State of Travel Insurance 2017 - Microsoft · The State of Travel Insurance 2017 is an outgrowth of...
Transcript of State of Travel Insurance 2017 - Microsoft · The State of Travel Insurance 2017 is an outgrowth of...
State of Travel Insurance 2017An exclusive whitepaper produced by Berkshire Hathaway Travel Protection.
About the State of Travel Insurance........................................................3
Overall ......................................................................................................4
Europe .................................................................................................... 13
Caribbean/Central America .................................................................. 21
Asia/Oceania ......................................................................................... 27
South America ....................................................................................... 32
Africa/Middle East ................................................................................ 36
Canada/Mexico...................................................................................... 41
United States ......................................................................................... 48
Appendix ............................................................................................... 53
Table of Contents
3
The State of Travel Insurance 2017 is an outgrowth of Berkshire
Hathaway Travel Protection’s ongoing efforts to innovate within the
travel-insurance industry by bringing clarity and transparency to the
business and helping travel professionals understand the many factors
that drive travel-insurance sales.
This report is based on a predictive model of domestic and international
travel originating in the United States. It uses a variety of research
methods to generate its outcomes. Please see the Appendix for details
on how the research was conducted.
Aboutthe State of Travel Insurance
In aggregate, U.S. travel-insurance (TI) sales for international
travel will increase 4.93% in 2017 to $2.22 billion. Last year we
projected that travel-insurance sales would increase 7.8%. Sales
actually increased 12.7%, driven by a travel boom early in the
year that was offset by fears over terrorist activities and lingering
fears of disease epidemics tied to the Zika virus.
Overall
We Project
5
More trips in general
Consumers indicated they planned more international travel in 2017, and travel agencies were very confident in their ability to sell more international
travel in 2017. These sentiments were corroborated by Travel Weekly, Travel Market Report1, and other sources.
More covered trips in 2017
In addition, consumers and travel agencies indicated they would be buying/selling more travel insurance in 2017. When actual intent to purchase was
calculated, the increase in sales was around 3%. The remaining 1.93% of market-size increase is related to travel costs.
The changing nature of Millennial travelers compared to previous generations
As MMGY’s “Global Portrait of American Travelers2” (POAT) points out, younger travelers are expected to keep driving travel growth, even as they
mature. Unlike generations that came before, the Millennial generation’s “experiences over stuff” mentality leads them to travel and experience new
things, as opposed to buying new things. Though many Millennials are moving into their 30s and assuming some of the patterns of maturity (e.g.,
buying a house, driving a minivan), their desire to travel does not seem to diminish.
1 Shillinglaw, James, “Travel Agencies Expect Banner Year, Says Ensemble Insights Survey,” accessed Nov. 6, 2016, at http://www.travelmarketreport.com/articles/Travel-Agents-Expect-Banner-Year-Says-Ensemble-Insights-Survey.2 “Global Portrait of American Travelers 2016-2017: Executive Summary” (New York: MMGY Global, 2016), p. 4.
Reasons for making this projection:
6
Travel agencies are much more bullish than consumers on increased travel and higher travel-insurance sales in 2017. However, the direction is positive for both groups.
Trips – Travelers Vs. Agencies
90%
80%
70%
60%
50%
40%
30%
20%
10%
0Sell/take moretrips in 2017
Sell/take fewertrips in 2017
41.41%
80.55%
12.94
%6.9
5%
consumersagencies
Travel Insurance – Travelers Vs. Agencies
70%
60%
50%
40%
30%
20%
10%
0Sell/buy moretravel insurancein 2017
Sell/buy lesstravel insurancein 2017
36.42%
60.57%
6.84%
7.04%
consumersagencies
7
Increased travel by Boomers
While Baby Boomers continue to travel extensively, and continue to
favor more active travel even as they approach unprecedented ages for
this kind of travel, the POAT shows that they increasingly are looking
to travel to places they have been before, and are preferring to travel
closer to home3. This changes the travel landscape somewhat; instead
of a Mediterranean cruise, these Boomers may choose to cruise the
Inside Passage, and instead of going to France they may go to Quebec.
This creates significant demand for U.S. travel (a point reinforced in
our travel-agency survey) and also for travel to Mexico and Canada.
Increased knowledge of how travel insurance works
According to BHTP’s consumer survey, travelers who said they bought
more travel insurance in 2016 than previous years said they were
doing it to a significant extent because they had better knowledge
of how travel insurance works. It is important to take these findings
in context; there’s no way of knowing how much more they feel they
know about the workings of travel insurance, or how much of that
increase is real. We plan to follow up on this question in 2017 and
clarify consumers’ intent.
3 “Global Portrait of American Travelers 2016-17,” p. 6.
90%
80%
70%
60%
50%
40%
30%
20%
10%
0RiverCruises
OceanCruises
Tours AdventureTravel
Weddings,Honeymoons,Babymoons,Bachelor/ette Parties
Trips to seefamily and friends
55.17%
53.84
%
86.04
%87.88%
51.22
%21.05%
36.73%
44.82
%
33.33%
23.81%
31.31%
21.95%
55-6465-74
Boomer Travel: Younger Vs. Older Boomers
Younger and older Baby Boomers are a lot alike -- except when it comes to adventure and family travel. Older Boomers are more likely to take adventure trips; younger Boomers tend to opt for family travel.
8
Slight increase in trip costs
Driven by higher airfare and lodging costs in some markets and currency fluctuations in others, we project that the average trip cost for all trips, insured
and uninsured, will increase about 4.1% in 2017. There is not necessarily a linear relationship between an increase in trip costs and a similar increase
in travel-insurance sales, since some of the trips that experience the greatest increases in costs may go uninsured, and other uninsured trips may be
taken simply because of a once-in-a-lifetime bargain fare. But from a purely mathematical standpoint, trip-cost increases do play a significant role in
determining increases in travel-insurance revenue.
Currency fluctuations
Several key currencies, such as the soon-to-be-liberated British pound, are expected to rebound
against the U.S. dollar in 20174. This can lead to higher trip costs and more expensive travel
insurance, which in a steady-state model of travel-insurance sales will drive up travel-insurance
revenue. Conversely, currencies expected to weaken against the dollar are from countries already
losing favor with travelers, like Brazil and Russia. Lower prices in these countries are not liable to
bring travelers back by themselves.
Scattered increases in lodging costs, particularly in North America
Globally, lodging prices are expected to stay level5, with declines in key markets like Asia and the Caribbean but increases in Western Europe and North
America. These increases are being driven by recovering economies, mergers and acquisitions concentrating more lodging in the hands of fewer large
organizations, and increasing sophistication in the pricing of shared-economy lodgings and timeshare rentals. These properties are figuring out how
to variably flex their pricing to take advantage of events and seasonality in their location. Companies like Beyond Pricing are helping owners create
4 GBTA Foundation, “Global Travel Price Outlook” (Minneapolis: Carlson Wagonlit Travel, 2016), p. 5.5 Ibid., p. 12.
Though not a one-to-one
relationship, trip-cost
increases play a significant
role in travel-insurance
revenue.
9
competitive rates, but will also drive travelers to consider hotels when rates level off. Mexico and Canada are both predicting lodging increases of
around 4%6; since these are key destinations for U.S. travelers, these increases should have an impact on trip cost, and eventually, on travel-insurance
premiums and revenue.
Some increases in airfares
While bargain fares make headlines, U.S. airlines are quietly taking steps to constrict the supply of flights, trying to stay just ahead of demand and
keeping the pressure on prices7. This can work since there are few disruptors in the domestic airline market, but it will be harder to effectively replicate
internationally, where disruptors like WOWair and Norwegian are prevalent, and becoming more popular.
Increases in other travel costs
Cruise costs are expected to increase around 3% in 20178, and costs for ground transportation and
other travel-related expenses are expected to rise at least with the rate of inflation. These can lead
to cost increases for tours and other organized travel, which can lead to higher travel-insurance
premiums and eventually higher TI revenues.
Greater use of travel advisors
The travel agencies we surveyed said they were very optimistic about selling more travel, and more
travel insurance, in 2017; Travel Weekly9 and other independent studies corroborated this finding, though there is a notable lack of hard data to back up
their assertions10. There are signs of a move away from large online travel bookers to something – perhaps a hybrid online travel agency like Lola Travel,
6 Ibid., p. 15.7 Bachman, Justin, “ Cheap Airfares Are About To Vanish As U.S. Airlines Tighten Capacity,” accessed Oct. 24, 2016, at https://skift.com/2016/10/14/cheap-airfares-are-about-to-vanish-as-u-s-airlines-tighten-capacity/.8 “Moody’s Sets US Cruise Industry’s Outlook At Stable,” accessed Oct. 24, 2016, at http://worldmaritimenews.com/archives/202884/moodys-sets-us-cruise-industrys-outlook-at-stable/.9 Shillinglaw, James, “Travel agencies Expect Banner Year, Says Ensemble Insights Survey,” accessed Oct. 24, 2016, at http://www.travelmarketreport.com/articles/Travel-agencies-Expect-Banner-Year-Says-Ensemble-Insights-Survey.10 Ibid.
U.S. airlines are quietly
taking steps to constrict
the supply of flights.
10
brick-and-mortar travel agencies, or a true direct-booking, DIY model. 2017
should be a better year for travel advisors than 2016. They should sell more
travel – and more travel insurance, because currently no one is better at selling
travel insurance than travel advisors.
Increased use of travel-insurance aggregators
Travel advisors are currently the best marketers of travel insurance, but that
may not be the case for long. Aggregator sites that let travelers compare plans
and rates are gaining in popularity. “The travel-insurance aggregator market
is very powerful and shows continued growth,” says InsureMyTrip CEO Jim
Grace. “From 2015 to 2016, we estimate that aggregator sites experienced a
10% or more increase in business11.” In general, these sites do not take TI sales
away from travel agencies; instead, they give choices to OTA customers and
leisure travelers booking their own trips. By simplifying the purchase process,
aggregators come closer than anyone to supplying the change and innovation
necessary to expand the travel-insurance market.
11 Accessed Jan. 20, 2017, at https://wordpress.com/post/blog.insuremytrip.com/7151
90%
80%
70%
60%
50%
40%
30%
20%
10%
0Un
ited
Stat
es
85.87
%
Euro
pe
27.72
%
Latin
Am
eric
a/Ca
ribbe
an
19.57
%
Cana
da
10.69
%
Mex
ico
9.96
%
Asia
/Aus
tralia
/Oce
ania
7.6
1%
Sout
h Am
eric
a 4
.71%
Othe
r 4
.53%
Afric
a 2
.54%
Destinations
It’s easy to overlook the importance of travel within the United States, but this may put it in perspective: More Americans travel in the United States than to all the other countries of the world combined.
11
A lack of new products and other innovations that truly expand the market
While aggregators are educating and expanding the reach of the market, travel insurers (with the exception of Berkshire Hathaway Travel Protection)
have been unable to innovate sufficiently to meet travelers’ needs. This is not a problem unique to travel insurance; many insurers have been fighting
this battle12. They mainly struggle marketing to Millennials, and this parallels the experience of travel insurers. Aggregators, along with Millennials’
increased use of travel advisors, will help reverse this trend to an extent, but as long as travel insurance looks and acts like other forms of insurance, it
will be a tougher sell to insurance-averse Millennials and other key pieces of the travel market.
Lack of significant growth in the OTA segment
Online travel agencies control nearly 20% of U.S. travel bookings13. One of the greatest opportunities
for travel insurers is the majority of OTA customers who do not buy travel insurance. However,
the price-driven products OTAs offer often are not comprehensive and not able to compete with
products found on aggregator websites increasingly used by travel-savvy consumers. The products
many times do not align with the OTA’s digital customer experience. As a result, we do not foresee
sufficient changes to the sales or product models to forecast major growth in this segment in 2017.
12 “Millennials: The Insurance Customer Has Changed, Will You?”, accessed Oct. 25, 2016, at https://www.ibm.com/blogs/commerce/2016/03/millennials-the-insurance-customer-has-changed-will-you/.13 Biesiada, Jamie, “U.S. travel market grew 5% in 2015: Phocuswright,” accessed Oct. 25, 2016 at http://www.travelweekly.com/North-America-Travel/US-travel-market-grew-5-percent-in-2015-Phocuswright.
Forces driving the sale of travel insurance are balanced by:
As long as travel insurance
looks and acts like other
forms of insurance, it will be
a tough sell to insurance-
averse Millennials.
12
Core of travelers/trips that do not utilize travel insurance
BHTP surveys show about 30% of travelers will not buy travel insurance for some highly ingrained reasons – for instance, they feel they’re covered
through their credit card or other insurance. When added to the segment of the market that consistently buys travel insurance, that still leaves more
than half of U.S. travelers uninsured, willing to buy travel insurance but currently not buying the product. Converting those consumers has been
difficult, and remains the largest opportunity in the travel-insurance market.
Travel-insurance sales to Americans traveling to Europe will
increase 4.03% in 2017. Europe remains the top destination in
terms of its ability to generate travel-insurance revenue.
Europe
We Project
14
The polarizing effect of travel to Europe, both among agencies and travelers, due to terrorism fears
In our consumer survey, 19% of travelers said they definitely would visit Europe, and 25% said they definitely would not. While other destinations
elicited more negative responses, Europe was the most strongly polarized destination. This pattern repeated itself in the agency survey, and correlates
strongly with terrorism fears. Travelers who are very fearful of terrorist attacks are highly unlikely
to be definite travelers to Europe in 2017 – and vice versa.
Increase in travel to Europe among Boomers
BHTP consumer research showed that travelers who fall into the Baby Boomer age groups are much
more likely than the general traveler population to be considering European travel in 2017 – unless
they’re afraid of terrorism. Acts of terrorism continue to concern older travelers, which is consistent
with feelings of the “YAHTZEE” (Young At Heart Travelers Zooming Everywhere Enthusiastically)
travelers profiled in MMGY’s POAT study1.
1 “Global Portrait of American Travelers 2016-2017: Executive Summary,” p. 7.
Reasons for making this projection:
Travelers who fall into
the Baby Boomer age
groups are much more
likely than the general
traveler population to be
considering European
travel in 2017 – unless
they’re afraid of terrorism.
15
45%
40%
35%
30%
25%
20%
15%
10%
5%
0
Unite
d Ki
ngdo
m
43.79
%
Fran
ce
30.72
%
Italy
26
.14%
Germ
any
18.95
%
Othe
r 17
.65%
Spai
n 1
7.65%
Switz
erla
nd
11.11%
Irela
nd
9.8%
Bene
lux
9.15
%
Scan
dina
via
5.88%
Aust
ria
5.23%
Croa
tia
4.58%
Pola
nd
3.92%
Icel
and
3.27
%
Gree
ce
3.27%
Czec
h Re
publ
ic
2.61%
Russ
ia
2.61%
Hung
ary
1.96
%
2017 Projected Travel To European Destinations
Brexit is expected to have little impact on American travel to the U.K. Travel agencies had it far down the list of travel concerns, and travelers are more bullish than ever on travel to the British Isles.
16
Continuation of low-cost fares to Europe
According to airfare-prediction site Hopper, fares to Europe will be down 16% on average by the end of the year2. And it’s not just low-cost airfares;
European tours are expected to cost at least 4% less than they cost in 20163. Some of these low-cost trips go uninsured, since younger, bargain-hunting
budget travelers who don’t traditionally buy travel insurance are taking them, but more travel to Europe will have a concomitant increase in travel-
insurance revenue, especially for relatively inexpensive comprehensive policies. Even though many travel policies are not tied to the cost of airfare, there
will be significant incremental TI revenue from an airfare-related bump in European travel.
Continuing economic weakness in Europe
According to the GBTA, “Economists are projecting much slower growth for the UK and Europe in
2017 with some projecting recession. This will most certainly impact corporate travel demand next
year, which could lead to lower prices on airfare, hotels, and transportation. Hotel and ground prices
are likely to be the most impacted given the inflexibility of supply. Currency fluctuations may also
impact travel prices4.” Most European economies are not expected to grow significantly in 2017. In
many of these countries inflation will be nonexistent; in several there’s a possibility of deflation.
The currencies of France, Germany, Greece, Italy, and Spain, along with the remaining Eurozone currencies, are expected to fall about 1% against the
U.S. dollar5. While a stronger U.S. dollar has meant more U.S. travel to Europe, there’s an element of choice involved. Travelers are choosing to travel to
Europe instead of traveling within the United States for roughly the same price. The result is an increase in travel-insurance purchases from travelers
seeking trip-interruption, trip-cancellation, and medical coverage they would not have bought if they had remained in the U.S.
2 Glusac, Elaine, “Europe and the Caribbean: In Reach At Last,” accessed Oct. 25, 2016, at http://www.nytimes.com/2016/10/23/travel/europe-and-the-caribbean-in-reach-at-last.html?_r=0.3 Baran, Michelle, “Tour ops stake Europe recovery on strong dollar, value-adds,” accessed Nov. 4, 2016, at http://www.travelweekly.com/Travel-News/Tour-Operators/Tour-ops-stake-Europe-recovery-on-strong-dollar-value-adds?cid=eltrdb.4 GBTA, p. 3.5 Ibid., p. 5.
In many countries inflation
will be nonexistent; in
several there’s a possibility
of deflation.
17
expected percentage of travelersactual percentage of travelers
European Travel By Age
18-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older
27.11%
25%
34.24%
36.25%
19.56
%47.22
%
43.67%
39.17%
52.48%
30.83%
39.64
%40.40
%
36.89
%35.72%
1.01%
0%
50%
40%
30%
20%
10%
0
Many more younger travelers than expected said they would travel to Europe in 2017; conversely, fewer than expected middle-aged travelers said they would travel to Europe. When these findings are cross-tabbed with travel fears, the reasons are clear: Middle-aged travelers are far more concerned about terrorism than younger travelers.
18
An expected currency recovery in the United Kingdom
According to GBTA, the U.K.’s currency post-Brexit is expected to improve by about 3%
against the dollar6. While that will still put the pound at close to historical lows, any increase
in the pound that translates to higher trip costs, whether for lodging or miscellaneous
travel expenses, will translate into more travel-insurance revenue from the destination
that’s shaping up at Europe’s safest, and one of its most desirable.
Number of hot destinations for agencies and travelers
According to BHTP surveys, Iceland and Croatia are high on agencies’ and travelers’ lists
of hot destinations for 2017. While neither is a top-10 European destination quite yet,
affordable airfares – especially to Iceland – will make these countries viable alternative
destinations to many domestic destinations, pumping travel dollars into Europe.
The continued popularity of river cruises among agencies and travelers
According to agencies, river cruises were one of their hottest travel types last year, and
they’re expected to be one of the hottest travel types this year. The bulk of this market is in
Europe. While river cruises are dwarfed in volume by ocean cruises, their growth has been
a boon to European travel, even when more conventional trips to Europe are threatened
by terrorist activity.
6 Ibid.
More Fewer
39.39%
67.44%
12.12%
4.66%
70%
60%
50%
40%
30%
20%
10%
0
consumersagencies
River Cruising In 2017
There’s a simple reason why so many more travel agencies said they were expecting to sell more river cruises than travelers said they were planning to take river cruises: Travel agencies tend to work with older travelers -- the target demographic for river cruises.
19
Continuing terrorism concerns alienating a segment of traveling population
One-quarter of travelers and 60% of travel agencies told BHTP that international terrorism was a threat to their travels. That fear is most fully realized
in Europe.
Popularity of adventure travel largely bypassing Europe
Adventure travel is a fast-growing segment of the overall travel market, and Europe has never been
a prime destination for adventure travel. More than 36% of travelers said they are planning more
adventure trips in 2017, but according to a survey conducted by Virtuoso, the top adventure-travel
destinations are not in Europe7. Europe may be largely bypassed by the growth in adventure travel.
Counter-promotion of non-European destinations like Canada as “safe” destinations
Destination Canada8 used this marketing approach, and it was also the subconscious reaction of
travelers and travel agencies after terrorist attacks in Europe. If European terrorism continues, expect more destinations to take Canada’s lead and
aggressively promote themselves as safe alternatives.
7 “Adventure travel: The Hottest Destinations and Trends,” accessed Oct. 20, 2016, at http://www.2luxury2.com/adventure-travel-the-hottest-destinations-and-trends/8 “Seizing the Winning Conditions for Canada,” accessed Oct. 25, 2016, at https://www.destinationcanada.com/sites/default/files/2016-08/2016-2020_corporate_plan_summary_-_june_14_-_e_0_0.pdf.
These factors have been balanced by:
60% of travel agencies told
BHTP that international
terrorism was a threat to
their customers’ travels.
20
Turkey’s troubles
Regardless of whether Turkey is considered to be part of Europe, in Asia, or somewhere
between the two, continued political issues in the country and its involvement in
conflicts in Syria and Iraq have dimmed its once-bright appeal. Though the World
Travel & Tourism Council projects Turkish tourism to increase its contributions
to GDP 2% in 2017, that comes after a 3.2% drop in 2016, meaning that Turkish
tourism, even after an optimistic projection, will still be below 2015 levels9. That will
weigh on travel to the entire sub-Caucasus region, at least through 2017 and likely
beyond.
Decreased interest in Russia as a destination
As relations cool between the U.S. and Russia, travelers’ interest in Russia is cooling
as well. Russia finished at the bottom of European destinations in our traveler
survey, and the WTTC expects tourism’s contributions to the Russian GDP to fall
another 1.5% in 201710. For a destination that was hot three or four years ago, it’s a
stunning reversal.
9 “Global Travel & Tourism: Economic Impact Update August 2016,” accessed Oct. 25, 2016, at https://www.wttc.org/-/media/files/reports/economic-impact-research/wttc-global-travel--tourism-economic-impact-update_july-2016_encrypted.pdf10 Ibid.
60%
50%
40%
30%
20%
10%
0
25.74%
59.72%
consumersagencies
Who’s Afraid Of Terrorism?
Travel agencies are much more concerned about terrorism than travelers, but terrorism remains high on travelers’ lists of travel concerns.
Travel-insurance sales to Americans traveling to the Caribbean
and Central America will increase 9.78% in 2017 – the largest
increase of any region.
Caribbean/Central America
We Project
22
A projected 11.8% increase in travel to the region
As Zika is no longer considered to be a “global health emergency1,”
the last reason fades for not going to the Caribbean. The area is
relatively safe, inexpensive, and close to the U.S. – and exotic, now
that Cuba is in the picture. Because of this, and because 2016
was a somewhat off year for Caribbean travel, we predict a robust
rebound for the region in 2017.
Significant increase in cruise-ship capacity
According to Cruise Market Watch, cruise-ship capacity will
increase by more than 17,000 in 2017, on top of a more than
20,000 increase in capacity in 20162. This capacity increase is being
done largely to meet demand, and is concentrated in the Caribbean.
1 Sun, Lena H., “WHO no longer considers Zika a global health emergency,” accessed Dec. 28, 2016, at https://www.washingtonpost.com/news/to-your-health/wp/2016/11/18/who-no-longer-considers-zika-a-global-health-emergency-2/?utm_term=.5eeb14b917cc.2 “Growth,” accessed Oct. 24, 2016, at http://www.cruisemarketwatch.com/growth/.
70%
60%
50%
40%
30%
20%
10%
0
Othe
r 5
9.26%
Baha
mas
23
.15%
Jam
aica
16
.67%
Dom
inic
an R
epub
lic
15.74
%
Beliz
e 7
.41%
Cost
a Ri
ca
6.48%
Cuba
4.63
%
2017 Projected Travel To Caribbean Destinations
Unlike other regions, the Caribbean and Central America does not focus its travel around a couple of key destinations. Travel in this region is non-destinational (in the case of cruises) or property-specific, as opposed to country-specific.
Reasons for making this projection:
23
Lessening of Zika fears
Despite not being a global health emergency, Zika has not gone away – in fact, it’s more
prevalent than ever worldwide, according to the Centers for Disease Control3. However, it is
being dealt with, news coverage is turning around, and that appears to be good enough for
many travelers, who are beginning to resume their pre-Zika travel patterns – which include
frequent trips to the Caribbean.
Prices remaining steady except for cruises
Cruise costs are projected to increase 1.5% in 2017, as cruise lines attempt to limit
discounting, add fees, and rein in costs4. Otherwise, lodging and airfares in the region are
projected to hold steady or decrease slightly – down 1.9% in the case of airfares, and down
0.9% in the case of hotels, according to GBTA. Increased regional competition from domestic
carriers like JetBlue and Southwest has the potential to further lower airfares to Caribbean
destinations. Currencies are likewise projected to be stable to slightly lower against the dollar.
The Caribbean and Central America are viewed as highly affordable destinations, so they will
attract bargain-hunting Americans looking for someplace warm that’s close to home. All of
this will drive tourist travel to the region.
3 “Zika Travel Information,” accessed Oct. 25, 2016, at https://wwwnc.cdc.gov/travel/page/zika-information.4 “Norwegian Cruise Line Holdings Reports Financial Results for the Second Quarter 2016,” accessed Oct. 25, 2016, at http://www.nclhltdinvestor.com/releases.cfm.
30%
25%
20%
15%
10%
5%
0
12.04
%26.39%
consumersagencies
Do Disease Epidemics A�ect Travel?
Travel agencies are much more likely to consider epidemics a threat to travel; in fact, disease outbreaks are a top-three concern for travel agencies.
24
Continued demand for cruises from travelers, and continued promotion of cruises by agencies
Cruises are big business for many travel advisors, and travelers continue to want a high-quality cruise experience. That combination is driving the
increase in cruise-ship capacity, and it’s very good for travel-insurance sales, since most cruise vacations are insured.
The Caribbean emerging as a destination of choice for higher-income travelers
BHTP travel-agency and consumer research indicates that higher-income travelers are much more
likely to travel to the Caribbean and Central America. The reason might be that these travelers are
also more likely to take multiple trips, and the Caribbean is just one of their destinations. Still, trips
to the Caribbean by higher-income travelers are likely to be more expensive, meaning more travel-
insurance premiums.
Cuba continuing to attract travelers
More than 4% of BHTP-surveyed travelers said they traveled to Cuba in 2016. That number should
increase significantly in 2017, assuming the current lifting of the travel ban stays in place. Cuba is beginning to build out infrastructure to accommodate
more American tourists. It’s a lengthy process, but every little bit helps, and Cuba should be a big player in Caribbean tourism by no later than the last
quarter of 2017.
4% of BHTP-surveyed
travelers said they traveled
to Cuba in 2016. That
number should increase
significantly in 2017.
25
A potential cutoff of demand for Cuba
Travel to Cuba could wither in 2017 after blooming in
2016. The Trump administration has pledged to reinstate
travel restrictions, and even if that doesn’t happen,
some experts are saying 2017 demand for Cuban travel
will not approach 2016 levels5. The problems with
Cuba as a destination will become more evident, and
the infrastructure won’t be able to accommodate more
Americans. It seems contradictory, but it shows the fluid
nature of the Cuban situation at the present time.
Increasing severity of storms and hurricanes
2016 was one of the most active seasons on record for
Caribbean storms6. The activity in attributed in part to
5 Platta, Daniel, “Cuba’s tourism boom is starting to slow down,” accessed Oct. 25, 2016, at http://www.businessinsider.com/r-cuban-tourism-boom-seen-slowing-but-finding-a-room-still-hard-2016-2.6 Belles, Jonathan, “Atlantic Hurricane Season 2016: How This Season Stacks Up So Far,” accessed Oct. 25, 2016, at https://weather.com/storms/hurricane/news/hurricane-season-2016-late-octo-ber-update.
expected percentage of travelersactual percentage of travelers
Who’s Traveling to The Caribbean, By Age
18-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older
58.82
%62.5%
22.98%
28.75%
24.22
%26.85%
35.35%
17.5%
23.46%
26.32%
24.59%
33.33%
20.35%
14.28%
0% 0%
60%
50%
40%
30%
20%
10%
0
Who’s really driving Caribbean travel? Younger travelers, for whom the Caribbean is a Spring Break mecca and a cheap, convenient getaway. Who’s not? Middle-aged travelers, who find other destinations more alluring ... perhaps because the Caribbean is overrun with kids.
These results are balanced by:
26
global warming, which means that the 2017 season could be as severe, if not more severe. That
has major impacts for cruise lines far beyond what on-land resorts might experience. Catastrophic
weather and the subsequent damage severely impacting demand is one of the greatest threats to
continued growth in Caribbean travel.
The Caribbean (exclusive of Cuba and possibly Costa Rica) is not a prime destination for
adventure travelers
Despite cruise lines’ and resorts’ efforts to the contrary, the Caribbean’s most regular visitors are
largely older travelers. It’s generally not seen as a destination for adventure travelers7. As that segment becomes increasingly important, it threatens to
bypass the Caribbean – something that could have long-term consequences.
7 “Adventure travel: The Hottest Destinations and Trends.”
As adventure travel
becomes increasingly
important, it threatens to
bypass the Caribbean.
Travel-insurance sales to Americans traveling to Asia and
Oceania will increase 4.93% in 2017.
Asia/Oceania
We Project
28
A projected 1.3% increase in travel to the region
This is according to our research, and reflects Americans’ travel behavior vis-a-vis the region.
An increase in cruise traffic, up from slightly less than 3 million passengers in 2016 to 3.7 million passengers in 2017
This is below last year’s 24% increase in cruise travel but is still a significant bump1.
A large increase in adventure travel to New Zealand, Australia and Antarctica
This increase in adventure travel is helping drive a 6.2% projected increase in travel to Australia2.
In addition, we expect Antarctica to continue to post gains in 2017 on the heels of a 5% increase in
tourism to the continent in 20163. This increase was driven in large part by an almost 10% increase in
travel to the area from American tourists4. As high-end adventure cruises from Quark, Hurtigruten
and others – even National Geographic – continue to appeal to Millennial adventure-seekers and
older bucket-list travelers, we expect another double-digit increase in American travel to the region.
1 Steighorst, Tom, “Asia cruise market prediction: 7M passengers a year by 2020,” accessed Oct. 23, 2016, at http://www.travelweekly.com/Cruise-Travel/Asia-cruise-market-prediction-7M-passengers-a-year-by-20202 “Tourism Forecasts 2016,” accessed Oct. 24, 2016, at https://www.tra.gov.au/documents/forecasts/Tourism_Forecasts_2016.pdf3 “Tourists By Nationality,” accessed Dec. 23, 2016, at https://iaato.org/documents/10157/1017626/Tourists+by+Nationality+-+Total.pdf/9a175577-5e15-4ee8-97d4-5a4327c4ea25.4 Ibid.
Reasons for making this projection include:
Increase in adventure
travel is helping drive a
6.2% projected increase in
travel to Australia.
29
expected percentage of travelersactual percentage of travelers
Asian Travel By Age30%
25%
20%
15%
10%
5%
018-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older
23.65%
25%
11.77%
21.25%
7.82%
18.52%
10.78%
15%
30%
11.28%
19.33%
14.14%
8.52%
7.14%
0.46%
0%
The pattern is obvious: Younger travelers are going to Asia in greater-than-expected numbers. Older travelers are going in smaller-than-expected numbers.
30
A general growth in travel to South Asia
South Asia has been identified as “the fastest growing sub-region
for total Travel & Tourism GDP long-run growth to 20265.” This
includes continued interest in recently opened-up destinations like
Myanmar and Laos and the rapid development of Indonesia as an
all-around tourist destination.
A recent proliferation of bargain airfares to Asia
Singapore Air, JAL, Cathay Pacific and others have recently offered
“sale” fares that have helped contribute to a large projected drop
in airfares to the region. The bargain airfares are emanating from
disruptors as well as existing airlines competing for traffic. Because
even bargain airfares to Asia are higher than comparable fares to
Europe, we expect a greater percentage of those trips to be insured.
A strong dollar
The dollar is very strong against the currencies of several key Asian
countries including Japan, Malaysia, Thailand, and China6. This
has been one of the contributing factors to stabilizing lodging
costs, long a driver of travel inflation in the region.
5 “Global Travel & Tourism: Economic Impact Update August 2016,” p. 12.6 GBTA, p. 3.
40%
35%
30%
25%
20%
15%
10%
5%
0
Othe
r 3
5.71%
Japa
n 3
5.71%
Aust
ralia
26
.19%
Chin
a (M
ainl
and)
21
.43%
Sing
apor
e 1
6.67%
Thai
land
14
.29%
New
Zea
land
14
.29%
Hong
Kon
g 1
4.29%
Sout
h Ko
rea
9.52
%
Tahi
ti 4
.76%
2017 Projected Travel To Asian Destinations
Among the other countries/continents not named specifically here: Vietnam, Myanmar, Antarctica, and perhaps most important of all, Indonesia, which is becoming a top-tier destination for Asian travelers.
31
A projected dip in Thai tourism
Because of the year-long mourning period following the death of King Bhumibol Adulyadej, there’s expected to be a dip in Thai tourism7. As NPR noted
shortly after the king’s death, “It … created uncertainty for some in [Thailand’s] tourism industry, which accounts for at least 10% of the country’s
GDP8.” Indications are this dip will be quite mild and short-term in nature, but it will be present nonetheless.
Continued softness in Americans’ travel to China
Americans seem to be cooling somewhat on travel to China9, though it remains quite popular
globally10, and popular with certain sub-segments of the American traveling population, most
notably Asian-Americans.
Competition for the travel dollar
Competition is coming from closer, less-exotic destinations like Europe, the Caribbean, and the U.S.
7 “King’s Death Slows Tourist Visits To Thailand,” accessed Dec. 23, 2016, at http://www.npr.org/2016/10/25/499262809/kings-death-slows-tourist-visits-to-thailand.8 Ibid.9 “Hong Kong Forecasts Slowing Economic Growth As Tourism Slumps,” accessed Oct. 24, 2016, http://www.bloomberg.com/news/articles/2016-02-24/hong-kong-forecasts-slowing-economic-growth-as-tourism-slumps) and India (http://www.tradingeconom-ics.com/india/tourist-arrivals/forecast)10 WTTC, p. 13.
Americans seem to be
cooling somewhat on travel
to China, though it remains
quite popular globally.
These are balanced by:
Travel-insurance sales to Americans traveling to South America
will decrease 7.3% in 2017 – the only decrease globally.
South America
We Project
33
A 0.5% projected decrease in travel to the region
Per our research, which shows a distinct post-event, post-Zika dip in
travel demand to South America.
A significant decrease in trip costs
This is driven by the absence of a high-profile event, like the Olympic
Games or the World Cup.
Continued political instability in Brazil, widespread weakness
in the economy, and an Olympics-fueled decrease in tourism
The Olympics were hardly a boon for Brazil. Peru was the top South
American destination in 2016 in our traveler poll, and Brazil remains
in a post-Olympics tourism funk. The Brazilian real is projected to
fall 8% against the dollar in 20171, airfares are projected to drop
more than 7%2, and Brazil’s poor economy and unstable politics will
depress Brazilian travel at least through the first part of 2017.
1 GBTA, p. 3.2 Ibid., p. 10.
40%
35%
30%
25%
20%
15%
10%
5%
0
Arge
ntin
a 3
4.62%
Peru
30
.77%
Braz
il 2
6.92%
Colo
mbi
a 1
5.38%
Othe
r 15
.38%
Chile
11.
54%
Urug
uay
11.54
%
Boliv
ia
7.69%
Ecua
dor
3.85%
2017 Projected Travel To South American Destinations
Somewhat surprisingly, Brazil is down the list of top South American destinations.
Reasons for making this projection include:
34
The fact that the region is largely bypassed by the cruise industry
Growth in the cruise industry has minimal residual benefits to South America. South American cruises are not numerous and are fairly unpopular, the
river-cruising phenomenon has largely bypassed the continent, and Venezuela, one of the few countries situated to benefit from cruises, is unstable
and inflation-wracked.
Continued political instability in Venezuela
Venezuela is suffering through an inflation spiral that may exceed 800%3. Its sketchy politics also
make it a less-desirable destination – and with so many desirable destinations so close, it’s hard to
predict anything but more depression for Venezuelan tourism.
Remaining fallout from the Zika virus
A quarter of all travel agencies and 12% of all travelers say they consider disease outbreaks to be
very threatening to their travels. As long as one-quarter to one-eighth of the traveling public and
their suppliers are concerned about epidemics, the epidemic currently grabbing the headlines – Zika, in this case – is going to have the greatest impact
on travel. How great an impact? Zika is not going to reduce travel to the region 25%. But it could certainly contribute two percentage points’ worth of
decline, despite having been removed from the World Health Organization’s global-emergency list.
Lack of airline disruptors keeping airfares high
While fares to Argentina and Brazil are expected to drop, fares across the rest of the region are expected to increase4. And South America is largely
exempt from any budget-fare frenzy.
3 Ibid., p. 3.4 Ibid., p. 10.
12% of all travelers say
they consider disease
outbreaks to be very
threatening to their travels.
35
Demand for Cuban travel siphoning off travelers to the region
Increased interest in Cuba means less interest in South America. The effect may be slight, but it will continue to negatively impact South American
tourism through 2017, or as long as the Cuba boom lasts.
Demand for Ecuador and Peru as travel destinations, especially for younger adventure travelers
Peru is a particularly appealing destination for many travelers, with a strong economy and opportunities for many types of travel5. Ecuador appeals to
adventure travelers and ecotourists but is investing in infrastructure and looking to diversify6.
A strong U.S. dollar
This is especially true in Argentina (up 4% against the Argentinian peso), Brazil (up 8% against the real), and Colombia (up 3% against the peso7).
5 “Adventure travel: The Hottest Destinations and Trends.”6 “Travel and Tourism in Ecuador to 2018,” accessed Oct. 25, 2016, at http://www.reportlinker.com/p02268187-summary/Travel-and-Tourism-in-Ecuador-to.html.7 BGTA, p. 3.
Balanced by:
Travel-insurance sales to Americans traveling to Africa and the
Middle East will increase slightly – 0.98% in 2017.
Africa/Middle East
We Project
37
A 2.5% projected increase in trip costs to the region
This increase is driven by higher costs for transportation and lodging.
Increased demand for travel to South Africa and Kenya
Both destinations were recently cited as top destinations for adventure travel1, one of the hottest travel sub-types.
A slight recovery for the Egyptian travel market
There is underlying demand for Egyptian travel, largely among older Americans who have a trip to the Pyramids on their bucket list. However, Egyptian
travel needs a safe, stable Egypt, and that has not been the case over the last several years. It’s hard to project the state of Egyptian politics in 2017; if
it’s seen as being stable, Egyptian tourism will recover. In fact, the WTTC projects an optimistic 5.7% increase in Egyptian tourism contributions to GDP
in 2017. But a full recovery in Egyptian tourism seems more likely for 2018 than 2017.
Strong baseline support for travel to Israel
For Israel, security issues are nothing new. The fact that it has dealt with them without distracting or diverting tourists bodes well for Israeli tourism
in 2017 and beyond.
1 “Adventure travel: The Hottest Destinations and Trends.”
Reasons for making this projection include:
38
expected percentage of travelersactual percentage of travelers
African Travel By Age
18-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older
0% 0% 4.59%
2.5%
3% 3.7%
3.28%
4.16%
2.09%
3.01%
5.01%
6.06%
2.11%
0% 0.15%
0%
6%
5%
4%
3%
2%
1%
0
From age 45 on, the impact of bucket-list travel is evident, as significantly more travelers than expected are visiting Africa and the Middle East.
39
Continued strength of Emirates travel
There will be continued strength in Emirates travel because of the routing patterns of Emirates-
based airlines like Emirates and Ethiad. As long as these airlines – service-based disruptors in the
international travel space – continue to be popular with Americans traveling internationally, their
flight patterns, which often include stopovers in Dubai, Abu Dhabi, or Oman, will buoy travel to that
region. Both airlines have started aggressive U.S. marketing campaigns to showcase the luxury of
the airlines to travelers.
Terrorist fears throughout the region will encourage purchase of travel insurance
The “terrorist effect” driving travel-insurance purchases is probably less of an effect in the Middle East than elsewhere, since there has almost always
been terrorism in the region. However, to the extent that these fears are spreading further throughout Africa, there may be more terrorism-driven
purchases of travel insurance for travelers to those regions. But we project that impact to be small.
Experiential and bucket-list travel buoying the African travel market
Bucket-list travel is a rapidly growing and potentially very significant subset of the overall travel market. 54% of travelers said they’ve traveled to cross
something off of their bucket list, and more than three-quarters of agencies said bucket-list travel will be “hot” or “very hot” in 2017. African safaris
and trips to the Pyramids are high on many travelers’ bucket lists. We expect to see more of these kinds of trips in 2017, and we expect the vast majority
of these trips to be insured.
54% of travelers said
they’ve traveled to cross
something off their
bucket list.
40
Political instability throughout the region driving down travel demand
In late October 2016 the State Department had active travel warnings for Egypt, Jordan, Yemen, Tunisia, Israel, Syria, Ethiopia, the Central African
Republic, the Congo, Cameroon, Eritrea, Nigeria, Lebanon, Saudi Arabia, South Sudan, Iraq, Iran, Afghanistan, Mali, Kenya, Libya, Chad, Burundi,
Algeria, Sudan, Niger, Burkina Faso, and Mauritania2. That’s a significant percentage of countries in the region, and the sheer numbers of countries with
travel advisories are bound to drive down travel to the region. This is compounded by the difficulty of entry into many of these countries, especially for
solo travelers.
A projected 2% increase in airfares and lodging rates across the region3
Outside of Emirates and Ethiad, there are no disruptors changing the cost structure of travel to the
region and really no bargain fares to Africa or the Middle East and. Costs of travel to these areas
continue to rise, making alternative destinations look that much more attractive.
Refugee issues across much of the region
While the ongoing refugee crisis is not affecting travel to the extent of terrorism, it’s having an
impact. More than 10% of travelers and 26% of travel agencies labeled it a threat to travel. While it has effects in certain parts of Europe, its effects are
most keenly felt in Africa and the Middle East, and it will have an impact on travel to those regions.
2 “Alerts and Warnings,” accessed Oct. 25, 2016, at https://travel.state.gov/content/passports/en/alertswarnings.html.3 GBTA, p. 7.
This is balanced by:
More than 10% of
travelers and 26% of travel
agencies labeled refugee
issues a treat to travel.
Travel-insurance sales to Americans traveling to Mexico and
Canada in 2017 will increase 3.83% for travels to Mexico and
6.22% for travels to Canada.
Canada and Mexico
We Project
42
A stronger Canadian dollar
The Canadian dollar is projected to be 3% stronger against the American dollar in 20171.
Higher costs
In part because of the stronger Canadian dollar, we project a 4.4% increase in airfares to Canada and
a 4% increase in lodging costs2 will lead to an 11% increase in total trip cost.
The 150th anniversary of Canadian confederation will be celebrated in 2017, with high-
profile events across the country
Among the top events will be National Aboriginal Day (June 21), Saint-Jean-Baptiste Day: Fête
nationale du Québec et de la Francophonie canadienne (June 24), Canadian Multiculturalism Day
(June 27), and of course July 1 – Canada Day.
A continuing perception of Canada as a “safe” destination
Destination Canada effectively spoke to this marketing tactic early in 2016. 21% of travel agencies stated that Canadian travel was above average in
2016; more than 10% of travelers surveyed said they visited Canada in 2016, and nearly 20% said they plan on visiting Canada in 2017.
1 GBTA, p. 3.2 Ibid., p. 11.
In the case of Canada, reasons for making this projection include:
A 4.4% increase in
airfares to Canada and
a 4% increase in lodging
costs will lead to an 11%
increase in total trip cost.
43
expected percentage of travelersactual percentage of travelers
Who’s Traveling to Canada, By Age40%
35%
30%
25%
20%
15%
10%
5%
018-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older
35%
37.5%
20.99
%20%
13.24%
25%
20.83%
18.34%
23.72%
17.3%
16.24%
19.19%
13.76%
7.14%
0.68%
0%
Except for older Baby Boomers, Canadian travelers tend to cluster toward the younger end of the age spectrum. What do older Boomers have in common with younger travelers? Cost-consciousness. Canada’s position as an affordable alternative to Europe boosts travel among these key travel constituencies.
44
Canada is growing in popularity as a destination for adventure travel
Virtuoso’s rankings of the top adventure destinations for 2017 put Canada – the Arctic and the Arctic Circle, specifically – fifth3.
Continued demand for cruises via the inside passage, and related tourism in Canada
North American cruise-ship capacity is expected to hold fairly steady in 20174; however, Cruise Industry News projects a slight increase in occupancy in
2017, which will have a residual impact on the Canadian travel market.
The affordability of travel to Europe and the Caribbean
When a traveler can fly to Paris for less than $400, why go to Montreal? The continued affordability of travel to Europe will have an impact on the
number of Canadian vacations that aren’t pure road trips.
The lack of a true disruptive air carrier exerting downward fare pressure on flights to Canada.
Currently most flights between the U.S. and Canada are on American or Canadian legacy carriers. There is no WOWAir for U.S.-Canada air travel.
3 “Adventure travel: The Hottest Destinations and Trends.”4 “2016-17 Annual Report,” accessed Oct. 24, 2016, at http://www.cruiseindustrynews.com/flip/cina16/mobile/index.html#p=9.
This is balanced by:
45
A 1% stronger Mexican peso against the American dollar5
This projection was made before the 2016 election and may change based on the Trump administration’s actions toward Mexico and economic
development in the country.
Higher costs
A 4% increase in airfares to Mexico and a 2.6% increase in lodging costs are driving a 3% increase in
total trip cost6.
A strong cruise market, including the Mexican Riviera
The most recent edition of the Cruise Line Industry Association annual report projects strong
demand growth for cruises to western Mexico, and moderate demand growth for cruises to eastern
Mexico7.
Moderately strong indications from agency and consumer survey respondents of increased travel to Mexico
Almost 14% of consumers said they plan to travel to Mexico in 2017, and one-third of travel agencies said they consider Mexico to be a hot destination.
5 GBTA, p. 3.6 Ibid., p. 11.7 “2016 Cruise Industry Outlook,” accessed Oct. 24, 2016, at http://www.cruising.org/about-the-industry/research/travel-agency-outlook
In the case of Mexico, this is driven by:
Almost 14% of consumers
said they plan to travel to
Mexico in 2017.
46
Resort popularity
Mexican resort areas continue to be popular for honey / babymooners, destination weddings and bachelor/ette parties. One-quarter of travelers and
about one-fifth of travel agencies said these types of travel would be hot in 2017, and Mexico is a prime destination.
Lingering Zika fears
The days are past where Zika had the power to decimate travel to a country. But it can contribute a small amount of decline to an affected region.
Political instability
State-level instability has led to State Department travel warnings for many Mexican states. The parts of Mexico most popular with American tourists
are largely safe. The other parts of the country are much less safe. However, if crime and instability in Mexico spill over to areas popular with tourists,
or continued violence elsewhere in the country grabs the headlines, it will impact travel to Mexico.
Increased risks of hurricanes and other severe storms due to global warming
The government’s Geophysical Fluid Dynamics Laboratory says global warming is affecting the frequency and severity of hurricanes and other storms8.
Mexico frequently bears the brunt of these storms. The increased possibility of very severe storms striking Mexico and adversely impacting travel must
be worked into any calculations regarding travel to the country.
8 Geophysical Fluid Dynamics Laboratory, “Global Warming and Hurricanes,” accessed Oct. 24, 2016, at https://www.gfdl.noaa.gov/global-warming-and-hurricanes/
This is balanced by:
47
25%
20%
15%
10%
5%
018-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older
12.37%
12.5%
6.8%
20%
7.11%
15.74%
12.68
%12.5%
24.52%
12.03%
22.16%
16.16%
9.93%
7.14%
0.48%
0%
expected percentage of travelersactual percentage of travelers
Who’s Traveling to Mexico, By Age
Cost and convenience are obvious drivers in high-than-expected levels of Mexican travel among key younger constituencies.
Travel-insurance sales to Americans traveling within the United
States in 2017 will increase 4.07%.
Note: Calculations on sales of travel insurance to Americans traveling
within the U.S. are not figured into the data on overall market sizes
and growth stated earlier in this report.
United States
We Project
49
More trips
According to the U.S. Travel Association, the number of domestic person-trips will increase 1.3% in 2017 – 0.5% for business trips and 1.6% for leisure
trips1. Those numbers may be conservative. According to BHTP research, 32% of travelers surveyed said they will take more domestic vacations in 2017
than in 2016, and 30% said they will take more domestic business trips.
Higher airfares
The GBTA projects a 0.5% increase in domestic airfares2. More importantly, Skift projects that
domestic airlines will continue to closely monitor flight supply and will strive to keep planes full and
discount fares at a minimum3.
Higher gas prices
The Energy Department projects a 5.4% increase in gasoline prices in 20174. This has only a marginal
effect on travel-insurance revenue, since most road trips are uninsured, and the cost of gas for a rental car is not part of a trip-cost calculation. However,
this could eventually mean higher costs for other forms of transportation, including air travel.
1 “U.S. Travel Forecast,” accessed Jan. 19, 2017, at https://www.ustravel.org/system/files/Media%20Root/Document/Research_U.S.%20Travel%20Forecast%20Summary.pdf2 GBTA, p. 8.3 Bachman, “Cheap Airfares Are About To Vanish As U.S. Airlines Tighten Capacity.”4 “Short-Term Energy Outlook,” accessed Jan. 19, 2017, at http://www.eia.gov/outlooks/steo/.
Reasons for making this projection include:
Domestic person-trips will
increase 1.3% in 2017 –
but these numbers may
be conservative.
50
Higher lodging costs
There will be a 4.7% increase in U.S. lodging costs in 2017, according to the GBTA5. Multiple dynamics play into this calculation, including an all-time
high in occupancy, mergers and acquisitions, and the effect of Airbnb and other private lodgings6. Because the sharp rise in occupancy is not consistent
with the dramatic increase in supply contributed by Airbnb and other disruptors, we believe the total cost increase will be closer to 3.5%.
Uncertainty on the number of insured trips
Due to a lack of clarity in the data, we cannot project with certainty that the number of domestic trips covered by travel insurance will increase in 2017.
A projected decrease in the number of low-end travelers
We project that the elimination of tax credits and other incentives tied to the Affordable Care Act will lead to a decline in the number of older, fixed-
income travelers and other lower- to middle-class travelers. However, because they take fewer trips and more uninsured trips, we project this impact to
be slight.
5 GBTA, p. 12.6 Deloitte Center For Industry Insights, “Travel and Hospitality Industry Outlook 2017,” accessed Jan. 19, 2017, at https://www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/us-cb-2017-travel-hospitality-industry-outlook.pdf.
This is balanced by:
51
expected percentage of travelersactual percentage of travelers
United States Travel By Age100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
018-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older
98.91%
100%
83.38%
90%
99.31%
94.44%
85.73%
87.50
%
97%
92.48%
87.09
%85.86
%
78.44%
78.57%
100%
100%
Travel within the U.S. is simple and convenient for travelers of all ages.
52
Fewer vacation days taken
Despite efforts to counteract this phenomenon, more than half of Americans don’t take all of their vacation days – and Millennials are the worst at not
taking their vacation time7. Most often vacation days are spent traveling domestically. This continues to exert a slight drag on domestic TI sales.
The attractiveness of overseas destinations
In short, the better (and cheaper) Amsterdam or Iceland or the Caribbean appear to be, the less
attractive American destinations look by comparison. And as outlined earlier, overseas destinations
look very attractive indeed, terror threats notwithstanding.
Potential for domestic civil unrest
We cannot rule out the possibility of significant domestic civil unrest this summer. This will have its
greatest impact on foreign travelers coming to America, but will have a negative impact on domestic
travel as well.
7 Berger, Sarah, “Most workers leave paid vacation time unused, a Bankrate survey finds,” accessed Jan. 19, 2017, at http://www.bankrate.com/finance/consumer-index/money-pulse-1216.aspx.
More than half of
Americans don’t take all of
their vacation days – and
Millennials are the worst.
53
Quantitative ResearchIn preparation for this report, more than 5,700 travelers and 3,500 travel agencies were invited to take a survey asking about their travel habits, their travel business, their experiences in 2016, and/or their expectations for 2017. Ninety-six agencies and more than 570 travelers responded to the survey. While the confidence level is considerably greater for the consumer survey than the travel-agency survey, the confidence levels in both surveys are sufficient to draw large-scale conclusions from the results.
Other Statistical SourcesThe travel-and-tourism statistics from the Department of Commerce (http://travel.trade.gov/research/programs/i92/index.html) provide a month-by-month report of U.S. citizen travel to international regions. Because these statistics are historical, monthly, valid, and detailed, they provide a highly accurate picture of Americans’ travel patterns over time and help us accurately project Americans’ travel habits – and travel-insurance buying preferences – in 2017.
Literature Review Sources consulted in preparing this report included travel-trend reports from the Global Business Travel Association, Sojern, IATA, Cruise Lines International Association, and cruisemarketwatch.com. MMGY’s “Global Portrait of American Travelers” was particularly helpful.
Building the ModelData from these sources were used to create detailed models of trip costs to various regions, to extrapolate out the Commerce Department statistics, and to make projections on percentage of covered trips, traveler ages, and travel-insurance cost as a percentage of trip cost. These projections were used to calculate total 2017 travel-insurance sales, and then those figures were compared against last year’s figures to chart percentage change.
Questions on the research?Please contact us directly:Berkshire Hathaway Travel ProtectionAttn: Marketing1145 Clark StreetStevens Point, WI [email protected]
Berkshire Hathaway Travel Protection (BHTP) is a registered trademark and a subsidiary of Berkshire Hathaway Specialty Insurance (BHSI), a leader in specialized casualty and liability insurance. Reproduction or distribution of this publication in any form without BHTP’s prior written permission is prohibited. The information contained herein has been obtained from sources believed to be reliable. BHTP disclaims all warranties as to the accuracy, completeness or adequacy of such information. The opinions expressed herein are subject to change without notice.
Appendix: Research Details