Online Travel Market

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.