ICAN 2015

ANTALYA, TURKEY 20 Oct 2015

NEW UNDERSTANDINGS

AND APPROACHES IN

AIRLINE AND TOURISM

BUSINESS

MÁRCIO FAVILLA

UNWTO Executive Director

Tourism Towards 2030

Continued

growth of

demand

International Tourist Arrivals

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1995 2000 2005 2010 2015 2020 2025 2030

mill

ion

Trend 1995-2010

Tourism Towards 2030 projection

Actual 1995-2014*

1.4 bn

1,133 mn

1.8 bn

527 mn

Source: World Tourism Organization (UNWTO)

Actual Trend vs. Tourism Towards 2030 Int’l arrivals reach 1.4 bn in 2020 and 1.8 bn in 2030

Continued growth of demand

From advanced markets • established markets still far from saturated, however growth potential is

comparatively moderate

• growth both from: – increase of participation, but tourism is already available for broad part of society

– increased frequency: more frequent but shorter stays

From emerging markets • still huge potential for growth to exploit from current travellers but above all

from new emerging middle classes

• sizable populations currently still only take part in international tourism very limitedly

• economic growth in many emerging economies resulting in increasing disposable incomes

• a good share of this increase will be spent on tourism (domestic as well as international)

Growth in international tourism will continue but

at a more moderate pace

International tourism, World International Tourist Arrivals, % change over previous year

source: World Tourism Organization (UNWTO) ©

3

0

0

1

9

4

3

9

7

6

7

0

9

3

44

6

5

3

4

8

0

3

-2

10

66

7

2

-4

7

-6

-4

-2

0

2

4

6

8

10

12

1980/'79 1985/'84 1990/'89 1995/'94 2000/'99 2005/'04 2010/'09 2015/'14 2020/'19 2025/'24 2030/'29

Average growth 2010-2030

3.3% a year

2010-2020

3.8% a year

2020-2030

2.9% a year

International tourist arrivals to increase

by 43 million a year on average

International tourism, World International Tourist Arrivals, absolute change over previous year, million

source: World Tourism Organization (UNWTO) ©

8

0

0

4

25

1310

3027

22

28

-2

39

15

21 20

33

26

16

22

49

-1

20

-11

70

45 45

56

20

-35

58

-40

-20

0

20

40

60

80

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Average increase 2010-2030

43 million a year

2010-2020

42 mn a year

2020-2030

45 mn a year

Asia and the Pacific, the Middle East

and Africa to increase their shares

Africa

3%

Americas

23%

Asia and the Pacific

8%

Europe

63%

Middle East

3%

Middle East

6%

Europe

51%

Asia and the Pacific

22%

Americas

16%

Africa

5%

Africa

7%

Americas

14%

Asia and the Pacific

30%

Europe

41%

Middle East

8%

1980

2010

2030

Asia and the Pacific to be the

outbound region to grow the most

Outbound tourism by region of origin International Tourist Arrivals generated, million

12

11088

308

1030

160

204

509

37

90

265

541

832

81

6

169

25

71

6

0

100

200

300

400

500

600

700

800

900

Africa Americas Asia and the Pacific Europe Middle East

1980 1995 2010 2030

Connectivity

Connectivity

• Transport and tourism are closely interconnected

• Infrastructure development

• Technological development and improvement

• Air transport liberalisation

• New mega hubs

• Low-cost airlines

• Interconnectivity of means

• High-speed rail

• Facilitation: entry formalities, visas

Courtesy of Boeing

Cost of transport has remarkedly decreased

Wages vs airfares

time taken to earn the lowest Sydney-London return airfare130

21

5 3.5 2.7 1.9 1.70

25

50

75

100

125

1945 1965 1985 1995 2000 2005 2009

we

eks

source: Qantas, page 40 of www.qantas.com.au/infodetail/about/FactFiles.pdf

Visa facilitation: UNWTO jointly with partners has worked

closely with stakeholders to move agenda forward

Various reports to analyse the issue and make policy

recommendations

For more information and download of reports, see

http://rcm.unwto.org/en/content/facilitation-tourist-travel

Diversification

Diversification

• Tourism development, like society and economy overall, is characterised by ever increasing diversification and sophistication – of destinations

– of source markets

– of products

– of segments

• tap emerging markets

• China boom

• shift from products and service to experience

• need for upgrade and regeneration of existing offer

• develop products, markets, segments that complement current ones

• also intensified competition

Emerging economies to surpass

advanced destinations by 2020

Inbound tourism, advanced and emerging economies International Tourist Arrivals, million

emerging economies

advanced economies

source: World Tourism Organization (UNWTO) ©

0

250

500

750

1,000

1,250

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Rank 1950 Share 1970 Share 1990 Share 2014 Share

1 United States Italy France France

2 Canada Canada United States United States

3 Italy 71% France 43% Spain 39% Spain 29%

4 France Spain Italy China

5 Switzerland United States Austria Italy

6 Ireland Austria Mexico Turkey

7 Austria Germany Germany Germany

8 Spain 17% Switzerland 22% United Kingdom 18% United Kingdom 15%

9 Germany Yugoslavia Canada Russian Federation

10 United Kingdom United Kingdom China Mexico

11 Norway Hungary Greece Hong Kong (China)

12 Argentina Czechoslovakia Portugal Malaysia

13 Mexico 9% Belgium 10% Switzerland 9% Austria 11%

14 Netherlands Bulgaria Yugoslav SFR Thailand

15 Denmark Romania Malaysia Greece

Others 3% Others 25% Others 34% Others 45%

Total 25 million 166 million 436 million 1133 million

Source: World Tourism Organization (WTO) © (Data as collected by UNWTO August 2015)

Diversification

World and regions: Outbound Tourism

International Tourism Expenditure (US$ billion)

China

United States

Germany

United Kingdom

Russian Federation

France

Canada

Italy

Australia

Brazil

Source: World Tourism Organization (UNWTO) ©

0

20

40

60

80

100

120

140

160

180

'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

China became number 1 outbound market

in 2012 and strong growth continues

International Tourism Expenditure: increase 2007-2014* (US$ billion)

Source: World Tourism Organization (UNWTO) ©

30.0

22.517.4

10.5 9.9 9.5 9.1 9.0 7.4 7.1 6.9 6.9 6.7 6.5 6.4 6.4 6.1 6.0 4.9 4.7 4.0 2.8 2.8 2.0 1.8 1.8 1.5 1.5 1.5 1.4 1.4 1.3 1.3 1.2 1.1 1.1 1.0

-7.2

-13.8

135

-20

-10

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

China

Russia

n Fed

erat

ion

United

Sta

tes

Brazil

Singap

ore

Austra

lia

Franc

e

Germ

any

Canad

a

Qatar

Hong

Kong

(Chin

a)

Norway

Philipp

ines

Mala

ysia

Switzer

land

Untd

Arab

Emira

tes

India

Belgium

Sweden

Taiwan

(pr.

of C

hina)

Kuwait

Saudi

Arabia

Colom

bia

Indo

nesia

Nethe

rland

s

Thaila

nd

Ukraine

Korea

, Rep

ublic

of

Denm

ark

Czech

Rep

Argen

tina

Turke

y

Finlan

d

Leba

non

Mex

ico Italy

Poland

New Z

ealan

d

Japa

n

United

King

dom

International Tourism Expenditure: between 2007 and 2014 total up by € 293 billion (US$ 362 bn), from € 644 bn (US$ 883 bn) in 2007 to € 937 bn (US$ 1,245 bn)

in 2014 (current terms) in spite of 2008/09 crisis Average growth rate in real terms: +2.7% a year

High potential outbound markets

Disruption

Disruption Business is continuously evolving thanks to:

• New ideas

• R+D (C+I)

• Innovation

• Entrepreneurship (low capital and technical barriers)

• Economic and social changes

• Technological changes

• Changing customers’ behaviours

• Not only technology but also business models, design,

service, etc.

Disruption Resulting in:

• Offering new products

• Offering better service

• Enhancing experience

• Use of economies of scale

• Decreasing costs

• Increase labour productivity / value added

• Sources of market growth

– Inclusiveness, open up for new customers

– Enables more frequent trip taking

Disruption Market concentration • Tourism sector still strongly characterised by fragmentation

• Lower concentration of its industries as compared to others (e.g. automobiles, oil, computers, micro processors, beverages, etc.)

• From highest to lowest: GDSs, online booking engines, cruise lines, airlines, car rentals, TO/travel agencies, hotels, restaurants, attractions

• Traditionally very few big worldwide players, but some new ones have appeared, e.g. Expedia, Booking, TripAdvisor, etc.

• Within industries also strong diversity in size and model, e.g. in hotels a few large companies owning properties, or with management contracts, franchises, and a large number of medium and small-sized companies

• Asymmetry in power, e.g. OTAs versus hoteliers

• Change of balance of power between Operators – Consumers – Intermediaries

Disruption Some (recent) game changers

• Airline alliances (One World, Star Alliance, Sky Team)

• Low-cost carriers (RyanAir, AirAsia, easyJet, Gol, …)

• Online direct booking: OTA – Online Travel Agencies

• Non-traditional operators

• Mega hubs in the Middle East (UAE, Qatar), Turkey

• All-inclusive resorts

• Cruise lines

• Vertical integration (TO, TA, airline, resort, attraction, …)

• Internet and social media

Disruption A connected world, a connected customer • Internet, social media, mobile technology (apps, GPS,

etc.) single biggest change in past decades

• Sharing economy: internet and social media to share opinions, reviews, etc. – Increase of choice and transparency for customers

• oops… my clients talk back

• valuable feedback, need to be responsive

• pecking order: if you do things right, you can charge a better price

• it gets harder if you want to sell a lousy product to an ignorant customer

• reputation management / positioning / branding / loyalty building even more important

• Platform economy: internet as intermediary – B2B, B2C but also C2C

– Increasingly platform use for transactions between private persons, offering for instance goods and services in auctions (eBay); accommodation (airbnb); transport services (Uber, Lyft and blablacar); dining at home (eatwith and eatfeastly).

Disruption Adaptation • Issue not new, but internet makes transactions far easier

• In most cases need to recognise it is an economic transaction

• Might not fit into some existing rules, but necessarily illegal (??)

• Different traditions and regulation, for instance private rental long

established practice in many coastal and mountain destinations,

e.g. ‘zimmer frei’

• Maintain level playing field

• Take inefficiencies out

• Review existing rules and adjust if needed

• But do not overdo it

8.9 by 2030 devise and implement policies to promote sustainable tourism which creates jobs, promotes local culture and products

14.7 by 2030 increase the economic benefits to SIDS and LDCs from the sustainable use of marine resources, including through sustainable management of fisheries, aquaculture and tourism

12.b develop and implement tools to monitor sustainable development impacts for sustainable tourism which creates jobs, promotes local culture and products

Sustainable Development Goals

UNWTO Network of Observatories (INSTO)

http://sdt.unwto.org/content/international-network-sustainable-tourism-

observatories-insto

MEASURE TO MANAGE

MEASURE – MANAGE – IMPROVE

Measurement

Analysis

Policy/Strategy Formulation

Implementation and Monitoring

Evaluation

Socio-cultural

Environmental Economic

Measuring for impact at destinations:

Exploring existing and new approaches

UNWTO Network of Observatories (INSTO)

Round-up

Round-up in one page

• Tourism Towards 2030 shows that there is still a great

potential for further expansion in coming decades

• Emerging as well as established destinations can benefit from

this trend and opportunities, provided they have the adequate

conditions and policies with regard to business environment,

infrastructure, facilitation, marketing and human resources

• Along with opportunities, challenges also arise in maximising

social and economic benefits and minimising negative impacts

Long-term tourism growth pattern: more moderate,

sustainable and inclusive

Thank you very much for

your attention!

Márcio Favilla

World Tourism Organization

(UNWTO)

www.unwto.org