Holiday Purchasing Patterns

Buying a holiday is a more complex matter for UK consumers than making most other purchases. The first purchasing decision to be made is whether to take a holiday in the UK or to travel abroad. The demand for overseas holidays has grown almost incessantly for several decades, a period in which the `domestic' half of the market has declined. In 2008, UK residents took an estimated 120 million holidays (around two per inhabitant), on which they spent £39bn. While the majority of holiday trips away from home were within the UK, domestic trips are relatively low in value, largely involving cheap leisure breaks to see family and friends.

The second purchasing decision is whether to buy a convenient package holiday or to travel independently, booking each element of the holiday separately. The sun-and-sea packages sold through high-street travel agents are well established, but the Internet has grown steadily in importance, helping consumers with some technological ability to book their own `dynamic' holiday packages.

Since the start of the current decade, independently booked holidays have increased their share of holidays abroad to nearly 60% of overseas holidays. For the independent traveller, a host of purchasing decisions have to be made — transport, accommodation, holiday activities, buying insurance, etc. — whereas the main decision for package holiday tourists is destination. Assuming they are going abroad, Spain and France are still the most popular, but the range of other significant destinations (e.g. the US, Greece, the Caribbean, Egypt or Scandinavia) illustrates the sophisticated choices made by the British abroad after two generations of travel.

The recession that started in 2008 and deepened in 2009 had an immediate impact on holiday purchasing. Key Note's consumer research found that a significant proportion of adults were considering saving money by staying in the UK for their holidays in 2009, while a quarter were worried they might not be able to afford a holiday at all. However, Key Note's overall conclusion is that the holiday market has come through previous recessions and the long-term growth trends will soon be reinstated, because holidays away from busy working lifestyles are now seen as `essentials', not luxuries.

The industry that supplies the demand for holidays abroad is in a strong position to help the market recover. Once extremely fragmented, tour operating and travel agency are now focused on two giant groups: TUI (including Thomson Travel) and Thomas Cook, both owners of airlines, travel agents (high street and Internet) and numerous holiday brands ranging from the mainstream to the ultra-specialist. The sophistication of these groups, both German controlled, is well suited to the growing sophistication of the UK tourist.

Executive Summary

1. Introduction

BACKGROUND

RESEARCH

Consumer Research

MARKET TRENDS

DEFINITIONS

2. Strategic Overview

MARKET DYNAMICS AND SEGMENTATION

Table 2.1: The UK Holiday Market by Volume and Value (million and £bn), 2004-2008

Holiday Supply

Destinations

Table 2.2: Main Destination Countries for Holidays Abroad (% of trips), 1998 and 2008

Figure 2.1: Main Destination Countries for Holidays Abroad (% of trips), 2008

Exchange Rates

Transport Routes

Package to Independent?

Domestic Developments

DISTRIBUTION

Table 2.3: Booking Method Used for Last Holiday (% of adult holiday takers), 1999 and 2008

COMPETITIVE STRUCTURE

Travel Industry Consolidation

Brand Allegiance

ADVERTISING

Table 2.4: Main Media Advertising Expenditure on Travel and Tourism (£000 and %), Year Ending December 2008

Airlines and Airports

Other Transport

Accommodation and Resorts

Tourist Boards

Tour Operators

THE CONSUMER

The Importance of Holidays

The Impact of Experience

MARKET FORECASTS

3. The Holiday Market

BACKGROUND

Domestic Holidays

Holidays Abroad

MARKET SIZE

Table 3.1: The Total UK Holiday Market by Sector by Volume and Value (million and £bn), 2004-2008

Notes on Methodology

Current Market Trends

HOLIDAYS ABROAD

Package versus Independent

Table 3.2: Independent and Package Holidays Abroad by Volume and Value (000, £m and %), 2004-2008

Transport Method

Destination Country

Table 3.3: Main Destination Countries for Holidays Abroad by Independent and Package Holidays (000 and %), 2007

Short Breaks

Specialist Holidays

DOMESTIC HOLIDAYS

Table 3.4: The Domestic UK Holiday Market by Volume and Value (million, £bn and £), 2004-2008

Short Breaks

Table 3.5: Long Holidays and Short Breaks in Domestic Tourism by Volume and Value (million, %, £m and £), 2007

Accommodation

Table 3.6: Accommodation Used on Domestic Holidays (% of trips), 2007

Transport Method

Specialist Holidays

4. Current Purchasing Patterns

BACKGROUND

SOURCES OF HOLIDAY INFORMATION

Table 4.1: Main Sources Used to Obtain Information for Last Holiday Taken in the Past 12 Months (% of adults), Years Ending March 2006-2008

Table 4.2: Selected Methods for Planning Last Holiday (% of respondents), 2009

Consumer Sophistication

Role of the Brochure

INTERNET USAGE IN DETAIL

Table 4.3: Internet Activities (% of respondents), 2008

`Dynamic Packaging' and Web 2.0

HOLIDAY BOOKING METHODS

Table 4.4: Selected Methods of Booking Last Holiday (% of adults), 1999, 2003, 2005 and 2008

Table 4.5: Booking Methods for Domestic Holidays (% of trips), 2005-2007

5. The Travel Industry and the Internet

BACKGROUND

TRAVEL AGENTS AND TOUR OPERATORS

DOMESTIC TOURISM

THE INTERNET

6. An International Perspective

INTRODUCTION

NORTH-TO-SOUTH MIGRATION

EU ENLARGEMENT

THE EUROZONE

INFRASTRUCTURE DEVELOPMENTS

LOW-COST AIRLINES

7. PEST Analysis

POLITICAL FACTORS

ECONOMIC FACTORS

SOCIAL FACTORS

TECHNOLOGICAL FACTORS

8. Consumer Dynamics

BACKGROUND

HOW CONSUMERS PLAN AND BOOK THEIR HOLIDAYS

Table 8.1: Methods Used for Planning Last Holiday (% of respondents), 2009

Traditional (Non-Internet) Holiday Planning

Not Much Planning Involved Because I/We Returned to Somewhere We've Been Before

Followed the Recommendation of a Friend or Relative

Table 8.2: Not Much Planning Because of Returning to a Previous Destination, and Followed the Recommendation of a Friend or Relative (% of respondents), 2009

Looked Through Printed Holiday Brochures

Went in Person to a Travel Agent

Table 8.3: Looked Through Printed Holiday Brochures, and Visited a Travel Agent (% of respondents), 2009

Got Information From Teletext or a Television Programme

Table 8.4: Obtained Information from Teletext or a Television Programme (% of respondents), 2009

Use of the Internet for Holiday Planning

On the Internet, an Airline Website (e.g. easyJet or British Airways)

On the Internet, Another Type of Transport Website (e.g. Trains, Coach, Ferry)

Table 8.5: Used an Airline or Another Type of Transport Website (% of respondents), 2009

On the Internet, a Website of a Travel Agent You See in the High Street (e.g. Thomas Cook or Going Places)

On the Internet, Another Travel Company Website (e.g. Thomson or First Choice)

Table 8.6: Used the Website of a High-Street Travel Agent or Another Travel Company (% of respondents), 2009

On the Internet, a General Travel Website (e.g. Expedia or TripAdvisor)

On the Internet, a Hotel Website, Either for a Chain or an Individual Hotel

Table 8.7: Used a General Travel Website or a Hotel Website (% of respondents), 2009

REACTIONS TO THE CREDIT CRUNCH

Table 8.8: Holiday Planning in the Recession (% of respondents), 2009

Positive Reactions

I Need to Go on Holiday for Quality Time with My Family

I'd Rather Cut Back Spending on Other Things Because My Holidays are so Important to Me

Table 8.9: Needing Quality Time with Family, and Preference for Cutting Back Spending on Other Things (% of respondents), 2009

It Won't Affect Me, I'll Go on Holiday as Usual

Table 8.10: Recession Will Not Affect Holiday Plans (% of respondents), 2009

Neutral Reactions

I'll Go Abroad on Holiday But Spend Less on it Than Usual

I'm Looking into Countries That are Good Value for Money, e.g. That Don't Use the Euro

Table 8.11: Spending Less Than Usual on a Holiday Abroad, and Looking at Countries Offering Good Value for Money (% of respondents), 2009

I Won't Book Anything Early But Hope to Find a Last-Minute Deal

I'll Take the Usual Summer Holiday But Cut Out Extra Breaks to Save Money

Table 8.12: Hoping to Find a Last-Minute Deal, and Cutting Out Extra Breaks to Save Money (% of respondents), 2009

Negative Reactions

I Might Stay in the UK for Holidays Instead of Going Abroad

Instead of a Long Holiday, I'll Take Short Breaks to Save Money

Table 8.13: Staying in the UK for Holidays, and Taking Short Breaks Instead of a Long Holiday (% of respondents), 2009

I'm Worried That Travel Companies or Airlines I Book With Might Go Bust

I May Not be Able to Afford a Holiday at All

Table 8.14: Worrying About Travel Companies or Airlines Going Bust, and Not Being Able to Afford a Holiday (% of respondents), 2009

9. Company Profiles

INTRODUCTION

TUI TRAVEL PLC

History

TUI Travel Today

Corporate Strategy

Profitability

THOMAS COOK GROUP PLC

History

Thomas Cook Today

Corporate Strategy

Profitability

OTHER TOUR OPERATORS

Co-operative Holidays

Holidaybreak PLC

Other Operators

OTHER TRAVEL COMPANIES

Expedia Inc

Sabre Holdings Inc

Travelport

Budget Airlines

10. The Future

INTRODUCTION

MARKET FORECASTS

Table 10.1: The Forecast UK Holiday Market by Volume and Value (million and £bn), 2009-2013

Figure 10.1: The UK Holiday Market by Volume (million), 2004-2013

Figure 10.2: The UK Holiday Market by Value (£bn), 2004-2013

FUTURE TRENDS

Impact of the Recession

Package versus Independent

Online versus High Street

Strength of the `Big Two'

Tackling Overcapacity

Holiday Branding

Domestic Sector Optimism

The Predictable and the Unpredictable

11. Further Sources

Associations

Publications

General Sources

Government Sources

Other Sources

Key Note Sources