US $1,795.00

PhoCusWright's Canadian Online Travel Overview

June 2007
US $1,795 CA $2,220 £1189 €1425

Nearly one third of Canadian travel will be booked online for leisure/unmanaged business in 2007, according to PhoCusWright. As a point of sale for travel, the Web will enjoy growth rates well into the double digits through 2009 and beyond. Just over half, or 51%, of “online travelers” in Canada said the Internet is the usual channel through which they purchase travel. And more than two thirds of offline buyers said they are interested in purchasing travel online in the future.

For companies looking to break into the Canadian online travel market, this is certainly good news. But Canada also possesses qualities that defy comparison with other markets, such as the huge volume of offline business conducted by online travel agencies and the dominance of airline Web sites. PhoCusWright's Canadian Online Travel Overview provides groundbreaking, in-depth analysis of the Canadian online travel landscape and opportunity.

Report Overview Table of Contents Methodology

REPORT OVERVIEW ^top

PhoCusWright has been tracking the online travel industry since 1998, providing rigorous market sizing and forecasting, company performance assessments and analyses of consumer shopping trends in the U.S., as well as across the European and Asia Pacific regions. In 2006 and 2007, PhoCusWright undertook its first comprehensive study of the Canadian online travel marketplace, conducting both a market sizing study and consumer survey to acquire a rich and complete picture of the total market size and opportunity, as well as key traveler behavior trends. This report, PhoCusWright’s Canadian Online Travel Overview, presents the results of this research.

Why Canada, Why Now
It would be easy to consider Canada merely an extension of the U.S. online travel marketplace. After all, it has a close geographical proximity, shared history and cultural characteristics, similar high standard of living, high incidence of travel, and significant penetration of Internet usage and high-speed broadband penetration.

But there are also important differences in the Canadian market, differences that, as this report reveals, give rise to a unique travel marketplace with a very distinctive traveling population. For example:

Tour Operators. With a geographical climate more akin to that of Northern Europe than the varied U.S. landscape, Canadians, like Europeans, are huge consumers of travel packages. Tour operators offering vacations to classic warm destinations in the Caribbean and Mexico play a large role in the Canadian leisure travel market, compared to the relatively small role of traditional tour operators in the U.S. market.
Scheduled and Charter Air. The dominant positions of Air Canada and WestJet airlines in a market where four airports account for almost 70% of all passenger traffic create a vastly different environment for scheduled air travel, compared to the relatively open skies of both the U.S. and Europe. The significant role of tour operators and charter carriers adds another interesting wrinkle to this unique market.
Population Density and Hotel and Car Fragmentation. A population little more than one tenth of the U.S. yet spread across roughly the same geographical area generates vastly different dynamics in the lodging and car rental sectors. The sectors are more fragmented, less reliant on large, global brand affiliation; and, in the case of the latter, far less dependent on airport locations.
Regional Differences Extend to Online Spend. PhoCusWright’s research compared and contrasted six key regions: Atlantic, Quebec, Ontario, Prairies, Alberta and British Columbia, and found that British Columbia (B.C.) spends significantly more online versus all regions but Ontario. Trip frequency was also the highest for those two regions, with online travelers taking an average of 3.9 trips in B.C. and 4.1 trips in Ontario.

These are just a few of the key dynamics in Canada that have given rise to its distinctive travel landscape and a unique online travel marketplace. Major global online travel players entering the market have had to adapt their models to suit Canadian tastes, while several Canadian travel suppliers, retailers and homegrown online travel entities have leveraged their knowledge of the market to capitalize on the growing shift to book travel online.

Although smaller than the U.S. marketplace, the Canadian opportunity is worthwhile and getting bigger. The Internet is playing an increasingly significant role in both influencing consumer shopping and as a source of transactions. Nearly one third of all Canadian leisure and unmanaged business travel will be booked online in 2007. As a point of sale for travel, the Web will enjoy growth rates well into the double digits through 2009 and beyond.

Purpose of Report
PhoCusWright conducted a comprehensive study of the Canadian travel marketplace from November 2006 - February 2007 to assess the size of the total travel market and online travel, identify key trends and project future growth and developments. The study consisted of two concurrent phases:

Market Sizing. PhoCusWright interviewed and acquired data from more than 30 companies and industry associations representing the full spectrum of travel in Canada. PhoCusWright used this data to develop market size estimates, acquire supply side perspective and generate trend analysis.
Consumer Survey. PhoCusWright gathered data from nearly 1,500 Canadian travel consumers to assess their online behavior regarding leisure travel planning and buying.

TABLE OF CONTENTS ^top

Introduction
Why Canada, Why Now
Purpose of Report
Methodology

Size of the Market
Travel Market Rebounds
Have Internet, Will Travel
Online Travel Forecast to Nearly Double by 2009
Online Penetration Reaching One Third of Travel Market
Three Out of Four Online Travel Dollars Spent on Air
Three out of Four Online Travel Dollars Spent on Supplier Sites
Dynamic Packaging Headway
Consumer Survey: Traveler Shopping & Buying Trends
Three Out of Four Canadian Travelers Online
Cost Not a Deterrent to Buying Online
Online Shopping Habits Grow
Consumers Choose Online Travel Agencies for Packages, Suppliers for Components
Pricing Drives Online Purchasing; Habit Drives Offline Buying
Search Engines Have Huge Influence

Online Travel Agencies: Fragmented Market Loses Ground to Suppliers
Overview
Size of the Market
U.S. Imports Maintain Edge Over Fragmented Canadian Field
Packaging Powers Online Travel Agency Growth
Losing Ground in a Supplier Dominated Space
Still Waiting for Travel 1.0
Fragmentation Today... Consolidation Tomorrow?

Flying Online: A Few Airlines Rule a Turbulent Market
Overview
Size of the Market
Suppliers Own the Skies
Charter Operators Adapt as LCCs, New Entrants Move In
Charter Airlines Slow to Drive Direct Sales

Packaged Travel: Fixed – Flexible – Dynamic
Overview
Size of the Market
Demand for Dynamic Packaging Rises

Land & Sea: Lodging, Rental Car, Rail and Cruise
Lodging Online: Fragmented Market Impedes Growth
Car Rental: Suppliers in the Driver’s Seat
Rail: A Growing Market, Single Supplier
Cruise: Online Bookings Just a Drop in the Ocean

LIST OF TABLES
Comparative Size of Online Travel by Region
Canadian Online Travel Market Gross Bookings, 2004-2009
Online Travel as a Percentage of the Total Travel Market
Canada, U.S., Europe and Asia Pacific Online Leisure/Unmanaged Business Travel as Percentage
Total and Online Travel Markets by Segment, 2006
Total Travel Market and Online Travel Market, 2004-2009
Online Travelers in Canada
Level of Future Interest Among Offline Users in Buying Travel Online
Usual Travel Shopping Method for Online Travelers
Usual Method of Buying for Online Travelers
Usual Online Purchase Method, by Component
Primary Reasons for Using Buying Method
Web Site Use and Influence In Travel Purchase Decisions
Online Travel Agencies: Three Models in Canada
Online Travel Agency Gross Bookings, 2004-2009
Online Travel Agency Gross Bookings by Product Segment, 2004-2009
Online Market Share by Type of Online Travel Agency
U.S. vs. Canada Online Agencies: Different Models, Product Mix
Online Travel Agencies Lag as Suppliers Consolidate Their Online Dominance
Vertical and Global Alignment Among Leading online travel agencies
Airline Internet Gross Bookings, 2004-2009
Top Web Sites for Purchasing Air
Scheduled vs. Charter Service
Airline Web Site as a Percentage of Total Bookings, Scheduled vs. Charter
Packaged Travel Definitions
Package Internet Gross Bookings, 2004-2009
Online Agencies Dominate Online Packages, Dynamic Packaging Grows
Hotel Internet Gross Bookings, 2004-2009
Car Rental Internet Gross Bookings, 2004-2009
Rail Internet Gross Bookings, 2004-2009
Cruise Line Internet Gross Bookings, 2004-2009

METHODOLOGY ^top

Market Sizing
PhoCusWright’s Canadian Online Travel Overview addresses the Canadian marketplace as a point of sale. PhoCusWright’s estimates and forecasts cover all travel purchased within Canada for domestic, transborder (Canada-U.S.) and outbound international travel, for both travel suppliers (scheduled and charter airlines, hotels, car rental companies, tour operators, railways and cruise lines) and online travel intermediaries.

All figures are in Canadian dollars unless otherwise noted. In some cases, currency conversion from U.S. to Canadian dollars was required. PhoCusWright used a consistent exchange rate of C$1.20:US$1.00 based on the 2004-2007 cumulative average from the online global currency resource OANDA.

Both consumer leisure and unmanaged business travel services are included in the market size and forecast figures. Unmanaged business travel refers to all air, car and hotel expenses associated with business travel in firms that do not have a travel policy dictating the channel, type of travel, supplier or fare/rate uses. Corporate online booking systems such as Sabre/GetThere and Amadeus/e-Travel, as well as the corporate travel units of online travel sellers (e.g., Expedia Corporate Travel) are excluded from this analysis (for more information on the corporate travel market, see PhoCusWright’s Corporate Travel Distribution: Key Markets).

PhoCusWright built its estimates and forecasts from discussions with more than 30 travel executives regarding their companies’ Internet sales, marketing and technology investments, challenges, strategies and expectations. Their responses have been vetted and aggregated to determine market size for supplier Web sites and online travel agencies. PhoCusWright has also obtained data from financial reports of public companies and, in limited cases, reputable third party sources including Statistics Canada, the Canadian Tourism Commission and others.

Estimates and projections are for gross bookings, i.e., the retail value of travel sold, after cancellations for the core travel product segments (flights, hotels, car rental, packages, cruise and rail). This report excludes, wherever possible, additional revenues such as in-room purchases, restaurant and retail revenues for hotels, and onboard revenues for cruise lines and rail operators. This could not be accomplished, however, in all product segments, where some key suppliers do not separate ticket and non-ticket sources of revenue. PhoCusWright believes the extent of such “non-core” revenues to be immaterial to total market sizing estimates. Figures for airlines are flown, i.e., passenger, revenue.

In addition, estimates and projections presented in this report include only travel where the entire transaction has been completed online. For its U.S. reports, PhoCusWright includes travel researched online but booked offline using a toll-free telephone number. PhoCusWright has changed its definition for this report due to a unique attribute of the online travel market in Canada. Whereas in the U.S. market, online travel agencies conduct only a small portion of bookings offline, there are several online travel sellers in Canada that also conduct a significant portion of their business over the phone. PhoCusWright believes presenting such bookings here as offline presents a more accurate picture of the Canadian online travel market.

Figures for 2004-2006 are based on actual company results, although in some cases, PhoCusWright had to estimate 2004 figures. Projections for 2007-2009 are based on company interviews, consumer survey research and market developments. PhoCusWright also considers historical growth and economic trends when developing its forecasts. Total travel market figures (online and offline) are used to determine Internet penetration for each market segment. Total travel figures are either derived from third party sources or are PhoCusWright estimates. The figures listed in tables may not always add precisely to column totals due to rounding.

Consumer Travel & Behavior Information
PhoCusWright collected consumer travel shopping and purchasing behavior from a field survey of online Canadians utilizing Ipsos Reid’s online panel. Founded in 1998, Ipsos Reid’s online panel consists of over 153,000 randomly recruited Canadian residents. For this report, a representative sample of the online panelists was sent an email invitation to participate. Respondents were given a unique personal identification number to ensure strict control in the data collection process and provide access to Ipsos Reid’s secure survey Web site.

Survey fieldwork was completed in December 2006. The criteria for participation was designed to reflect the dynamics of online travel purchasing in Canada among the adult population (19 years and older). Therefore, to qualify for this study, respondents had to meet the following three criteria:

They had personally taken a trip by charter or commercial airline or train in the last 12 months.
They had personally stayed at a hotel, motel or other paid accommodations on a pleasure or personal trip away from home in the past 12 months (1+ nights).
They had connected to the Internet in the last month.

A total of 1,458 surveys were completed and averaged 11 minutes in length. To ensure sufficient representation across Canada, the country’s 10 provinces were classified into six regions: British Columbia, Alberta, Prairies (Manitoba and Saskatchewan), Ontario, Quebec and Atlantic (New Brunswick, Newfoundland, Nova Scotia and Prince Edward Island). A minimum of 200 surveys were completed in each of these regions.

This is a fully representative, scientific, random-sample survey whose results can be projected with confidence to Canada’s online adult population. The error interval for the sample is +/- 2.8% at the 95% confidence level.