| Tourism Economics

Market Allocation PlatformGuiding investment decisions to maximize ROI

| Tourism Economics

Tourism Economics core services

Travel data and

forecasts for 190

countries, 50

states, and 300

cities

Policy analysis

and

recommendations

Market opportunity

and scenario

analysis

Destination visitor

tracking and

economic impact

3

Market Allocation Platform

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Intelligent decisions …improved ROI

Selected MAP destinations

ROI ROI

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An optimal investment portfolio has the following

characteristics

• Adequate diversification

• Risk mitigation

• Defined time horizon

• Maximizing returns

...the same is true for destination marketing

Market allocation as an investment portfolio

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• Marketing strategies are often based on current travel

activity

• However, the goal is to identify new opportunities

• Market costs and risks vary across markets

• And all this changes over time!

The need: a dynamic and flexible system to continuously

evaluate market opportunities and guide investment decisions

Translating market analysis into decisions

| Tourism Economics

Solution: Market Allocation Platform (MAP)

• The underlying model scores and ranks origin markets across

comparable metrics of opportunity, cost, and risk.

• MAP uses these scores to suggest marketing budget allocation

across markets.

• Up to 30 international markets

• The model delivers flexibility in terms of:

• Timeframe for outlook

• Risk tolerance

• Origin markets for comparison

• Components

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• Market size and growth

• Destination and activity preferences

• Market presence

• Accessibility / barriers

• Purchasing power

• Value per visitor

Measuring opportunity is complex

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Framework

Realizable ReturnOpportunity

Propensity

Value

CostMarketing

Access

RiskConstraintsAccessAllocation

Relative ROI Potential index

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Realizable ReturnOpportunity

Propensity

Value

CostMarketing

Access

RiskConstraintsAccessAllocation

Relative ROI Potential index

Step 1: Quantify the raw opportunity

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Implementation

• Over 25 indicators of

demand are grouped into

like categories and

weighted based on

historic importance in

determining market

demand

• The MAP scoring system

ensures a comparable

basis for assessing

potential across all

markets

• Scores are all relative

indices for easy

benchmarking

CATEGORY COMPONENT

Opportunity Travel Market Size

Country Size

Market Growth

Headroom

Propensity Sentiment

Alignment

Value Purchasing Power

Visitor Value

Affordability

Market Presence

Constraints Risk

Accessibility

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Example: Country size

• The country size score is based on GDP per capita and the

number of households in each income tier.

Component scores Summary data

Rank Market scoreGDP per

capita (US$)

Households

Tier 1

(income over

$150,000)

Households

Tier 2

(income

$70,000 to

$150,000)

Households

Tier 3

(income

$20,000 to

$70,000)

1 Japan 77.2 36,805 2,553 18,464 30,199

2 Germany 48.7 46,364 1,406 8,357 25,771

3 United Kingdom 44.1 42,481 1,678 6,850 15,396

4 France 40.0 42,313 1,084 7,071 18,785

5 China 39.3 7,297 876 5,908 72,940

6 Australia 33.5 63,787 2,252 3,556 2,756

7 Canada 32.5 48,011 1,530 3,773 7,362

8 Italy 30.6 35,526 787 4,663 15,922

9 Spain 22.6 29,573 658 2,672 9,510

10 Brazil 20.8 10,930 417 2,687 20,979

11 Switzerland 18.8 82,183 742 1,634 1,273

12 Mexico 17.8 10,519 349 2,266 14,413

13 United Arab Emirates15.2 43,923 834 704 516

14 Norway 14.1 101,944 369 1,005 874

15 Sweden 12.3 59,496 166 1,147 3,053

16 Netherlands 12.1 48,201 117 1,200 5,190

17 Austria 11.6 50,547 163 1,039 2,297

18 Denmark 10.1 61,117 163 472 1,334

19 Colombia 9.4 7,591 176 584 3,214

20 Finland 9.2 47,779 81 587 1,706

21 Chile 9.1 14,807 90 686 3,382

22 Ireland 8.8 48,607 91 463 1,028

23 Qatar 8.5 97,118 109 165 104

24 Venezuela 8.4 18,267 47 527 4,114

25 India 8.3 1,484 58 469 11,344

26 Argentina 8.0 9,266 40 474 5,255

27 Peru 6.5 7,060 25 192 2,702

28 Costa Rica 5.7 10,069 12 68 491

29 Panama 5.6 11,627 7 49 366

30 Guatemala 5.5 3,567 15 79 663

For example, Japan, the

highest scoring country

on country size, has 2.6

million households

within income over

$150k, plus 18.5 and

30.2 million households

in the next two income

tiers.

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Detailed analysis…simple conclusions

For each origin market…

T

1

1

1

2

3

2

4

5

6

3

7

8

9

2

4

10

11

12

5

13

14

6

15

16

3

7

17

18

8

19

20

9

21

22

4

10

23

24

11

25

26

12

27

28

Total potential score

4 categories

12 components

28 indicators

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Example metric: Alignment

0 20 40 60 80 100

Australia & NZ

Brazil

Canada

UK & Ireland

France

Scandinavia

Italy

Ger, Aus, Swi

China

Benelux

South America

India

S Korea

Japan

Mexico (air)

Competitor share outbound

Comparable share outbound

Alignment in activities

Alignment in leisure activities

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Step 2: estimate costs (the flip side of return)

Cost of doing business in a market AND costs faced by its travelers

Realizable ReturnOpportunity

Propensity

Value

CostMarketing

Access

RiskConstraintsAccessAllocation

Relative ROI Potential index

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Market cost estimates

2 types of costs are considered

1. Marketing costs

• The physical cost incurred of operating marketing

activity by market

• The ease of doing business in each market is also

considered

• Current marketing presence as a mitigating factor to

operating costs are also considered

2. Barriers

• Accessibility is included as restrictions on travel from

each market also presents a cost to be overcome

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Example metric: Costs

0 20 40 60 80 100

Mexico (air)S Korea

ChinaSouth

JapanGer, Aus,

France

BrazilItaly

ScandinaviBenelux

Australia &India

UK &Canada

Cost of Marketing

Ease of Doing

Business

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Step 3: Create ROI index

ROI index is calculated as the ratio of Return and Cost indices

Realizable ReturnOpportunity

Propensity

Value

CostMarketing

Access

RiskConstraintsAccessAllocation

Relative ROI Potential index

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Step 4: Factor in risk

Realizable ReturnOpportunity

Propensity

Value

CostMarketing

Access

RiskConstraintsAccessAllocation

Relative ROI Potential index

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Risk-return trade-off?

A trade-off is evident between risk and return across similar markets. Markets in the upper-left quadrant should targeted (low-risk, high-return) with limited exposure to those in the lower-right (high-risk, low return).

Canada

United KingdomBrazil

Mexico

Australia

Germany

China

ColombiaFrance

Switzerland

Norway

IrelandChileItaly

United Arab Emirates

50

100

150

200

250

300

50 75 100 125 150

Return relative to Risk

Each score averages to 100 across countries, only the top 15 countries are shown

Risk

Total Return

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MAP enables decisions to reflect preferred risk tolerance

2

3

4

5

6

7

8

Risk - Return schedule

Port

folio

retu

rn o

n investm

ent

Very low risk Low risk Average risk High risk Very high risk

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Market risk

Risk is the counterparty to return. This is considered according

to 3 categories

1. Country risks

• Based on Oxford Economics risk ratings considering

debt, currency and government stability

2. Volatility / Stability

• Typical volatility in both the economy and travel are

considered

3. Volatility / Stability in recession

• Economic and travel volatility is also considered in

recession years, with a large weight placed on volatility

in 2009.

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Market risk is used to “discount” returns

0 20 40 60 80 100

Canada

Scandinavia

UK & Ireland

Australia & NZ

Benelux

Ger, Aus, Swi

France

Italy

Japan

India

China

Mexico (air)

South America

S Korea

Brazil

GDP resilience

Composite intrinsic risk

Market Resilience

GDP resilience in recession

Market resilience in recession

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Step 5: Factor in constraints

Suggested allocations are subject to upper bounds according to market constraints

Realizable ReturnOpportunity

Propensity

Value

CostMarketing

Access

RiskConstraints

AccessAllocation

Relative ROI Potential index

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Market constraints

Market constraints provide upper limits on allocation based on:

• Distance

• Air service

• Visa requirements

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• Interactive analysis

• Time horizon: short-term, long-term

• Risk tolerance: Low, balanced, or high

• Market subsets

• Indicator subsets

Dynamic functions of MAP system

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Interactive analytical platform (example)

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Viewing an individual market

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The user can select any 4 markets and compare their scores. France represents more potential than Japan, Canada, or Australia for this sample destination.

Comparing markets

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Strategic applications

• MAP output guides the decision-making process with a

consistent framework to measure opportunity for a particular

destination across its key markets.

• These opportunities are indexed against risk and costs to derive

an optimal allocation and focus marketing investments.

• Flexibility in market inclusion, time horizon, and risk tolerance

provide dynamic analysis.

• Model is completely transparent in its details. Output tables and

charts tell the story of “why” for each market.

OXFORD

Tel: +44 1865 268900

LONDON

Tel: +44 207 803 1400

BELFAST

Tel: +44 2892 63540

FRANKFURT

Tel: +49 69 95 925 280

PARIS

Tel: +33 (0)1 78 91 50 52

MILAN

Tel: +39320 4525 559

DUBAI

Tel: +971 56 396 7998

NEW YORK

Tel: +1 646 503 3050

BOSTON

Tel: +1 617 206 6112

CHICAGO

Tel: +1 773 867 8140

MIAMI

Tel: +1 954 916 5373

LOSANGELES

Tel: +1 424 238 4331

PHILADELPHIA

Tel: +1 (610) 995 9600

TORONTO

Tel: +1 (905) 361 6573

MEXICO CITY

Tel: +52 (55) 52503252

SINGAPORE

Tel: +65 6850 0110

HONG KONG

Tel: +852 3103 1096

SYDNEY

Tel: +61 2 9220 1707

PAARL

Tel: +27(0)21 863 6200