “ • DIFFERENT TYPES: – – – – – – CLUB SPA CRUISE SHIP SPA DESTINATION SPA MEDICAL SPA MINERAL SPRINGS SPA RESORT/HOTEL SPA • POPULAR IN: GERMANY, RUSSIA, AUSTRIA, FRANCE, FINLAND….. 61 INDOOR RESORTS • CONCEPT: A RESORT IS A PLACE FREQUENTED FOR A SPECIFIC PURPOSE, A DESTINATION IN ITS OWN RIGHT. BY IMPLICATION, AN INDOOR RESORT IS CREATED TO COMPETE WITH THOSE TOURIST CENTRE WHICH HAVE THE ADVANTAGE OF A WARM AND PLEASANT CLIMATE IN A COVERED ARTIFICIAL ENVIRONMENT SEVERAL INDOOR CENTRES IN THE UK • CENTER PARCS: RESIDENTIAL RECREATION 365 DAYS PER ANNUM IN A NORTH EUROPEAN CLIMATE. • FEATURES: – 300-400 ACRES OF WOODLAND AND WATER – HIGH QUALITY BUNGALOWS – CENTRAL COMPLEX OF SHOPPING, DINING AND RECREATION 62 INTEGRATED LEISURE COMPLEXES • COMBINATION OF: – RETAIL – LEISURE – ENTERTAINMENT – CATERING – ACCOMMODATION • EXAMPLES: – EDMONTON MALL – TRAFFORD PARK • FANTASY CITIES 63 DEMAND AND SUPPLY TRENDS IN TOURISM PROF. Dr. N VANHOVE