The Online Travel Market in Canada: Historical Data and Trends
The Canadian online travel market significantly outperformed the total travel market in Canada during the recession, falling only 2% to $8.5 billion in 2009 versus the total travel market’s 7% decline. Cost-conscious travelers looked harder for bargains and deals online, while offline channels – in particular, traditional travel agencies and travel management companies – experienced a sharper decline, with a dramatic falloff in corporate travel demand.
Online travel crossed the one-third threshold in 2009, accounting for 34% of all travel in Canada. It will continue to gain share as online channels outperform the broader market through 2011, climbing 7% in 2010 and 2011, versus 4% annual growth for the total travel market. While online penetration is growing, the rate of penetration is decelerating, signaling a maturing marketplace. Online penetration in Canada is trailing the U.S., where 38% of all travel was booked online in 2009, and is mapping more closely to trends in Europe, where online travel market hit just shy of the one-third mark in 2009.
The Internet is now central to Canadians’ travel planning and shopping, but not necessarily buying. Some 83% of Canadian travelers cite websites as their usual travel shopping method, but that affinity doesn’t always convert into online purchasing. More than one third of Canadian travelers usually or exclusively purchase offline, compared to just 18% of U.S. travelers.
Despite the growth of online travel in Canada, offline and travel agency channels continue to play important roles in leisure travel distribution. One driver is the much higher incidence of packaged travel purchasing in Canada. Although consumers often research packages online, they are still sold predominantly via brick-and-mortar travel agencies. In fact, 27% of Canadian travelers say they usually book through traditional travel agencies, compared to just 13% of U.S. travelers. Another factor behind the higher incidence of offline purchasing is the highly fragmented Canadian lodging sector, which is again more akin to Europe than the U.S. A majority of Canada’s hotels are independent (not affiliated with a chain), and the market has a much higher incidence of direct-to-property bookings. Canadian travelers may shop online, but they are multi-channel purchasers.
Air dominates the online travel market in Canada, driven largely by the strong market power of Canada’s near-duopoly of Air Canada and WestJet. Flights represented two thirds of the online leisure/unmanaged business travel market in 2009, versus just 46% of the total travel market. The relatively lower online market share of hotel and package segments is indicative of the lower online penetration of those segments. Hotels and packages accounted for 14% and 12%, respectively, of the online travel market, versus 25% and 18% of the total market.