UK Holiday Market Research Report 2013/2014 - Essay Example

UK Holiday Market Research Report Number Contents Contents 2 Executive summary 3 2.Introduction 4 2 Aim of the Study 5 2.2.Objectives of the study 5 3.Findings 5 3.1.Tourists tend to explore further 5 3.2.An overview of Air Travel 6 3.3.Choice of destination 6 3.6 Choice of holiday package 7 3.4.Online Early Booking being embraced 8 3.5.Accommodation Choices 8 4.Analysis 9 4.1.Domestic Outlook 9 4.2.Changes in Consumer Behavior and the Impact on the Market 10 5.The Future of UK Holiday Market 12 6.Conclusions and Recommendations 13 7.Referencing 15 1. Executive summary Financial year 2013/1014 saw a mixed picture from a consumer confidence and sales perspective. The year started with a buoyant regular peak-booking season from January to March with high consumer confidence and strong early season sales. During the year, that confidence softened with a warm, dry summer likely to have had an impact on the market. However, there has been a small decline in the percentage of people taking holidays in the year. This was offset by a slight increase in people taking a greater number of breaks abroad. The most popular overseas destinations in 2014 for British travelers were Spain, France, Italy, The USA, Portugal, Greece, Turkey, The Netherlands, Belgium and Ireland in decreasing order. A real success for 2014 was Italy that rose to take the third spot, overtaking the USA. The desire for authentic experiences and the perception of lower prices are driving the growth of this sector and marketing agency. Increased populations have tried peer-to-peer services. However, staycations were the most common, with respondents saying their major holiday was in the UK. A study of 2,000 respondents found more than half who took a holiday in the UK or abroad and booked less than two months in advance. This report examines the central issues and developments affecting the travel money market. It provides analysis of UK domestic overseas holiday trends and the key market drivers. Also, there is an analysis of increased spending and a forecast showing the expected growth over the next five years. The CAA/Mintel independent holiday market research provides insight into attitudes towards foreign currency exchange rates, hotel and flight accountability. The report, therefore, examines the holiday habits and attitudes of British adults (16 years and above). 2. Introduction It is in human nature to be curious and try to figure out what lies within and beyond our boundaries, and ever since the ancient Greeks and Romans people have been traveling (Noel, 2009). The evolving marketplace of the tourism sector has started to recognize the importance of understanding the behaviors, reasons for choice and preferences of todays travelers for a more profitable, satisfactory, and higher quality of service opportunities. Consumer Behavior is the study of individuals, organizations and the methods they use to select, use and dispose of services, products, and experiences, or ideas to satisfy the urge and the effect that these processes have on the consumer and society (Noel, 2009). This report that was conducted in October among 2,000 UK internet users aged 16 and over examines the holidays of UK residents, both domestic and overseas, and forecasts what the market will look like in the coming five years. It explores the opportunities and challenges that operators faced in 2014 and investigates the core drivers behind changes in the market. The report also looks at booking lead times, expenditure on holidays and consumer attitudes towards paying for a vacation. 2.1. Aim of the Study The study aims at examining the nature of consumer behavior and the factors influencing the choice of hotels and accommodation for travel, the travel airline and the destination of the holiday. The secondary aim was to study the trend of the UK holiday market as of 2014 and an outlook for the future market. 2.2. Objectives of the study To understand the changes in consumer behavior in the UK holiday market To get an insight into the future of the tourism industry in the UK To explore the relationship between changes in UK holidays and hotel choice To determine the consumer booking behavior 3. Findings 3.1. Tourists tend to explore further According to MINTEL report, in the next one year, over a third of consumers think that they will take a vacation to a new country, and almost half say they are quite likely to visit new resorts. Younger holidaymakers were the most eager to explore new holiday homes with half of 16-24-year-olds (49%) saying this is quite likely, and a further 16% prepared to say they are confident they will go to a new holiday destination. Meanwhile, older users are more conservative, in that, 56% of over 65 and 51% of 55-64-year-olds said that they would not or would be unlikely to visit a country they had never been to before. 3.2. An overview of Air Travel The largest airline in the UK, by total passenger uplift, easyJet, increased volumes carried by a significant 6% during the last one-year ending October 2014; this is according to MINTEL’s report. Apart from Easy Jet, British Airways Plc, Monarch Airlines, Virgin Atlantic Airways and Loganair recorded an increased carriage volume of 3%, 2.5%, and 6.5% respectively. The parent company of British Airways, IAG, took over Aer Lingus, the national flag carrier of Ireland which hubs in Dublin Airport. The 1.36 billion euros takeover offer was accepted in January 2015 by the board. TUI and Thomas Cook both increased ATOL licensed passenger capacity in the 12 months ending February 2015, an indication of returning confidence to the overseas holiday market. One of the highest rising holiday firms in the UK is Dnata, owned by the Emirates Group. The UKs two largest tour operators TUI and Thomas Cook both increased ATOL licensed passenger capacity in the 12 months ending February 2015, an indication of returning confidence to the overseas holiday market (Schimmel, 2014). Virgin Atlantic commenced a major restructuring of operations during 2014, following its 2012 merger with US Delta Airlines as it closed its domestic brand Little Red (Schimmel, 2014). Budget carrier Jet2.com is seeing the strongest growth among the second tier of UK airlines after the ‘big two easyJet and BA, with passenger volumes up 13% during the 12 months ending October 2014. 3.3. Choice of destination Regionally, there were substantial regional differences with how many holidays are taken. Those in the North East, East and Scotland made the fewest foreign holidays per person with Londoners and those in the North West taking the most (Perrey, Freundt, & Spillecke, 2015). Londoners took on average 3.9 holidays in the UK and internationally, up from 3.3 in 2013. They also took the most foreign vacations per person, with 11% taking 4 or more international holidays in the past 12 one year. This is the same as the 2% of those in the East and 3% of the ones in the East Midlands taking 4 or more foreign holidays. The Welsh made the greatest number of national holidays at 2.2 per person (Perrey, Freundt, & Spillecke, 2015). Internationally, holiday destinations have remained largely unchanged for the past four years with Turkey and Portugal still making the top ten despite decreasing in popularity by one per cent. Beach breaks are still the top holiday choice for 2015 at 25%, but more tourists of 12% will decide on cultural city breaks than in recent years. City breaks, luxury and adventure; and all-inclusive trips are also becoming more popular. 16% more holidaymakers are looking for adventure trips compared to last year, a 12 percent increase, with only 10 percent planning to pay for a cottage or villa rental. 3.6 Choice of holiday package 25% of the total number of respondents took a package holiday in the UK in 2014, up from 18% in 2013, 23% in 2012 and double the number in 2011 when only 12% of consumers said they had taken a domestic package holiday (Cater, Garrod, & Low, 2015). Packages remain an attractive option with value cited as the primary reason for this (Morpeth, & Hongliang, 2015). Greatest value for money (but not necessarily lowest prices) remains a top ten booking essential for the majority of consumers 66%). 3.4. Online Early Booking being embraced According to MINTEL Report 2014, Among all those who booked at least one vacation abroad online 49% of those surveyed in the 12 months to August 2013, 96% used a PC or laptop as their booking device. Booking on a mobile or tablet remains most popular amongst younger travelers with 46% of 16-24-year-olds who booked a holiday abroad online saying they have used one of these two devices. The longer in advance a person booked their previous holiday, the more likely they are to accept that they book in advance to get value for money. The top reasons cited for booking in advance were: better deals/cheaper prices (63%); to get better availability (49%); better choice (33%) and to get time off work (26%) 3.5. Accommodation Choices Premier Inn and Travelodge continually dominate the market by some properties, but Whitbread-owned Premier Inn has cemented its position as market leader, increasing its lead over rival Travelodge from 140 to 159 properties. The two budget Giants are also the two most favorite hotel brand websites by some unique visitors, but both have seen unique visitors to their websites fall over the past year. This has been matched by a massive growth in traffic to metasearch site, Trivago. Trends in UK hotel market supply are positive. Growth in supply from new hotel rooms increased significantly in 2014 and were expected to rise again in 2015. 42% of guests booked directly with the hotel, 21% used an accommodation booking site and 10% purchased through a comparison website. Only half of visitors usually visit a hotels website before booking. Online travel agents such as Booking.com, Hotels.com and metasearch sites such as Trivago have indeed played a decisive role in providing hotels with access to the digital marketplace. However, they have also allowed consumer decisions to be driven by metrics such as price, star ratings and review scores and other factors such as brand have taken a back seat. 4. Analysis 4.1. Domestic Outlook Tourism within UK borders enjoyed a good year with nearly 68% consumers taking at least one UK holiday (Miller, Velasquez, & Saunders, 2014). Apart from the warm summer weather, domestic tourism in 2014 was boosted by high-profile events including the Tour de France Grand Départ in Yorkshire, Essex and London, and The Commonwealth Games in Glasgow (Miller, Driver, Velasquez, & Saunders, 2014). The domestic package holiday was a real success story in 2014 and is expected to continue its steady growth up to 2019. The popularity of shorter holidays in the UK continues to grow (Ray, 2015); some managers have increased the destinations, and breaks on offer for a shorter holiday in 2015. The UK city break is a crucial part of this trend, and the national capitals London, Cardiff, Edinburgh and Belfast are all popular destinations. Packages incorporating festivals and special events are a growth area for 2015 with consumers building breaks around events such as the Grand National, Royal Ascot, and the Great Yorkshire Show. Large numbers of boutique festivals have sprung up in recent years and are enjoyed by all age groups. In 2015, the Rugby World Cup in September and October is set to be a major event for domestic tourism in 13 English and Welsh destinations across 44 days. Key anniversaries in 2015 include the 800th anniversary of the signing of the Magna Carta that will put Salisbury Cathedral and Lincoln Cathedral into the spotlight. The Channel Islands also expect to see significant numbers of visitors to the islands celebrate the 70th anniversary of their liberation with special commemorative events throughout the year. According to the International Conference on Information and Communication Technologies In Tourism, Tussyadiah, & Inversini, (2015). Some upcoming trends have also provided a real boost for domestic tourism in recent years with popular films such as Game of Thrones and Downton Abbey increasing visitor numbers to Northern Ireland and stately homes in 2014. Classic films are also inspiring travel to destinations including Castle Howard and Morses Oxford (Morpeth, & Hongliang, 2015). 4.2. Changes in Consumer Behavior and the Impact on the Market There was a surge in the ownership of smartphones, with this increasing growth in mobile travel sales at the end of the research period thus boosting overall online sales (International Conference on Information and Communication Technologies In Tourism, Tussyadiah, & Inversini, 2015). Growth is also being caused by an improved offer, with a particular focus on mobile optimization for websites. Strategic partnerships are also proving particularly important to players, with leading online intermediary Booking.com, for example, benefiting from partnerships with low-cost carriers like easyJet and Ryanair in 2014. A shift is noted in consumer demand, with those under 35-years-old in particular increasingly prioritizing convenience, value and online features over personal service. This is having an impact on travel and tourism, with leading players thus adjusting their strategies. Within hotels, there was a growing focus on automated check-ins and free Wi-Fi. Players across travel and tourism are currently focusing on facilitating mobile sales and on offering flexible and personalized offers, alongside greater transparency regarding cost A fall in visits to hotel websites means that hotel operators have fewer touch points through which they can engage with their guests to build loyalty, upsell products or drive incremental revenue (Marvell, 2005). As hotel brands introduce features such as mobile check-in and checkout, the number of opportunities they have to engage with guests will be even more limited, contributing towards an increasing commodification of the hotels market. (Gross & Klemmer, 2014). It is clear that despite continuing pressure on the majority of household budgets, people are still keen to preserve their main annual holiday (Cater, Garrod, & Low, 2015). Although the market appeared buoyant at the beginning of the year with consumer confidence on the up, the following holiday market was tougher, perhaps reflecting the broader dip in consumer confidence in July, as well as good weather in the UK in June and July that we know impacts holiday sales. UK travel and tourism benefited strongly from a rise in economic confidence at the end of the review period. It is because the UK economy and those of the other countries around the world registered a better performance. Effective marketing is also driving growth from VisitBritain, which is successfully capitalizing on growing interest in the UK. Within intermediaries, TUI and Thomas Cook are for example shifting their focus to encouraging online sales by opening concept stores offering online technology coupled with personal service. A shift towards independent bookings is expected to resume, as it will be driven by increasing smartphone and tablet penetration and increasingly powerful price comparison and prediction tools. The total spending will rise at double the rate of bookings because package holidaymakers are almost twice as likely to spend £2,000 or more on a booking as independent travelers. 5. The Future of UK Holiday Market The majority of the travel areas and tourism are expected to register a better performance in the forecast period of up to 2019, due to stronger economic confidence. The exceptions will be domestic trips as more UK consumers opt to holiday abroad and offline sales. There will be a steady shift towards online sales, particularly mobile sales, with this encouraged by ongoing technological development (Benckendorff, Sheldon, & Fesenmaier, 2014). Established players will optimize their sites and offer greater flexibility and personalization while high investment in meta-search developments from players such as Google and TripAdvisor will also fuel growth. Due to the steady year-on-year growth for UK holiday sales over the next five years, the market research for UK Holiday market growth predicts that holiday consumers will take more than 100 million holidays both overseas and domestic in 2018, an increase from 94 million in 2013. The average holiday expenditure per person for the whole year, including accommodation, flight, food, shopping and other expenses was 1,398.46 pounds. Studies found that the average overseas break involved flying to Spain for a short-haul holiday and spending a total of £609.52. That includes £353.24 from savings account to pay for flights, transport and accommodation, leaving them with £255.28 spending money. This suggests recent growth in package sales will go into reverse. UK households will take almost 41 million overseas holidays by 2019, up from 36 million last year. This suggests that while consumer attitudes are not predictable towards taking a leave, the recovery is unlikely to draw in new users. Instead, the recovery is likely to result in existing holidaymakers upgrading holidays, spending more on each trip and taking multiple trips each year. A significant number of consumers who identify themselves as struggling financially intends to take an overseas holiday. The biggest growth will be in independent bookings. 6. Conclusions and Recommendations "The hybrid consumer buys cheaper generics and low-end brands on some purchase occasions, and then on other occasions trades up to premium, high-end brands and happily pays for them." (Ehrnrooth & Gronroos 2013). According to this report, this statement is contrasting since most consumers tend and intend to change their choices each time. Therefore, we can conclude that; Holiday habits are often a reflection of consumer confidence, and hence these results indicate that the mood of the UK nation is becoming more confident (Benckendorff, Sheldon, & Fesenmaier, 2014). People are starting to spend more on their main break, go away more often on holidays and even book more luxurious and costly trips. There are significant changes in the consumer choice of Airlines, Accommodation services, and holiday destinations. The changes are mainly influenced by the costs, past reviews, security, age, and type of break. Despite all this, Spain continues to be a firm favorite, holidaymakers are now seeking more than just a fly and flop in a sunny clime. Change is good. Therefore, it is recommended that holidaymakers should embrace change and focus on this to ensure it is the best by focusing on the security, convenience and cost. A person before going out on holiday should work out how much everything will cost, including insurance, spending money, car hire and so on and not just look at the brochure price, but also consider the full cost of the holiday to know exactly how much one will need. On the other hand, the managers, one way should encourage early bookings by offering time-sensitive or limited-quantity deals and flash sales, fuelling perceptions of value for money. They should focus highly on the changing preferences of the consumers hence strive to reach them. 7. Referencing Schimmel, M. (2014). Communication in the U.K. Budget Airline Industry. Hamburg, Diplomica Verlag. http://public.eblib.com/choice/publicfullrecord.aspx?p=1640337. Benckendorff, P., Sheldon, P. J., & Fesenmaier, D. R. (2014). Tourism information technology. Ray, N. 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