Travel Advertising in US and Europe

Travel Advertising in U.S. and Europe: Industry Sizing and Trends Executive Summary

November 2018

Written and researched by Alice Jong, Bob Sacco, George Skarpelos, Marina Lähteenmäki, & Douglas Quinby

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THANK YOU TO OUR PARTNERS AND SPONSORS

Phocuswright thanks its partners and sponsors for Travel Advertising in U.S. and Europe: Industry Sizing and Trends. Without their active support, this research would not have been possible.

Partners Destination International HSMAI

Sponsors Expedia Group Media Solutions Sojorn TripAdvisor WEX

CONTENTS FOR FULL REPORT

Table of Contents

Overview: The Push and Pull of Travel Advertising Key Takeaways Online Travel Is Travel Mobile and Desktop Are Not One in The Same SEM Delivers the Conversions but the Dependency Is Problematic Distinct Channel Strategies Connect to Distinct Channel Goals TV Is Keeping Offline Relevant for Now So Many Advertising Channels, So Little Attribution Research Methodology, Scope, and Objectives Size and Segmentation of Travel Advertising Spend Traditional Methods Deliver for Brands: An Ode to Offline Ad Spend Mobile and Desktop Working Hand in Hand Sticking to What Works – SEM Reigns Supreme in Online Spend The Big Three: Search, Social, Display Keeping the Clicks Coming at Any Cost Facebook as a Synonym for Social Media Standing Behind Display No Matter Its Complexities Brand Awareness vs. Direct Response Attribution & Metrics What’s Next: Emerging Tech Appendix Display Advertising Technology Glossary Attribution Glossary Partners Sponsors

CONTENTS FOR FULL REPORT

Table of Charts

Figure 1 Figure 13

Regional Total Ad Spend, by Segment (US $M), 2016 vs. 2018 Ad Strategies and Technology Use

Figure 2 Figure 14 Ad Strategy and Technology Effectiveness Total Ad Spend, by Online vs. Offline Share, 2016-2020 Figure 15 Figure 3 Channel Objectives, Direct Response vs. Brand Awareness Segment Ad Spend, by Online vs. Offline Share, 2018 Figure 16 Figure 4 Effectiveness for Driving Direct Response, All Respondents Offline Ad Spend by Ad Channel (US $M), 2018 Figure 17 Figure 5 Effectiveness for Driving Brand Awareness, All Respondents

Online Ad Spend, by Device Share, 2016-2020 Figure 18 Figure 6 Effectiveness for Driving Brand Awareness; Respondents Who Use It Online Ad Spend by Ad Channel (US$M), 2018 Figure 19 Figure 7 Top Online Advertising Challenges Online Advertising Channels and Tactics Used Figure 20 Figure 8 Attribution Models Used

Top SEM Keyword Competitor Average Ranking Figure 21 Figure 9 Planned Attribution Implementation SEM Management, Internal vs. Agency Figure 22 Brand Awareness Success Metrics Used Figure 10

Social Media Technology Use Figure 23 New Technology Planning and Investment Figure 11 Figure 24 Social Media Technology Effectiveness Emerging Technologies Current Usage Figure 12 Display Ad Purchase Method

Overview:

The Push and Pull of Travel Advertising The travel industry is no stranger to the ebb and flow of change. Consumer travel behavior has seen massive shifts with technological developments. Travelers are dreaming, researching, shopping, and booking travel across devices and being led into the funnel through various advertising channels. The travel industry has bounced back after a few difficult years, and advertising budgets are likewise rising. U.S.- ad vertising spend (ad spend) will reach $7.6B in 2018 and European ad spend will reach $4.6B – rising right alongside revenue growth.

Phocuswright’s Travel Advertising in U.S. And Europe: Industry Sizing and Trends is a deep-dive into the landscape of current ad spend and trends. The study assesses the market, challenges faced, and technologies – by channel, device and travel industry segment, covering the essential trends that define digital travel advertising.

It is an exciting time to be in the business of travel – the excitement of mobile, the decline in offline, the promise of new technologies – the buzz is all too familiar, and the stakes are high. Through trial and error, advertisers have found that no one-size- fits-all advertising formula applies. The breadth of advertising products is constantly growing, so travel brands need to ensure that they have strategies in place, both for maintaining a set of core channels and experimenting with newer technologies. Travel brands are increasingly leveraging advertising agencies whose expertise in the field assists in customizing a multi-channel strategy.

The most prominent shift in advertising has been the rise of online, but the advance- ment in online technologies can be a complex web to detangle. Products have their strengths, and travel brands need to diversify their ad channel mix to maintain a balance of brand awareness tactics, direct-response offerings, and a foray into emerging technologies to stay relevant.

KEY TAKEAWAYS

Online Travel Is Travel • The distinction between online and offline travel is blurring, with a majority of consumers engaging with digital in some form from the dream state through their travel plans.

• Advertisers are aligning budgets with consumer travel behavior to guarantee their presence wherever the traveler may be.

• Digital ad spend budgets account for a substantial and growing share of total budgets, and this trend will only continue.

Mobile and Desktop Are Not One in The Same • Mobile spend has increased nearly to that of desktop, but traveler behavior deter- mines the final split. Most bookings are completed on desktop, while travelers use mobile to peruse and plan their travels. Advertisers must be active on both.

• More than half of U.S. online travelers now shop on mobile, but European travelers are still more likely to shop on desktop. Mobile shopping in Europe will continue to rise, however. SEM Delivers the Conversions but the Dependency Is Problematic • The word Google has become synonymous with online search, making it no surprise that search engine presence is a key component of ad spend strategies.

• Search engine marketing (SEM) is expanding rapidly and accounts, on average, for the biggest share of advertising budgets. Google AdWords is one of the most widely-used such SEM products. More than four out of five advertisers use SEM because they are considered the most effective products for delivering bookings.

• Keyword competition is a major challenge, and advertisers are in a search for ways to lessen their heavy dependence on SEM.

Distinct Channel Strategies Connect to Distinct Channel Goals • In today’s multi-screen, multi-channel world, there are many more opportunities to reach travelers. Advertisers need to be present across channels or risk missing their chance at a conversion.

• Some advertising channels are viewed as better than others for specific goals. Direct response is more successful through SEM, metasearch, and online travel agency (OTA) advertising, while brand awareness is aided by platforms such as social media or video advertising.

TV Is Keeping Offline Relevant for Now • Offline budgets are shrinking due to less interest in channels like print and out of home and to travelers’ ongoing shift to online shopping and booking. TV advertising spend accounts for the biggest offline advertising expense.

• TV stands the test of time as the most effective way to deliver brand lift to a big audi- ence, though the hefty price tag means that not all travel brands can participate.

• Of the many new advertising technologies, online video stands out as an effective branding channel. Though not yet widely adopted, many travel advertisers are experimenting or have plans to implement this new medium. Online video marries the old with the new, offering a more affordable alternative to delivering rich engaging content similar to TV.

So Many Advertising Channels, So Little Attribution • Travel advertisers are managing the use of many different products, so identifying what works and what doesn’t is more important than ever to ensure dollars are spent effectively. But employing attribution models that truly reflect the performance of multi-channel strategies remains a major challenge.

• Advertisers are overwhelmingly using simplistic single-click attribution models – or none at all – creating somewhat misleading success metrics. The future of attribution must consider cross-channel and cross-device behavior. RESEARCH METHODOLOGY, SCOPE, AND OBJECTIVES

Phocuswright’s Travel Advertising in U.S. and Europe: Industry Sizing and Trends illustrates:

• The amount of spend by U.S., U.K., France, and Germany-based travel companies on advertising

• Spend allocation by device, channel, and ad product

• The implementation and effectiveness of various ad products

• The balancing act of chasing conversions and growing brand awareness

• The state of attribution and its complexities

• How travel brands are leveraging emerging technologies

Scope of this study covers: • Travel advertising in U.S., U.K., France, and Germany (“focus markets”). U.K., France and Germany will collectively be referred to as “Europe.”

• Ad spend on purchased media displayed or distributed globally

• Ad spend promoting leisure and unmanaged business travel. Managed corporate travel and B2B travel industry advertising is excluded.

• Ad spend market size includes suppliers (airline, hotel, car rental, cruise, rail), tour operators, online travel agencies (OTAs) and destination marketing organizations (DMOs)

The study includes three research components: 1. Advertising Buyer Survey: Phocuswright conducted quantitative research through an online survey to 100 respondents representing consumer travel advertising buyers for DMOs, OTAs and travel suppliers (airline, hotel, cruise, tour, car rental, rail) who purchased media displayed or distributed in at least one focus market. The survey was fielded from June to July of 2018. Survey respondents were advertising decision makers with the knowledge and responsibility to determine the overall ad strategy of their organizations. Ninety percent of respondents were management level (C-suite, Director, VP) and two out of five spent at least US $1M in the focus markets.

2. Executive Interviews: Phocuswright conducted qualitative research with over 70 executive interviews with advertising and marketing executives across travel suppliers, intermediaries, DMOs, advertising agencies and technology companies representing travel businesses based in the focus markets that advertise to consumers in at least one of these markets. Interviews were conducted from April to July of 2018.

3. Market Sizing: Phocuswright sized the market using a multi-pronged approach, leveraging survey and interview data from this study and previous ad spend studies, its travel market overview research studies for the respective focus markets, as well as third-party data (including company public filings, U.S. Economic Census, UK Office for National Statistics, etc.), data from travel and trade organizations (such as Destinations International, WTTC, WTO), and cross-referenced advertising industry benchmarks from organizations (including IAB, Kantar Media and Advertising Age). Market size represents the amount of ad spend by U.S., U.K., France and Germa- ny-based travel companies.

Partners

Destinations International is the world’s largest resource for official destination -or ganizations, convention and visitors bureaus (CVBs) and tourism boards. Destinations International is a community of over 5,000 professionals from nearly 600 destinations around the world. It represents a powerful, forward-thinking, collaborative association by exchanging bold ideas, connecting innovative people and elevating tourism to its highest potential.

The Hospitality Sales and Marketing Association International (HSMAI) is committed to growing business for hotels and their partners, and is the industry’s leading advocate for intelligent, sustainable hotel revenue growth. The association provides hotel professionals & their partners with tools, insights, and expertise to fuel sales, inspire marketing,aviano and sans optimize revenue through programs such as HSMAI’s Revenue Optimization berling Conference,FUTURA Digital Marketing Strategy Conference and Adrian Awards. HSMAI offers organizationalPMS-377 PMS-2617 and PMS-444 individual membership, with more than 7,000 members worldwide, 669933 663399 999999 with 36 chapters in the Americas Region. There are three regions: the Americas, Asia Pacific, and Europe, and a chapter in the UAE. Each region has geographic chapters and signature programs and services for association members.