All-inclusive on Steroids - OneCaribbean.org inclusives... · 2014-09-25 · Package Prices Lower than After 9/11 $1,921 $-$500 $1,000 $1,500 $2,000 $2,500 Winter 2001/02 $1,478 $-$500

www.conferenceboard.ca

All-inclusive on Steroids

Changing the discussion David Redekop

October 24, 2012


Let’s talk more about $

and less about arrivals & market

share


Package Prices Lower than After 9/11

$1,921

$-

$500

$1,000

$1,500

$2,000

$2,500

Winter 2001/02

$1,478

$-

$500

$1,000

$1,500

$2,000

$2,500

Winter 2012/13

Average advertised base package price

for three time periods, one week, all-inclusive,

lowest price, from Toronto to Mexico, Cuba, Jamaica, DR.

-15%

Total Price=

$1,772

-8%


Package Prices Lower than After 9/11

Average brochure base package price, for three

time periods, one week, all-inclusive, lowest price,

from Toronto as of October 2001 & 2012.


TUI £14.7b Revenues - £360m Profit

*TUI statutory profit before taxes


• Transat A.T. Inc.

• $3b Revenues first 9 months FY 2012

• -$36m Operating loss before taxes

Transat & Thomas Cook also

looking for greater margin

• Thomas Cook PLC North America

• £349m Revenues in 2011

• - £67m loss (segmented result)


SUPPLY EVEN STRONGER

Canadian Travel Demand Strong

7


Mexico & Cuba #1 for

2011/12 Winter Destinations

88%


Ranking of CDN

$ Spent per Visit Country

1 Grenada

2 Bermuda

3 St. Lucia

4 St . Vincent

5 Antigua

6 Barbados

7 Jamaica

8 Mexico

9 Bahamas

10 Panama

11 DR

12 Cayman Is.

13 Cuba

14 Puerto Rico

Ranking of Visits

Winter 2011-12 Country

1 Mexico

2 Cuba

3 DR

4 Jamaica

5 Bahamas

6 Barbados

7 Panama

8 St. Lucia

9 Cayman Is.

10 Puerto Rico

11 Antigua

12 Bermuda

13 Grenada

14 St Vincent

Sources: Statistics Canada and CBoC for averages.

Ranking of Winter 2011/12 Visits

Vs. CDN $ Spent per Visit


It’s a different world

Margin trumps market share


Drive for margin “There is a prevailing trend towards

online bookings in all of our source

markets and increasing our share of

sales made through online channels

results in lower distribution costs and

higher margins.” TUI

“Our focus is to drive growth

organically and reduce net

borrowings by improving operating

and free cash flow generation, with

an emphasis on protecting

margin rather than market

share.” Thomas Cook PLC



All-inclusive Has Changed

• Competing on price to gain market share not

sustainable

• Shareholders want dividends and higher share

prices


$HOW ME THE $$$$ TIME



Tour Operations Changing

–Cost management ongoing

–Product mix and concentration has

changed



Cost Management

• Moving small margin mainstream

destinations to online

• Leveraging size when purchasing rooms

• Rationalizing fleet – TCX, Transat/CanJet

• Greater focus on increasing capacity to

destinations where there is a higher

margin to be made.


Margins Driving Capacity (Number of seats to Caribbean/Mexico/S. America from Canada)

Seat capacity for winter

2012/13 down by -4.3%

Sources: CBoC calculations using OAG & websites for Transat & Sunwing


Winter 2012/13 Capacity down

to Mainstream

• 4.3% reduction in overall capacity for Winter

2012/13

• Capacity to “big four” down -5.2%

• Capacity to some higher margin destinations

up 10% or more – Costa Rica up +40%,

Honduras more than double, Aruba +15%,

Martinique +30%


Package Prices on the Rise (Winter 2012/13 prices versus Winter 2011/12)

• Average package price

up 5.8% for winter

2012/13 to “big four”

destinations.

• Price increase expected

to hold “this time

around”.

Winter

2011/12

Winter

2011/12

Winter

2012/13

Winter

2012/13



Product Mix

• More exclusive hotels to help differentiate (RIU

& Signature)

• Greater focus on experiential and activity based

special interest travel -Transat Discoveries

“Centered on authenticity and flexibility….to

allow travellers to enjoy memorable

moments in all four corners of the earth..”

Travel Industry Today


Cuba

Mexico

Jamaica


Sunquest Vacations Bahia & Activity


Air Canada Vacations

Brochure all about activity


Margins Higher on

“Differentiated” Based Products

• Experiential or activity based travel part of

“differentiated” product.

• Most purchased onsite but operators taking cue

from cruise industry.

• Will gradually move to mobile.

• Travel industry playing catch-up to travellers.


Cruise Industry Knows How to Sell Activity


7 in 10 Package Travellers Plan to

Buy Separate Activity this Winter 69%

39%

29% 25%

22%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Purchasingactivity whileon package

trip

Water activity Adventure Spa Fitness Golf


“AIR CANADA VACATIONS IS

FIRST CANADIAN TOUR

OPERATOR TO GO MOBILE”

Air Canada Realigns Sales Organization;

Zeina Gedeon Appointed Vice President,

E-commerce, Product Distribution and Sales

Development;

Selling during more stages of the travel cycle.


Improved Margins through Mobile

• 44% of package travellers carrying smart

phone or tablet during winter 2012/13

• 19% “very likely” to purchase something

while on package trip with smart device

• 36% to use smart device to research local

activities and things to see and do

• 25% to research local history


The Operator’s Steroid “The TUI mobile strategy is about responding to

consumer demands, enhancing customer

relations, generating ancillary revenues,

improving use of destination content, being

closer at each stage of the customer

experience”


Travel Cycle Touch Points

Inspire Research

Planning trip

Confirming

& Closing

Arranging Travel to

Destination

In Destination

activities

Return Trip Home

Follow-up & sharing

Travel Stages

30


Market Share giving way to Margins

Driving down costs and increasing margins is the

order of the day.

Why?

Shareholders want dividends &

higher stock values


Caribbean: Occupancy & rates up

Source: STR Global via CHA.


$$ Canadians will Spend in Caribbean

– 2011-2013

33


Average Spent per Visit by Canadians

2011-2013

34

Source: CBoC.


1 Yr. for Canadian Outbound to

Rebound

Sources: Statistics Canada, UK ONS, CTO, US OTTI.

(‘000 of trips prior to and after global recession)


Outbound Leisure Travel: Average

Annual Rate of Growth 2012 - 2016

36



• More activity based – much like cruise lines

• Greater segmentation with more exclusive

arrangements with large operators

• Margin driven = happy shareholders

Documents

All-inclusive on Steroids - OneCaribbean.org inclusives... · 2014-09-25 · Package Prices Lower than After 9/11 $1,921 $-$500 $1,000 $1,500 $2,000 $2,500 Winter 2001/02 $1,478 $-$500