FOXTROTS*

 

Questions on Euromonitor’s forecasts

An excerpt from our monthly Travel Business Analyst newsletter and/or our WYSKs (What-You-Should-Know). As these are subscription publications, the following item is not from the current edition.

 

Euromonitor* (EM), a UK-based market research company, forecasts that international visitor arrivals will total 2.4bn in 2030, with visitor spend at US$2.6tn – which we calculate to US$1083-per-arrival.

 

EM does not give its current data, but see below. WTO (World Tourism Organization) has reported 1.33bn +6.9% for 2017 with visitor spend at US$1.34tn +4.9% – which we calculate to US$1012-per-arrival.

 

Our forecasts show bigger numbers, possibly mainly because of our interpretations on the China outbound market.

 

Based on China’s current economic growth, and without any sizeable political negatives (such as wars) not just in China but other key parts of the world, China will reach a 1:1 ratio in terms of outbound travel – which includes arrivals in technically-domestic destinations such as Hong Kong and Macau – in 10 years’ time. That means 1.4bn visitor arrivals, which alone would take WTO’s current total to 2.7bn.

 

Other EM findings, along with our comments:

 

-China, France, US will be the ‘main beneficiaries’ of the growth EM forecasts. Reason for that order of destinations is not clarified, or if this means these three will be the biggest recipients of spending, or count the biggest growth over the next 13 years.

 

-Arrivals will grow 5% this year to reach 1.4bn ‘trips’ (which we calculate back to 1.33mn for 2017, indicating EM is basing its forecasts on WTO data). EM credits this growth to an ‘upgraded economic outlook for major economies such as the US, Japan and the Eurozone’.

 

We presume EM means ‘faster economic growth’ (if only because an ‘outlook’ would have only marginal impact on current activity).

 

Also, many would question EM’s selection of economies to report a positive outlook. Indeed, many economists and official bodies such as the IMF, are lowering their economic-growth expectations.

 

EM terms that 1.4bn as ‘trips’, which appears to be a surprising misinterpretation of the WTO’s 2017 data – if that indeed is EM’s source. WTO’s data shows visitor-arrivals; if a traveller from the US, for example, visits France and the UK on the same trip, that would be two arrivals, but one trip.

 

These are basics, although misinterpreted by many in the travel business. David Scowsill, ex-head of WTTC (World Travel & Tourism Council), a lobby group for the travel business, made the same error in his valedictory speech in mid-2017.

 

WTO forecast +4-5% growth this year, which would mean about 1.39bn visitor-arrivals – the same (rounded) as EM.

 

-‘Low-cost carriers’ (probably what we define as NFAs*) are expected to grow 6% over 2018-23, thus outperforming what it defines as ‘scheduled operators’.

 

This is sloppy editing (we hope it is not sloppy research). 6% over five years is tiny, so we presume EM means annually, although that would also be below recent growth. Our tracking shows +27% in seat sales for NFAs in Europe in 2017, and +9% in the first-half of this year.

 

In addition, Air Asia, Ryanair, Southwest, and others, are ‘scheduled operators’. We presume that by ‘scheduled operators’ EM means what we call FSAs*. But surely EM can do better than this?

 

-‘By 2023, travel intermediaries are forecast to exceed US$2tn stimulated by digital advances and the shift to mobile sales representing 70% of travel agents’ sales in 2017.’ We are unable to interpret this statement.

 

*Notes:

 

1. We have run a few critical reports on EM findings – most apparently due to imprecision in its editorial commentary. At press time, EM had not answered our request for clarifications.

 

2. Following are our airline-type definitions:

 

FSA = full-service-airline. Offering first/business/economy, travel agency bookings, meals/bookings/baggage/cancellations included, etc. As its name indicates – full service.

 

LCA = low-cost-airline. (Not a no-frills-airline; see next.) An FSA but with lower operating costs – cheaper longer-hours flight-deck crew, younger/new longer-hours cabin crew, tighter cost control (twinned 3-star hotel rooms, for example), fewer fare types, may have first and business cabins as well as economy, and which allows bookings through travel agencies etc. If relevant, usually similar to the parent airline, but a different name, and competition against parent airline allowed.

 

NFA = no-frills-airline. We believe that among the many essential elements that make a successful NFA are: shorthaul point-to-point routes; market freedom in terms of fares, routes; single aircraft type; where relevant, competition against parent airline allowed; extremely-low fares when bought at least three months in advance, say US$25; one fare at one time (no wholesale rates, travel agency commissions, etc); no refunds; no (free) service frills; single economy-class cabin; no (free) seat selection; two toilets for 150-seat aircraft; 25-minute turnaround time; cabin crew do daytime cabin cleaning; name and flight change charged at least US$25 each; no trade shows; plenty of consumer advertising and promotion; and much more.

 

 

The Fox. Remember, I’m an industry expert in the parallel world.

*Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.  Foxtrots – leading the industry in a dance.

 

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