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KEY NOTE Travel Agents and Overseas Tour Operators : June 2002

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This report covers: Europe travel, business travel, outbound, inbound, car hire, passengers, air travel, hotels, outbound tourism, inbound tourism, domestic tourism, air inclusive, package tours,

Companies covered include: First Choice Holidays, My Travel Group, Thomas Cook, TUI UK,

EXECUTIVE SUMMARY

Key Note estimates that the revenues generated by UK travel agents and tour operators fell by 3.6 percent in 2001, to £37.29bn. This follows a 9 percent increase in revenues for 2000. The main reasons for this decline were the impact of the foot and mouth epidemic, instability in the Middle East, the war on terrorism after the attack on the World Trade Center on 11th September 2001, the development of low-cost airlines and a cut in capacity by some tour operators.

In 2001, the decline in tour operator revenues was slightly greater than for travel agents. Concurrently, the reduction in the level of main media advertising was larger for tour operators than for travel agents, while the number of travel agents' offices declined. Consequently, despite the reduction in revenues, many travel agents and tour operators saw profits rise in 2001.

For most of the 1990s, the travel agent and tour operating sectors were dominated by the strategies of the four leading companies — which are the same in both sectors — vying to increase market share through acquisition and organic growth. By the beginning of 2000, the same level of competition was still in evidence but the strategic focus of the main companies moved towards overseas expansion. This was also a focus of major competitors in Germany, the largest tour operating market in Europe. In 2000, Preussag AG, the largest leisure travel company in Germany, acquired Thomson Holidays Ltd, the largest UK leisure travel group. At the time, Thomson had market leadership in retail travel agencies, tour operators and charter airlines. In 2001, the second-largest leisure travel group in Germany (C&N Touristic AG) acquired Thomas Cook UK Ltd, the third-largest leisure travel group in the UK at the time.

Expenditure through travel agents and tour operators is equivalent to around a third of all expenditure on international and domestic travel by UK residents and organisations. It is the demand for outbound travel, rather than domestic travel, that provides the majority of revenue for travel agents and tour operators. The level of travel business that is transacted through travel agents and tour operators is dependent on the dynamic appeal of domestic travel versus international travel and between independent and inclusive travel arrangements. Domestic travel favours independently-organised travel arrangements, which were dampened by the effect of the foot and mouth epidemic in 2001. In the same year, the development of low-cost routes to Europe encouraged a faster rate of growth of independent over inclusive outbound trips.

Despite the increasing use of the Internet, teletext and television channels to investigate travel and accommodation arrangements, travel agents and tour operators have continued to hold a high market share of outbound arrangements. In 2001, the travel agents and tour operators' share of the total outbound market fell slightly. Although this trend is likely to continue as low-cost air services grow, the total growth in the market should allow travel agent and tour operator revenues to grow in 2002.

TABLE OF CONTENTS

Executive Summary	1
1. Market Definition	2
REport Coverage	2
Market Sectors	2
Table 1: Estimated Value Share of UK Tourism Market Accounted for by Travel Agents and Tour Operators ( percent), 2001	3
Market Trends	3
Underlying Growth	3
Trade Barriers and International Travel Costs	3
Table 2: UK Tourism Market by Share of Gross Domestic Product (£bn and percent), 1997-2001	4
Market Position	4
The UK	4
Table 3: Tourism Revenues by UK Residents by Sector by Value (£m), 1997-2001	5
Overseas	6
Table 4: Travel and Tourism Demand ($m and percent), 2002	6
2. Market Size	7
Total Market	7
Table 5: UK Tourism Market by Value (£m and percent), 1997-2001	7
Table 6: UK Tourism Market by Number of Visits by UK Residents (million and percent), 1997-2001	8
Table 7: UK Tourism Market by Number of Nights Spent Away by UK Residents (million and percent), 1997-2001	9
Table 8: Share of Tourism Expenditure Accounted for by Travel Agents and Tour Operators ( percent), 1997-2001	10
By MARKET SECTOR	10
Outbound Tourism	10
Table 9: Expenditure, Visits and Nights Spent Overseas by UK Residents (£m, million and percent), 1997-2001	11
Expenditure on Outbound Tourism	11
Table 10: UK Outbound Tourism Market by Purpose of Visit by Value (£m and percent), 1997-2001	12
Number of Outbound Tourism Visits	12
Table 11: UK Outbound Tourism by Purpose of Visit by Volume, (million and percent), 1997-2001	13
Table 12: Outbound ATOL† Passengers by Value and by Volume (million, £bn and percent), 1997-2001	14
Table 13: Inclusive Tour Packages by Region (000 and percent), 1997-2001	15
Domestic Tourism	15
Table 14: UK Domestic Tourism Market by Purpose of Visit by Value (£m and percent), 1997-2001	16
Table 15: UK Domestic Tourism Market by Purpose of Visit (million visits and percent), 1997-2001	17
Table 16: UK Domestic Holidays by Number of Nights by Value (million nights and £m), 1997-2001	18
3. Industry Background	19
Recent History	19
Outbound Tour Operators	20
Number of Companies	20
Tour Operators	20
Table 17: UK ABTA-Registered Tour Operators by Number of ATOLs by Volume (number and million), Years Ending 1st July 1997-2001	21
Travel Agents	21
Table 18: ABTA-Registered Travel Agents in the UK (000 trips and million ATOLs), 1st July/November 1997-2001	22
DISTRIBUTION	22
How robust is the market?	23
Legislation	24
Key Trade Associations	24
Association of British Travel Agents	24
Association of Independent Tour Operators	24
Federation of Tour Operators	25
Guild of Business Travel Agents	25
4. Competitor Analysis
The Marketplace	26
Tour Operators	26
Table 19: Passengers Carried under Leading ATOLs (000), Years Ending September 1999-2001	26
Table 20: Seats Licensed to the Leading Tourism Companies (000 and percent), Years Ending December 2000 and 2001	27
Table 21: Leading Air Inclusive Tour Operators Booked Through Travel Agents by Market Share ( percent), 1999-2001	29
Travel Agents	29
Table 22: Leading UK Travel Agents by Number of Branches (number), 1995, 1996, 1997, 1999, 2000 and 2001	30
Table 23: UK Travel Agents by Estimated Air Inclusive Tours Market Share ( percent), 2000-2001	31
Market Leaders	31
First Choice Holidays PLC	31
MyTravel Group PLC	32
Thomas Cook UK Ltd	33
TUI UK Ltd	34
Outside Suppliers	36
Table 24: Number of UK Airline Passengers Travelling on Charter Services (000), 1997-2000	36
Table 25: UK Residents Travelling to Europe by Final Destination (000 visits), 1997-2001	38
Advertising and Promotion	39
Tour Operators	39
Table 26: Main Media Advertising by Leading Tour Operators (£000), Years Ending March 2000-2002	39
Table 27: Main Media Advertising by Leading Travel Agents (£000), Years Ending March 2001-2002	40
5. Strengths, Weaknesses, Opportunities and Threats
Strengths	41
Weaknesses	42
Opportunities	42
Threats	43
6. Buying Behaviour
Consumer penetration	44
Table 28: Consumer Penetration of Holidays ( percent of adults), 1997 and 1999-2001	44
Profile of Repeat holidaymakers	44
Table 29: Profiles of Holidaymakers by Number of Holidays Taken in the Previous 12 Months, ( percent of adults), 2001	45
Holidaymaking by Age	46
Table 30: Age Profile of Adult Holidaymakers ( percent of adults), 1997, 1999, 2000 and 2001	47
Holidaymaking by Month	47
Table 31: Holidays Taken in the Previous Year by Month of Departure ( percent of holidaymakers), 2001	48
Holidaymaking by Type of Arrangement	48
Table 32: Profiles of Holidays Taken Over the Previous Year by Tour Operator Arrangement ( percent of adults), 2001	49
Table 33: Profiles of Holidays Taken Over the Previous Year by Travel Agent Arrangement ( percent of adults), 2001	51
Travel Abroad by Purpose of Visit	52
Table 34: UK Residents Travelling Abroad by Purpose of Visit (000 and percent), 1997-2001	53
7. Current Issues
Tourist Tax in Balearics	54
Low-cost airlines and seat-only charters	54
TErrorist Activity	54
Table 35: Holidaymakers’ Intentions Over the Next Year ( percent of adults), 2001	55
Online Bookings	56
8. The Global Market
Table 36: Travel and Tourism Industry Gross Domestic Product ($m), 2002	57
9. Forecasts
Introduction	59
Forecasts 2002 to 2006	59
Table 37: Forecast UK Outbound Tourism Market by Value (£m and percent), 2002-2006	60
Table 38: Forecast UK Outbound Tourism Market by Purpose of Visit by Value (£m and percent), 2001-2006	61
Future trends	61
10. Company Profiles
First Choice Holidays PLC	63
Mytravel Group PLC	65
Thomas Cook UK Ltd	67
TUI UK Ltd	69
11. Further Sources
Associations	71
Publications	72
Directories	73
General Sources	74
Bonnier Information Sources	74
Government Publications	76
Other Sources	77
Understanding TGI Data	79
Number, Profile, Penetration	79
Social Grade	80
Standard Region	80
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Last updated by Amanda Porteous February 2004