Economic downturn impacts most travel and tourism categories
While several categories grew strongly in 2012, this development was reversed in 2013, when the performance in many areas was sluggish or even registered a decline. Worst affected were travel accommodation and transportation, with both recording a volume sales decline in 2013 (travel accommodation in the number of outlets and bed nights, transportation in the number of people travelling by air). The average unit price of hotels grew in previous years in current terms, but declined slightly in 2013, while air travel did slightly better as unit prices grew and current value growth of low cost carriers made up for the decline registered by schedule carriers during the year. Travel retail and tourist attractions recorded very modest current value growth, but there were major differences between the categories, and even the most-dynamic categories, such as cruises, registered only moderate current value growth, after recording record growth prior to the beginning of the review period.
Online sales established whilst mobile sales present opportunities
Online sales were well developed in most areas of travel and tourism in 2013. While for most categories there was still room for growth, the most-developed ones, such as travel retail, registered only moderate current value growth of online sales in 2013. Internet sales have become an integral part of travel and tourism operators’ arsenal as they enable them to promote, market and sell through one channel. The success of online-only operators was a clear indication that when buying travel and tourism products, Finns often preferred to do this online. Mobile sales were still low as at the end of the review period, but there was high engagement by travel and tourism operators with this selling channel. It was still mainly used for offering additional services and marketing, but some online sales will be shifting to m-commerce during the forecast period.
Competitive situation intensifies, and low sales result in price-based promotions
The weak economic situation made the already-intense competitive situation more difficult. During the review period, most categories witnessed entries by new competitors. Within air travel, sales of low cost carriers increased significantly, while in travel retail international online companies gained share from traditional operators. Even strong traditional players, such as Finnair-owned travel retailers, were forced to adapt to the environment by closing outlets, laying off staff and shifting more operations online in 2013. Intense competition coupled with a weak economic outlook resulted in those operators that had the resources utilising price-based promotions in order to not lose sales.
Inbound Russian tourists make up for sluggish domestic tourism demand
Domestic travel was close to stagnation in 2013 in terms of the number of trips, and Finns were reluctant to increase domestic tourism spending, often choosing destinations in neighbouring countries. Russian tourists, however, made up for this as the number of trips from them recorded healthy growth in 2013, albeit lower than the strong growth of the previous two years. The increased number of Russian tourists had an impact on investment decisions, and eastern Finland saw several large-scale developments. Health and wellness tourism in particular is expected to attract investment, and if the new developments are well positioned, they could even boost domestic tourism over the forecast period. This development, however, is dependent on the overall economic and political situation in Russia. Should economic growth in Russia slow down, there may be implications for inbound tourists travelling from Russia to Finland.
Growth in the first few years of the forecast period will be sluggish, but better performance towards the end of the period
Many travel and tourism categories are expected to record stagnation or a decline at constant 2013 prices during the first two years of the forecast period. Growth at constant 2013 prices is set to increase towards the end of the forecast period, when the economy is expected to recover. It is not likely that the industry will register as steep a drop as in 2009, mainly because most players will be more adaptable thanks to higher sales online. In addition, it is likely that the price discounting that took place in 2009 and 2010 will not be repeated by industry players.
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The Travel And Tourism in Finland market research report includes:
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