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3. Travel Industry Overview
Definition: The travel industry is agencies that provide the booking services for travel needs or sales packaged touring services to travelers including arrangements of travel planning, lodging, dining, tour guiding and etc.
Global Market View
Source: https://skift.com/2015/04/13/five-charts-that-explain-the-size-of-the-global-travel-industry-in-2015
According the United Nation World Tourism Organization (UNWTO) 2015 annual report, the tourism industry contributed 10% of the global GDP, and amounted over 7 trillion USD sales value globally in 2014. The international tourist arrival number increased by 4.4% in 2015 reaching 1.1 billion travelers, and the growth rate has be over 4% for six straight years. The growth rate of inbound visitors for developed countries (over 5%) is greater than emerging
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countries (over 4%). The market remain strong overall with positive outlook with considerations that affect individual country performance such as economic condition, exchange rate fluctuation, terrorist related safety issues, and oil price. Oil price plays a crucial role. Recent oil price drop has helped increase disposable income globally and reduce the travel transportation cost such as air fare. On the long run, the industry growth is also expected to continue.
As for the composition of travelers worldwide, in World Travel and Tourism Council, in 2014, out of over 1.1 billion international outbound travelers, 46% of them are from the emerging economies comparing to 38% in year of 2000. The global economy growth and increased traveler number and travel spending is the key to the travel industry growth.
Source: http://skift.com/wp-content/uploads/2015/04/Screen-Shot-2015-04-12-at-7.52.14-PM.png
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Big tourism markets around the globe: The most popular destinations are either in America or Europe continent with the exception of China in 2014. The detailed numbers and locations are shown in the following graphs
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Most International Tourist Arrivals in 2014
Rank Country
UNWTO International International Change Change Region [3] tourist tourist (2013 to (2012 to
arrivals arrivals 2014) 2013)
(2014)[1] (2013)[1] (%) (%)
1 France Europe 83.7 million 83.6 million 0.1 2.0
2 United States North America 74.8 million 70.0 million 6.8 5.0
3 Spain Europe 65.0 million 60.7 million 7.1 5.6
4 China Asia 55.6 million 55.5 million - 0.1 -3.5
5 Italy Europe 48.6 million 47.7 million 1.8 2.9
6 Turkey Europe 39.8 million 37.8 million 5.3 5.9
7 Germany Europe 33.0 million 31.5 million 4.6 3.7
8 United Kingdom Europe 32.6 million 31.1 million 5.0 6.1
9 Russia Europe 29.8 million 28.4 million 5.3 10.2
10 Mexico North America 29.1 million 24.2 million 20.5 3.2
Source: https://en.wikipedia.org/wiki/World_Tourism_rankings
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Source: By Maurice Flesier, https://commons.wikimedia.org/w/index.php?curid=33428043
International Tourism Expenditure in 2014
Rank Country
UNWTO International International Market Change Region[3] tourism tourism Share (2013 to
expenditure expenditure (%) 2014)
(2014)[1] (2013)[5] (%)
1 China Asia $164.9 billion $128.6 billion 13.2 27.1
2 United States
North America
$110.8 billion $104.1 billion 8.9 6.4
3 Germany Europe $92.2 billion $91.4 billion 7.4 0.9
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8 Italy Europe $28.8 billion $27.0 billion 2.3 6.9
9 Australia Oceania $26.3 billion $28.6 billion 2.1 -1.7
10 Brazil
South America
$25.6 billion $25.0 billion 2.1 11.7
Source: https://en.wikipedia.org/wiki/World_Tourism_rankings
Taiwan Market View
The amount of yearly outbound travelers has been increasing for the past 30 years.
It is an upward trend at a steady increasing pace, and it is also expected to be true due to increasing GNI over the years and large retiring population with spending capability to fuel the growth of the travel industry.
Taiwanese Outbound Traveler Volume by Year
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The travel industry business operation can be divided into three categories based on the origin of the traveler and his destination - resident outbound travel, resident domestic travel, and foreigner inbound travel. Most large companies’ sales focus mainly on pre-set group tours products and travel booking services. The pre-set tours are designed based on companies’
market research to define product’s pricing range, travel length, and destination planning.
The industry has the following features:
Seasonality: Touring product sales numbers shows seasonality due to weather cycle, holiday seasons, and touring designations’’ special events. The revenue streams fluctuate greatly and sales number during high season ramp up by folds comparing to the low season.
Crowded market: The industry is highly competitive due to low barrier of entrance. It is also found that the number of travel agencies overall is increasing in the past 5 years, and the industry is attracting more investments. There are currently over 3000 companies in Taiwan sharing the annual market of 1176 billion NTD (2013); however, the profit margin is low. The market share for the big 4 agencies are also low, with the largest market share of 4.5%. for the outbound traveler market According to the information released by 4 largest travel agencies on the market, the gross margin is around 10~15% while the net margin is from 1%~5%.
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Number of Travel Agencies in the Taiwan Market
Source: Ministry of Finance, R.O.C.
Low pricing power over customers: Customers are very price sensitive and similar/identical products are easy to find. The cost structure is not flexible and price information is readily available online.
Low differentiation: Differentiation is limited and expires quickly. Since products are openly sold to the public, competitors can find all the tour product details from product description and replicate the same products easily.
Economy of Scale: Larger travel agencies with higher customer volume will have higher bargaining power over the local service suppliers.
Global and Taiwan View Combined
Our platform will start from our home market considering the resources available to us, which are all Taiwan based, but this platform can be expanded to serve the Chinese speaking communities including the Hong Kong and China. Our service can also be translated to
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different languages starting with English. China and United States are the top two expenditure country while France has the most traveler count. Based on the expenditure/market share of the destination countries, China and U.S.A. will be on top of our list.
First Stage: Travelers traveling from Taiwan.
Second Stage: Travelers from Hong Kong, and China
Final Stage: Globally acquire customers
Travel Industry Value Chain
Upstream Middle Stream Down Stream
Lodging
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Key Players: There are currently 4 publicly traded travel agencies, including 2 publicly listed - Lion Travel Co.(雄獅旅遊 2731.TW),, LTD. and Phoenix Travel International Inc. (鳳凰旅 遊 5706.TW), 2 listed at over-the-counter market- Ezfly International Inc.(易飛網 2734), Star Travel Corp.(燦星旅遊 2719). Additionally, there are 2 more companies listed at the emerging stock market – 山富旅遊(2743) and 五福旅遊(2745), and are in the process of applying for being publicly listed.
Growing Market: Both inbound and outbound travelers count trend are going upwards. The market has been growing for the past 10 years.
Source: Tourism Bureau, R.O.C.
Taiwan Inbound and Outbound Traveler Count (2006
~2015)
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Types of Agencies: The Taiwan government regulation requires that all travel agencies to be registered with the government, and according to the capital size, they can be breakdown into 3 types of agencies:
General travel agencies: This type of agency is allowed to operate both domestic and international tours. This type of agencies can sell their products to Type A and Type B agencies. This type of agency requires the highest amount of market capital to establish the business – 25 Million NTD with 10 Million NDT security deposit requirement. There are currently 131 companies in the market.
Type A travel agencies: This type of agency is allowed to operation at the same scope of general travel agencies except Type A companies are not allowed to sell their tours to other agencies. The market capital requirement is at medium rank- 6 Million NTD with 1.5 Million security deposit requirement. There are currently 2491 companies in the
market.
Type B agencies: This type of agency is only allow to operate local tours. The market capital requirement is the lowest at 3 million NTD with 0.6 million security deposit requirement. There are roughly 221 companies in the market.
Type A agency license is suitable for the purpose of our platform service, and the required capital preparation is at total of 7.5 million NTD. There is also regulatory requirement for the agency manager to be able to provide service on the market. With the proper qualification, the manager can participate in training program to be able to manage a touring business. According to listed circumstances, our team member will fit in the
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third type of qualification – university graduate with 4 years’ experience working in a travel agency.
Insurance: there are 2 types of insurance policies required by the government that for the travel agencies to purchase. They are travel industry liability insurance and travel
industry performance bond insurance. The insured amount for a Type A travel agency is 20 million NTD for the performance bond insurance, and 2 million NTD per traveler death for the liability insurance.
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Our new solution to the current industry practice is conducted by use of the new technology to change the processes. Below chart A, and Chart B illustrate how our services and the classic agency deliver the service differently.
A: Traditional Travel Agency
The problem of traditional touring process has several issues that usually produce less than pleasant travel experience.
1. The product design is to aim for the most acceptable/compromise of most travelers’ needs, but it usually end up with everyone being unhappy from all different perspective.
2. Layers of information relay meaning that if any issue occurs from either the travel agency’s “tour captain”, the local tour guide, or local suppliers during the touring, the travel experience will be greatly affected, and yet will less likely to be properly handled by the company until the traveler returns and provide feedback.
3. There is almost always no chance to have future improvement. Most travelers tend not to bother wasting time and give feedback since the traveling is already over. If the customer is upset to the level of seeking to resolution, nothing will change or improve the touring experience, and only monetary compensation could be provided.
Prduct Design Travel Agencies Agency Local Branch/Partner