State of Travel Insurance 2017 - Microsoft · The State of Travel Insurance 2017 is an outgrowth of...

State of Travel Insurance 2017An exclusive whitepaper produced by Berkshire Hathaway Travel Protection.

About the State of Travel Insurance........................................................3

Overall ......................................................................................................4

Europe .................................................................................................... 13

Caribbean/Central America .................................................................. 21

Asia/Oceania ......................................................................................... 27

South America ....................................................................................... 32

Africa/Middle East ................................................................................ 36

Canada/Mexico...................................................................................... 41

United States ......................................................................................... 48

Appendix ............................................................................................... 53

Table of Contents

3

The State of Travel Insurance 2017 is an outgrowth of Berkshire

Hathaway Travel Protection’s ongoing efforts to innovate within the

travel-insurance industry by bringing clarity and transparency to the

business and helping travel professionals understand the many factors

that drive travel-insurance sales.

This report is based on a predictive model of domestic and international

travel originating in the United States. It uses a variety of research

methods to generate its outcomes. Please see the Appendix for details

on how the research was conducted.

Aboutthe State of Travel Insurance

In aggregate, U.S. travel-insurance (TI) sales for international

travel will increase 4.93% in 2017 to $2.22 billion. Last year we

projected that travel-insurance sales would increase 7.8%. Sales

actually increased 12.7%, driven by a travel boom early in the

year that was offset by fears over terrorist activities and lingering

fears of disease epidemics tied to the Zika virus.

Overall

We Project

5

More trips in general

Consumers indicated they planned more international travel in 2017, and travel agencies were very confident in their ability to sell more international

travel in 2017. These sentiments were corroborated by Travel Weekly, Travel Market Report1, and other sources.

More covered trips in 2017

In addition, consumers and travel agencies indicated they would be buying/selling more travel insurance in 2017. When actual intent to purchase was

calculated, the increase in sales was around 3%. The remaining 1.93% of market-size increase is related to travel costs.

The changing nature of Millennial travelers compared to previous generations

As MMGY’s “Global Portrait of American Travelers2” (POAT) points out, younger travelers are expected to keep driving travel growth, even as they

mature. Unlike generations that came before, the Millennial generation’s “experiences over stuff” mentality leads them to travel and experience new

things, as opposed to buying new things. Though many Millennials are moving into their 30s and assuming some of the patterns of maturity (e.g.,

buying a house, driving a minivan), their desire to travel does not seem to diminish.

1 Shillinglaw, James, “Travel Agencies Expect Banner Year, Says Ensemble Insights Survey,” accessed Nov. 6, 2016, at http://www.travelmarketreport.com/articles/Travel-Agents-Expect-Banner-Year-Says-Ensemble-Insights-Survey.2 “Global Portrait of American Travelers 2016-2017: Executive Summary” (New York: MMGY Global, 2016), p. 4.

Reasons for making this projection:

6

Travel agencies are much more bullish than consumers on increased travel and higher travel-insurance sales in 2017. However, the direction is positive for both groups.

Trips – Travelers Vs. Agencies

90%

80%

70%

60%

50%

40%

30%

20%

10%

0Sell/take moretrips in 2017

Sell/take fewertrips in 2017

41.41%

80.55%

12.94

%6.9

5%

consumersagencies

Travel Insurance – Travelers Vs. Agencies

70%

60%

50%

40%

30%

20%

10%

0Sell/buy moretravel insurancein 2017

Sell/buy lesstravel insurancein 2017

36.42%

60.57%

6.84%

7.04%

consumersagencies

7

Increased travel by Boomers

While Baby Boomers continue to travel extensively, and continue to

favor more active travel even as they approach unprecedented ages for

this kind of travel, the POAT shows that they increasingly are looking

to travel to places they have been before, and are preferring to travel

closer to home3. This changes the travel landscape somewhat; instead

of a Mediterranean cruise, these Boomers may choose to cruise the

Inside Passage, and instead of going to France they may go to Quebec.

This creates significant demand for U.S. travel (a point reinforced in

our travel-agency survey) and also for travel to Mexico and Canada.

Increased knowledge of how travel insurance works

According to BHTP’s consumer survey, travelers who said they bought

more travel insurance in 2016 than previous years said they were

doing it to a significant extent because they had better knowledge

of how travel insurance works. It is important to take these findings

in context; there’s no way of knowing how much more they feel they

know about the workings of travel insurance, or how much of that

increase is real. We plan to follow up on this question in 2017 and

clarify consumers’ intent.

3 “Global Portrait of American Travelers 2016-17,” p. 6.

90%

80%

70%

60%

50%

40%

30%

20%

10%

0RiverCruises

OceanCruises

Tours AdventureTravel

Weddings,Honeymoons,Babymoons,Bachelor/ette Parties

Trips to seefamily and friends

55.17%

53.84

%

86.04

%87.88%

51.22

%21.05%

36.73%

44.82

%

33.33%

23.81%

31.31%

21.95%

55-6465-74

Boomer Travel: Younger Vs. Older Boomers

Younger and older Baby Boomers are a lot alike -- except when it comes to adventure and family travel. Older Boomers are more likely to take adventure trips; younger Boomers tend to opt for family travel.

8

Slight increase in trip costs

Driven by higher airfare and lodging costs in some markets and currency fluctuations in others, we project that the average trip cost for all trips, insured

and uninsured, will increase about 4.1% in 2017. There is not necessarily a linear relationship between an increase in trip costs and a similar increase

in travel-insurance sales, since some of the trips that experience the greatest increases in costs may go uninsured, and other uninsured trips may be

taken simply because of a once-in-a-lifetime bargain fare. But from a purely mathematical standpoint, trip-cost increases do play a significant role in

determining increases in travel-insurance revenue.

Currency fluctuations

Several key currencies, such as the soon-to-be-liberated British pound, are expected to rebound

against the U.S. dollar in 20174. This can lead to higher trip costs and more expensive travel

insurance, which in a steady-state model of travel-insurance sales will drive up travel-insurance

revenue. Conversely, currencies expected to weaken against the dollar are from countries already

losing favor with travelers, like Brazil and Russia. Lower prices in these countries are not liable to

bring travelers back by themselves.

Scattered increases in lodging costs, particularly in North America

Globally, lodging prices are expected to stay level5, with declines in key markets like Asia and the Caribbean but increases in Western Europe and North

America. These increases are being driven by recovering economies, mergers and acquisitions concentrating more lodging in the hands of fewer large

organizations, and increasing sophistication in the pricing of shared-economy lodgings and timeshare rentals. These properties are figuring out how

to variably flex their pricing to take advantage of events and seasonality in their location. Companies like Beyond Pricing are helping owners create

4 GBTA Foundation, “Global Travel Price Outlook” (Minneapolis: Carlson Wagonlit Travel, 2016), p. 5.5 Ibid., p. 12.

Though not a one-to-one

relationship, trip-cost

increases play a significant

role in travel-insurance

revenue.

9

competitive rates, but will also drive travelers to consider hotels when rates level off. Mexico and Canada are both predicting lodging increases of

around 4%6; since these are key destinations for U.S. travelers, these increases should have an impact on trip cost, and eventually, on travel-insurance

premiums and revenue.

Some increases in airfares

While bargain fares make headlines, U.S. airlines are quietly taking steps to constrict the supply of flights, trying to stay just ahead of demand and

keeping the pressure on prices7. This can work since there are few disruptors in the domestic airline market, but it will be harder to effectively replicate

internationally, where disruptors like WOWair and Norwegian are prevalent, and becoming more popular.

Increases in other travel costs

Cruise costs are expected to increase around 3% in 20178, and costs for ground transportation and

other travel-related expenses are expected to rise at least with the rate of inflation. These can lead

to cost increases for tours and other organized travel, which can lead to higher travel-insurance

premiums and eventually higher TI revenues.

Greater use of travel advisors

The travel agencies we surveyed said they were very optimistic about selling more travel, and more

travel insurance, in 2017; Travel Weekly9 and other independent studies corroborated this finding, though there is a notable lack of hard data to back up

their assertions10. There are signs of a move away from large online travel bookers to something – perhaps a hybrid online travel agency like Lola Travel,

6 Ibid., p. 15.7 Bachman, Justin, “ Cheap Airfares Are About To Vanish As U.S. Airlines Tighten Capacity,” accessed Oct. 24, 2016, at https://skift.com/2016/10/14/cheap-airfares-are-about-to-vanish-as-u-s-airlines-tighten-capacity/.8 “Moody’s Sets US Cruise Industry’s Outlook At Stable,” accessed Oct. 24, 2016, at http://worldmaritimenews.com/archives/202884/moodys-sets-us-cruise-industrys-outlook-at-stable/.9 Shillinglaw, James, “Travel agencies Expect Banner Year, Says Ensemble Insights Survey,” accessed Oct. 24, 2016, at http://www.travelmarketreport.com/articles/Travel-agencies-Expect-Banner-Year-Says-Ensemble-Insights-Survey.10 Ibid.

U.S. airlines are quietly

taking steps to constrict

the supply of flights.

10

brick-and-mortar travel agencies, or a true direct-booking, DIY model. 2017

should be a better year for travel advisors than 2016. They should sell more

travel – and more travel insurance, because currently no one is better at selling

travel insurance than travel advisors.

Increased use of travel-insurance aggregators

Travel advisors are currently the best marketers of travel insurance, but that

may not be the case for long. Aggregator sites that let travelers compare plans

and rates are gaining in popularity. “The travel-insurance aggregator market

is very powerful and shows continued growth,” says InsureMyTrip CEO Jim

Grace. “From 2015 to 2016, we estimate that aggregator sites experienced a

10% or more increase in business11.” In general, these sites do not take TI sales

away from travel agencies; instead, they give choices to OTA customers and

leisure travelers booking their own trips. By simplifying the purchase process,

aggregators come closer than anyone to supplying the change and innovation

necessary to expand the travel-insurance market.

11 Accessed Jan. 20, 2017, at https://wordpress.com/post/blog.insuremytrip.com/7151

90%

80%

70%

60%

50%

40%

30%

20%

10%

0Un

ited

Stat

es

85.87

%

Euro

pe

27.72

%

Latin

Am

eric

a/Ca

ribbe

an

19.57

%

Cana

da

10.69

%

Mex

ico

9.96

%

Asia

/Aus

tralia

/Oce

ania

7.6

1%

Sout

h Am

eric

a 4

.71%

Othe

r 4

.53%

Afric

a 2

.54%

Destinations

It’s easy to overlook the importance of travel within the United States, but this may put it in perspective: More Americans travel in the United States than to all the other countries of the world combined.

11

A lack of new products and other innovations that truly expand the market

While aggregators are educating and expanding the reach of the market, travel insurers (with the exception of Berkshire Hathaway Travel Protection)

have been unable to innovate sufficiently to meet travelers’ needs. This is not a problem unique to travel insurance; many insurers have been fighting

this battle12. They mainly struggle marketing to Millennials, and this parallels the experience of travel insurers. Aggregators, along with Millennials’

increased use of travel advisors, will help reverse this trend to an extent, but as long as travel insurance looks and acts like other forms of insurance, it

will be a tougher sell to insurance-averse Millennials and other key pieces of the travel market.

Lack of significant growth in the OTA segment

Online travel agencies control nearly 20% of U.S. travel bookings13. One of the greatest opportunities

for travel insurers is the majority of OTA customers who do not buy travel insurance. However,

the price-driven products OTAs offer often are not comprehensive and not able to compete with

products found on aggregator websites increasingly used by travel-savvy consumers. The products

many times do not align with the OTA’s digital customer experience. As a result, we do not foresee

sufficient changes to the sales or product models to forecast major growth in this segment in 2017.

12 “Millennials: The Insurance Customer Has Changed, Will You?”, accessed Oct. 25, 2016, at https://www.ibm.com/blogs/commerce/2016/03/millennials-the-insurance-customer-has-changed-will-you/.13 Biesiada, Jamie, “U.S. travel market grew 5% in 2015: Phocuswright,” accessed Oct. 25, 2016 at http://www.travelweekly.com/North-America-Travel/US-travel-market-grew-5-percent-in-2015-Phocuswright.

Forces driving the sale of travel insurance are balanced by:

As long as travel insurance

looks and acts like other

forms of insurance, it will be

a tough sell to insurance-

averse Millennials.

12

Core of travelers/trips that do not utilize travel insurance

BHTP surveys show about 30% of travelers will not buy travel insurance for some highly ingrained reasons – for instance, they feel they’re covered

through their credit card or other insurance. When added to the segment of the market that consistently buys travel insurance, that still leaves more

than half of U.S. travelers uninsured, willing to buy travel insurance but currently not buying the product. Converting those consumers has been

difficult, and remains the largest opportunity in the travel-insurance market.

Travel-insurance sales to Americans traveling to Europe will

increase 4.03% in 2017. Europe remains the top destination in

terms of its ability to generate travel-insurance revenue.

Europe

We Project

14

The polarizing effect of travel to Europe, both among agencies and travelers, due to terrorism fears

In our consumer survey, 19% of travelers said they definitely would visit Europe, and 25% said they definitely would not. While other destinations

elicited more negative responses, Europe was the most strongly polarized destination. This pattern repeated itself in the agency survey, and correlates

strongly with terrorism fears. Travelers who are very fearful of terrorist attacks are highly unlikely

to be definite travelers to Europe in 2017 – and vice versa.

Increase in travel to Europe among Boomers

BHTP consumer research showed that travelers who fall into the Baby Boomer age groups are much

more likely than the general traveler population to be considering European travel in 2017 – unless

they’re afraid of terrorism. Acts of terrorism continue to concern older travelers, which is consistent

with feelings of the “YAHTZEE” (Young At Heart Travelers Zooming Everywhere Enthusiastically)

travelers profiled in MMGY’s POAT study1.

1 “Global Portrait of American Travelers 2016-2017: Executive Summary,” p. 7.


Travelers who fall into

the Baby Boomer age

groups are much more

likely than the general

traveler population to be

considering European

travel in 2017 – unless

they’re afraid of terrorism.

15

45%

40%

35%

30%

25%

20%

15%

10%

5%

0

Unite

d Ki

ngdo

m

43.79

%

Fran

ce

30.72

%

Italy

26

.14%

Germ

any

18.95

%

Othe

r 17

.65%

Spai

n 1

7.65%

Switz

erla

nd

11.11%

Irela

nd

9.8%

Bene

lux

9.15

%

Scan

dina

via

5.88%

Aust

ria

5.23%

Croa

tia

4.58%

Pola

nd

3.92%

Icel

and

3.27

%

Gree

ce

3.27%

Czec

h Re

publ

ic

2.61%

Russ

ia

2.61%

Hung

ary

1.96

%

2017 Projected Travel To European Destinations

Brexit is expected to have little impact on American travel to the U.K. Travel agencies had it far down the list of travel concerns, and travelers are more bullish than ever on travel to the British Isles.

16

Continuation of low-cost fares to Europe

According to airfare-prediction site Hopper, fares to Europe will be down 16% on average by the end of the year2. And it’s not just low-cost airfares;

European tours are expected to cost at least 4% less than they cost in 20163. Some of these low-cost trips go uninsured, since younger, bargain-hunting

budget travelers who don’t traditionally buy travel insurance are taking them, but more travel to Europe will have a concomitant increase in travel-

insurance revenue, especially for relatively inexpensive comprehensive policies. Even though many travel policies are not tied to the cost of airfare, there

will be significant incremental TI revenue from an airfare-related bump in European travel.

Continuing economic weakness in Europe

According to the GBTA, “Economists are projecting much slower growth for the UK and Europe in

2017 with some projecting recession. This will most certainly impact corporate travel demand next

year, which could lead to lower prices on airfare, hotels, and transportation. Hotel and ground prices

are likely to be the most impacted given the inflexibility of supply. Currency fluctuations may also

impact travel prices4.” Most European economies are not expected to grow significantly in 2017. In

many of these countries inflation will be nonexistent; in several there’s a possibility of deflation.

The currencies of France, Germany, Greece, Italy, and Spain, along with the remaining Eurozone currencies, are expected to fall about 1% against the

U.S. dollar5. While a stronger U.S. dollar has meant more U.S. travel to Europe, there’s an element of choice involved. Travelers are choosing to travel to

Europe instead of traveling within the United States for roughly the same price. The result is an increase in travel-insurance purchases from travelers

seeking trip-interruption, trip-cancellation, and medical coverage they would not have bought if they had remained in the U.S.

2 Glusac, Elaine, “Europe and the Caribbean: In Reach At Last,” accessed Oct. 25, 2016, at http://www.nytimes.com/2016/10/23/travel/europe-and-the-caribbean-in-reach-at-last.html?_r=0.3 Baran, Michelle, “Tour ops stake Europe recovery on strong dollar, value-adds,” accessed Nov. 4, 2016, at http://www.travelweekly.com/Travel-News/Tour-Operators/Tour-ops-stake-Europe-recovery-on-strong-dollar-value-adds?cid=eltrdb.4 GBTA, p. 3.5 Ibid., p. 5.

In many countries inflation

will be nonexistent; in

several there’s a possibility

of deflation.

17

expected percentage of travelersactual percentage of travelers

European Travel By Age

18-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older

27.11%

25%

34.24%

36.25%

19.56

%47.22

%

43.67%

39.17%

52.48%

30.83%

39.64

%40.40

%

36.89

%35.72%

1.01%

0%

50%

40%

30%

20%

10%

0

Many more younger travelers than expected said they would travel to Europe in 2017; conversely, fewer than expected middle-aged travelers said they would travel to Europe. When these findings are cross-tabbed with travel fears, the reasons are clear: Middle-aged travelers are far more concerned about terrorism than younger travelers.

18

An expected currency recovery in the United Kingdom

According to GBTA, the U.K.’s currency post-Brexit is expected to improve by about 3%

against the dollar6. While that will still put the pound at close to historical lows, any increase

in the pound that translates to higher trip costs, whether for lodging or miscellaneous

travel expenses, will translate into more travel-insurance revenue from the destination

that’s shaping up at Europe’s safest, and one of its most desirable.

Number of hot destinations for agencies and travelers

According to BHTP surveys, Iceland and Croatia are high on agencies’ and travelers’ lists

of hot destinations for 2017. While neither is a top-10 European destination quite yet,

affordable airfares – especially to Iceland – will make these countries viable alternative

destinations to many domestic destinations, pumping travel dollars into Europe.

The continued popularity of river cruises among agencies and travelers

According to agencies, river cruises were one of their hottest travel types last year, and

they’re expected to be one of the hottest travel types this year. The bulk of this market is in

Europe. While river cruises are dwarfed in volume by ocean cruises, their growth has been

a boon to European travel, even when more conventional trips to Europe are threatened

by terrorist activity.

6 Ibid.

More Fewer

39.39%

67.44%

12.12%

4.66%

70%

60%

50%

40%

30%

20%

10%

0

consumersagencies

River Cruising In 2017

There’s a simple reason why so many more travel agencies said they were expecting to sell more river cruises than travelers said they were planning to take river cruises: Travel agencies tend to work with older travelers -- the target demographic for river cruises.

19

Continuing terrorism concerns alienating a segment of traveling population

One-quarter of travelers and 60% of travel agencies told BHTP that international terrorism was a threat to their travels. That fear is most fully realized

in Europe.

Popularity of adventure travel largely bypassing Europe

Adventure travel is a fast-growing segment of the overall travel market, and Europe has never been

a prime destination for adventure travel. More than 36% of travelers said they are planning more

adventure trips in 2017, but according to a survey conducted by Virtuoso, the top adventure-travel

destinations are not in Europe7. Europe may be largely bypassed by the growth in adventure travel.

Counter-promotion of non-European destinations like Canada as “safe” destinations

Destination Canada8 used this marketing approach, and it was also the subconscious reaction of

travelers and travel agencies after terrorist attacks in Europe. If European terrorism continues, expect more destinations to take Canada’s lead and

aggressively promote themselves as safe alternatives.

7 “Adventure travel: The Hottest Destinations and Trends,” accessed Oct. 20, 2016, at http://www.2luxury2.com/adventure-travel-the-hottest-destinations-and-trends/8 “Seizing the Winning Conditions for Canada,” accessed Oct. 25, 2016, at https://www.destinationcanada.com/sites/default/files/2016-08/2016-2020_corporate_plan_summary_-_june_14_-_e_0_0.pdf.

These factors have been balanced by:

60% of travel agencies told

BHTP that international

terrorism was a threat to

their customers’ travels.

20

Turkey’s troubles

Regardless of whether Turkey is considered to be part of Europe, in Asia, or somewhere

between the two, continued political issues in the country and its involvement in

conflicts in Syria and Iraq have dimmed its once-bright appeal. Though the World

Travel & Tourism Council projects Turkish tourism to increase its contributions

to GDP 2% in 2017, that comes after a 3.2% drop in 2016, meaning that Turkish

tourism, even after an optimistic projection, will still be below 2015 levels9. That will

weigh on travel to the entire sub-Caucasus region, at least through 2017 and likely

beyond.

Decreased interest in Russia as a destination

As relations cool between the U.S. and Russia, travelers’ interest in Russia is cooling

as well. Russia finished at the bottom of European destinations in our traveler

survey, and the WTTC expects tourism’s contributions to the Russian GDP to fall

another 1.5% in 201710. For a destination that was hot three or four years ago, it’s a

stunning reversal.

9 “Global Travel & Tourism: Economic Impact Update August 2016,” accessed Oct. 25, 2016, at https://www.wttc.org/-/media/files/reports/economic-impact-research/wttc-global-travel--tourism-economic-impact-update_july-2016_encrypted.pdf10 Ibid.

60%

50%

40%

30%

20%

10%

0

25.74%

59.72%

consumersagencies

Who’s Afraid Of Terrorism?

Travel agencies are much more concerned about terrorism than travelers, but terrorism remains high on travelers’ lists of travel concerns.

Travel-insurance sales to Americans traveling to the Caribbean

and Central America will increase 9.78% in 2017 – the largest

increase of any region.

Caribbean/Central America

We Project

22

A projected 11.8% increase in travel to the region

As Zika is no longer considered to be a “global health emergency1,”

the last reason fades for not going to the Caribbean. The area is

relatively safe, inexpensive, and close to the U.S. – and exotic, now

that Cuba is in the picture. Because of this, and because 2016

was a somewhat off year for Caribbean travel, we predict a robust

rebound for the region in 2017.

Significant increase in cruise-ship capacity

According to Cruise Market Watch, cruise-ship capacity will

increase by more than 17,000 in 2017, on top of a more than

20,000 increase in capacity in 20162. This capacity increase is being

done largely to meet demand, and is concentrated in the Caribbean.

1 Sun, Lena H., “WHO no longer considers Zika a global health emergency,” accessed Dec. 28, 2016, at https://www.washingtonpost.com/news/to-your-health/wp/2016/11/18/who-no-longer-considers-zika-a-global-health-emergency-2/?utm_term=.5eeb14b917cc.2 “Growth,” accessed Oct. 24, 2016, at http://www.cruisemarketwatch.com/growth/.

70%

60%

50%

40%

30%

20%

10%

0

Othe

r 5

9.26%

Baha

mas

23

.15%

Jam

aica

16

.67%

Dom

inic

an R

epub

lic

15.74

%

Beliz

e 7

.41%

Cost

a Ri

ca

6.48%

Cuba

4.63

%

2017 Projected Travel To Caribbean Destinations

Unlike other regions, the Caribbean and Central America does not focus its travel around a couple of key destinations. Travel in this region is non-destinational (in the case of cruises) or property-specific, as opposed to country-specific.


23

Lessening of Zika fears

Despite not being a global health emergency, Zika has not gone away – in fact, it’s more

prevalent than ever worldwide, according to the Centers for Disease Control3. However, it is

being dealt with, news coverage is turning around, and that appears to be good enough for

many travelers, who are beginning to resume their pre-Zika travel patterns – which include

frequent trips to the Caribbean.

Prices remaining steady except for cruises

Cruise costs are projected to increase 1.5% in 2017, as cruise lines attempt to limit

discounting, add fees, and rein in costs4. Otherwise, lodging and airfares in the region are

projected to hold steady or decrease slightly – down 1.9% in the case of airfares, and down

0.9% in the case of hotels, according to GBTA. Increased regional competition from domestic

carriers like JetBlue and Southwest has the potential to further lower airfares to Caribbean

destinations. Currencies are likewise projected to be stable to slightly lower against the dollar.

The Caribbean and Central America are viewed as highly affordable destinations, so they will

attract bargain-hunting Americans looking for someplace warm that’s close to home. All of

this will drive tourist travel to the region.

3 “Zika Travel Information,” accessed Oct. 25, 2016, at https://wwwnc.cdc.gov/travel/page/zika-information.4 “Norwegian Cruise Line Holdings Reports Financial Results for the Second Quarter 2016,” accessed Oct. 25, 2016, at http://www.nclhltdinvestor.com/releases.cfm.

30%

25%

20%

15%

10%

5%

0

12.04

%26.39%

consumersagencies

Do Disease Epidemics A�ect Travel?

Travel agencies are much more likely to consider epidemics a threat to travel; in fact, disease outbreaks are a top-three concern for travel agencies.

24

Continued demand for cruises from travelers, and continued promotion of cruises by agencies

Cruises are big business for many travel advisors, and travelers continue to want a high-quality cruise experience. That combination is driving the

increase in cruise-ship capacity, and it’s very good for travel-insurance sales, since most cruise vacations are insured.

The Caribbean emerging as a destination of choice for higher-income travelers

BHTP travel-agency and consumer research indicates that higher-income travelers are much more

likely to travel to the Caribbean and Central America. The reason might be that these travelers are

also more likely to take multiple trips, and the Caribbean is just one of their destinations. Still, trips

to the Caribbean by higher-income travelers are likely to be more expensive, meaning more travel-

insurance premiums.

Cuba continuing to attract travelers

More than 4% of BHTP-surveyed travelers said they traveled to Cuba in 2016. That number should

increase significantly in 2017, assuming the current lifting of the travel ban stays in place. Cuba is beginning to build out infrastructure to accommodate

more American tourists. It’s a lengthy process, but every little bit helps, and Cuba should be a big player in Caribbean tourism by no later than the last

quarter of 2017.

4% of BHTP-surveyed

travelers said they traveled

to Cuba in 2016. That

number should increase

significantly in 2017.

25

A potential cutoff of demand for Cuba

Travel to Cuba could wither in 2017 after blooming in

2016. The Trump administration has pledged to reinstate

travel restrictions, and even if that doesn’t happen,

some experts are saying 2017 demand for Cuban travel

will not approach 2016 levels5. The problems with

Cuba as a destination will become more evident, and

the infrastructure won’t be able to accommodate more

Americans. It seems contradictory, but it shows the fluid

nature of the Cuban situation at the present time.

Increasing severity of storms and hurricanes

2016 was one of the most active seasons on record for

Caribbean storms6. The activity in attributed in part to

5 Platta, Daniel, “Cuba’s tourism boom is starting to slow down,” accessed Oct. 25, 2016, at http://www.businessinsider.com/r-cuban-tourism-boom-seen-slowing-but-finding-a-room-still-hard-2016-2.6 Belles, Jonathan, “Atlantic Hurricane Season 2016: How This Season Stacks Up So Far,” accessed Oct. 25, 2016, at https://weather.com/storms/hurricane/news/hurricane-season-2016-late-octo-ber-update.


Who’s Traveling to The Caribbean, By Age

18-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older

58.82

%62.5%

22.98%

28.75%

24.22

%26.85%

35.35%

17.5%

23.46%

26.32%

24.59%

33.33%

20.35%

14.28%

0% 0%

60%

50%

40%

30%

20%

10%

0

Who’s really driving Caribbean travel? Younger travelers, for whom the Caribbean is a Spring Break mecca and a cheap, convenient getaway. Who’s not? Middle-aged travelers, who find other destinations more alluring ... perhaps because the Caribbean is overrun with kids.

These results are balanced by:

26

global warming, which means that the 2017 season could be as severe, if not more severe. That

has major impacts for cruise lines far beyond what on-land resorts might experience. Catastrophic

weather and the subsequent damage severely impacting demand is one of the greatest threats to

continued growth in Caribbean travel.

The Caribbean (exclusive of Cuba and possibly Costa Rica) is not a prime destination for

adventure travelers

Despite cruise lines’ and resorts’ efforts to the contrary, the Caribbean’s most regular visitors are

largely older travelers. It’s generally not seen as a destination for adventure travelers7. As that segment becomes increasingly important, it threatens to

bypass the Caribbean – something that could have long-term consequences.

7 “Adventure travel: The Hottest Destinations and Trends.”

As adventure travel

becomes increasingly

important, it threatens to

bypass the Caribbean.

Travel-insurance sales to Americans traveling to Asia and

Oceania will increase 4.93% in 2017.

Asia/Oceania

We Project

28

A projected 1.3% increase in travel to the region

This is according to our research, and reflects Americans’ travel behavior vis-a-vis the region.

An increase in cruise traffic, up from slightly less than 3 million passengers in 2016 to 3.7 million passengers in 2017

This is below last year’s 24% increase in cruise travel but is still a significant bump1.

A large increase in adventure travel to New Zealand, Australia and Antarctica

This increase in adventure travel is helping drive a 6.2% projected increase in travel to Australia2.

In addition, we expect Antarctica to continue to post gains in 2017 on the heels of a 5% increase in

tourism to the continent in 20163. This increase was driven in large part by an almost 10% increase in

travel to the area from American tourists4. As high-end adventure cruises from Quark, Hurtigruten

and others – even National Geographic – continue to appeal to Millennial adventure-seekers and

older bucket-list travelers, we expect another double-digit increase in American travel to the region.

1 Steighorst, Tom, “Asia cruise market prediction: 7M passengers a year by 2020,” accessed Oct. 23, 2016, at http://www.travelweekly.com/Cruise-Travel/Asia-cruise-market-prediction-7M-passengers-a-year-by-20202 “Tourism Forecasts 2016,” accessed Oct. 24, 2016, at https://www.tra.gov.au/documents/forecasts/Tourism_Forecasts_2016.pdf3 “Tourists By Nationality,” accessed Dec. 23, 2016, at https://iaato.org/documents/10157/1017626/Tourists+by+Nationality+-+Total.pdf/9a175577-5e15-4ee8-97d4-5a4327c4ea25.4 Ibid.

Reasons for making this projection include:

Increase in adventure

travel is helping drive a

6.2% projected increase in

travel to Australia.

29


Asian Travel By Age30%

25%

20%

15%

10%

5%

018-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older

23.65%

25%

11.77%

21.25%

7.82%

18.52%

10.78%

15%

30%

11.28%

19.33%

14.14%

8.52%

7.14%

0.46%

0%

The pattern is obvious: Younger travelers are going to Asia in greater-than-expected numbers. Older travelers are going in smaller-than-expected numbers.

30

A general growth in travel to South Asia

South Asia has been identified as “the fastest growing sub-region

for total Travel & Tourism GDP long-run growth to 20265.” This

includes continued interest in recently opened-up destinations like

Myanmar and Laos and the rapid development of Indonesia as an

all-around tourist destination.

A recent proliferation of bargain airfares to Asia

Singapore Air, JAL, Cathay Pacific and others have recently offered

“sale” fares that have helped contribute to a large projected drop

in airfares to the region. The bargain airfares are emanating from

disruptors as well as existing airlines competing for traffic. Because

even bargain airfares to Asia are higher than comparable fares to

Europe, we expect a greater percentage of those trips to be insured.

A strong dollar

The dollar is very strong against the currencies of several key Asian

countries including Japan, Malaysia, Thailand, and China6. This

has been one of the contributing factors to stabilizing lodging

costs, long a driver of travel inflation in the region.

5 “Global Travel & Tourism: Economic Impact Update August 2016,” p. 12.6 GBTA, p. 3.

40%

35%

30%

25%

20%

15%

10%

5%

0

Othe

r 3

5.71%

Japa

n 3

5.71%

Aust

ralia

26

.19%

Chin

a (M

ainl

and)

21

.43%

Sing

apor

e 1

6.67%

Thai

land

14

.29%

New

Zea

land

14

.29%

Hong

Kon

g 1

4.29%

Sout

h Ko

rea

9.52

%

Tahi

ti 4

.76%

2017 Projected Travel To Asian Destinations

Among the other countries/continents not named specifically here: Vietnam, Myanmar, Antarctica, and perhaps most important of all, Indonesia, which is becoming a top-tier destination for Asian travelers.

31

A projected dip in Thai tourism

Because of the year-long mourning period following the death of King Bhumibol Adulyadej, there’s expected to be a dip in Thai tourism7. As NPR noted

shortly after the king’s death, “It … created uncertainty for some in [Thailand’s] tourism industry, which accounts for at least 10% of the country’s

GDP8.” Indications are this dip will be quite mild and short-term in nature, but it will be present nonetheless.

Continued softness in Americans’ travel to China

Americans seem to be cooling somewhat on travel to China9, though it remains quite popular

globally10, and popular with certain sub-segments of the American traveling population, most

notably Asian-Americans.

Competition for the travel dollar

Competition is coming from closer, less-exotic destinations like Europe, the Caribbean, and the U.S.

7 “King’s Death Slows Tourist Visits To Thailand,” accessed Dec. 23, 2016, at http://www.npr.org/2016/10/25/499262809/kings-death-slows-tourist-visits-to-thailand.8 Ibid.9 “Hong Kong Forecasts Slowing Economic Growth As Tourism Slumps,” accessed Oct. 24, 2016, http://www.bloomberg.com/news/articles/2016-02-24/hong-kong-forecasts-slowing-economic-growth-as-tourism-slumps) and India (http://www.tradingeconom-ics.com/india/tourist-arrivals/forecast)10 WTTC, p. 13.

Americans seem to be

cooling somewhat on travel

to China, though it remains

quite popular globally.

These are balanced by:

Travel-insurance sales to Americans traveling to South America

will decrease 7.3% in 2017 – the only decrease globally.

South America

We Project

33

A 0.5% projected decrease in travel to the region

Per our research, which shows a distinct post-event, post-Zika dip in

travel demand to South America.

A significant decrease in trip costs

This is driven by the absence of a high-profile event, like the Olympic

Games or the World Cup.

Continued political instability in Brazil, widespread weakness

in the economy, and an Olympics-fueled decrease in tourism

The Olympics were hardly a boon for Brazil. Peru was the top South

American destination in 2016 in our traveler poll, and Brazil remains

in a post-Olympics tourism funk. The Brazilian real is projected to

fall 8% against the dollar in 20171, airfares are projected to drop

more than 7%2, and Brazil’s poor economy and unstable politics will

depress Brazilian travel at least through the first part of 2017.

1 GBTA, p. 3.2 Ibid., p. 10.

40%

35%

30%

25%

20%

15%

10%

5%

0

Arge

ntin

a 3

4.62%

Peru

30

.77%

Braz

il 2

6.92%

Colo

mbi

a 1

5.38%

Othe

r 15

.38%

Chile

11.

54%

Urug

uay

11.54

%

Boliv

ia

7.69%

Ecua

dor

3.85%

2017 Projected Travel To South American Destinations

Somewhat surprisingly, Brazil is down the list of top South American destinations.


34

The fact that the region is largely bypassed by the cruise industry

Growth in the cruise industry has minimal residual benefits to South America. South American cruises are not numerous and are fairly unpopular, the

river-cruising phenomenon has largely bypassed the continent, and Venezuela, one of the few countries situated to benefit from cruises, is unstable

and inflation-wracked.

Continued political instability in Venezuela

Venezuela is suffering through an inflation spiral that may exceed 800%3. Its sketchy politics also

make it a less-desirable destination – and with so many desirable destinations so close, it’s hard to

predict anything but more depression for Venezuelan tourism.

Remaining fallout from the Zika virus

A quarter of all travel agencies and 12% of all travelers say they consider disease outbreaks to be

very threatening to their travels. As long as one-quarter to one-eighth of the traveling public and

their suppliers are concerned about epidemics, the epidemic currently grabbing the headlines – Zika, in this case – is going to have the greatest impact

on travel. How great an impact? Zika is not going to reduce travel to the region 25%. But it could certainly contribute two percentage points’ worth of

decline, despite having been removed from the World Health Organization’s global-emergency list.

Lack of airline disruptors keeping airfares high

While fares to Argentina and Brazil are expected to drop, fares across the rest of the region are expected to increase4. And South America is largely

exempt from any budget-fare frenzy.

3 Ibid., p. 3.4 Ibid., p. 10.

12% of all travelers say

they consider disease

outbreaks to be very

threatening to their travels.

35

Demand for Cuban travel siphoning off travelers to the region

Increased interest in Cuba means less interest in South America. The effect may be slight, but it will continue to negatively impact South American

tourism through 2017, or as long as the Cuba boom lasts.

Demand for Ecuador and Peru as travel destinations, especially for younger adventure travelers

Peru is a particularly appealing destination for many travelers, with a strong economy and opportunities for many types of travel5. Ecuador appeals to

adventure travelers and ecotourists but is investing in infrastructure and looking to diversify6.

A strong U.S. dollar

This is especially true in Argentina (up 4% against the Argentinian peso), Brazil (up 8% against the real), and Colombia (up 3% against the peso7).

5 “Adventure travel: The Hottest Destinations and Trends.”6 “Travel and Tourism in Ecuador to 2018,” accessed Oct. 25, 2016, at http://www.reportlinker.com/p02268187-summary/Travel-and-Tourism-in-Ecuador-to.html.7 BGTA, p. 3.

Balanced by:

Travel-insurance sales to Americans traveling to Africa and the

Middle East will increase slightly – 0.98% in 2017.

Africa/Middle East

We Project

37

A 2.5% projected increase in trip costs to the region

This increase is driven by higher costs for transportation and lodging.

Increased demand for travel to South Africa and Kenya

Both destinations were recently cited as top destinations for adventure travel1, one of the hottest travel sub-types.

A slight recovery for the Egyptian travel market

There is underlying demand for Egyptian travel, largely among older Americans who have a trip to the Pyramids on their bucket list. However, Egyptian

travel needs a safe, stable Egypt, and that has not been the case over the last several years. It’s hard to project the state of Egyptian politics in 2017; if

it’s seen as being stable, Egyptian tourism will recover. In fact, the WTTC projects an optimistic 5.7% increase in Egyptian tourism contributions to GDP

in 2017. But a full recovery in Egyptian tourism seems more likely for 2018 than 2017.

Strong baseline support for travel to Israel

For Israel, security issues are nothing new. The fact that it has dealt with them without distracting or diverting tourists bodes well for Israeli tourism

in 2017 and beyond.

1 “Adventure travel: The Hottest Destinations and Trends.”


38


African Travel By Age

18-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older

0% 0% 4.59%

2.5%

3% 3.7%

3.28%

4.16%

2.09%

3.01%

5.01%

6.06%

2.11%

0% 0.15%

0%

6%

5%

4%

3%

2%

1%

0

From age 45 on, the impact of bucket-list travel is evident, as significantly more travelers than expected are visiting Africa and the Middle East.

39

Continued strength of Emirates travel

There will be continued strength in Emirates travel because of the routing patterns of Emirates-

based airlines like Emirates and Ethiad. As long as these airlines – service-based disruptors in the

international travel space – continue to be popular with Americans traveling internationally, their

flight patterns, which often include stopovers in Dubai, Abu Dhabi, or Oman, will buoy travel to that

region. Both airlines have started aggressive U.S. marketing campaigns to showcase the luxury of

the airlines to travelers.

Terrorist fears throughout the region will encourage purchase of travel insurance

The “terrorist effect” driving travel-insurance purchases is probably less of an effect in the Middle East than elsewhere, since there has almost always

been terrorism in the region. However, to the extent that these fears are spreading further throughout Africa, there may be more terrorism-driven

purchases of travel insurance for travelers to those regions. But we project that impact to be small.

Experiential and bucket-list travel buoying the African travel market

Bucket-list travel is a rapidly growing and potentially very significant subset of the overall travel market. 54% of travelers said they’ve traveled to cross

something off of their bucket list, and more than three-quarters of agencies said bucket-list travel will be “hot” or “very hot” in 2017. African safaris

and trips to the Pyramids are high on many travelers’ bucket lists. We expect to see more of these kinds of trips in 2017, and we expect the vast majority

of these trips to be insured.

54% of travelers said

they’ve traveled to cross

something off their

bucket list.

40

Political instability throughout the region driving down travel demand

In late October 2016 the State Department had active travel warnings for Egypt, Jordan, Yemen, Tunisia, Israel, Syria, Ethiopia, the Central African

Republic, the Congo, Cameroon, Eritrea, Nigeria, Lebanon, Saudi Arabia, South Sudan, Iraq, Iran, Afghanistan, Mali, Kenya, Libya, Chad, Burundi,

Algeria, Sudan, Niger, Burkina Faso, and Mauritania2. That’s a significant percentage of countries in the region, and the sheer numbers of countries with

travel advisories are bound to drive down travel to the region. This is compounded by the difficulty of entry into many of these countries, especially for

solo travelers.

A projected 2% increase in airfares and lodging rates across the region3

Outside of Emirates and Ethiad, there are no disruptors changing the cost structure of travel to the

region and really no bargain fares to Africa or the Middle East and. Costs of travel to these areas

continue to rise, making alternative destinations look that much more attractive.

Refugee issues across much of the region

While the ongoing refugee crisis is not affecting travel to the extent of terrorism, it’s having an

impact. More than 10% of travelers and 26% of travel agencies labeled it a threat to travel. While it has effects in certain parts of Europe, its effects are

most keenly felt in Africa and the Middle East, and it will have an impact on travel to those regions.

2 “Alerts and Warnings,” accessed Oct. 25, 2016, at https://travel.state.gov/content/passports/en/alertswarnings.html.3 GBTA, p. 7.

This is balanced by:

More than 10% of

travelers and 26% of travel

agencies labeled refugee

issues a treat to travel.

Travel-insurance sales to Americans traveling to Mexico and

Canada in 2017 will increase 3.83% for travels to Mexico and

6.22% for travels to Canada.

Canada and Mexico

We Project

42

A stronger Canadian dollar

The Canadian dollar is projected to be 3% stronger against the American dollar in 20171.

Higher costs

In part because of the stronger Canadian dollar, we project a 4.4% increase in airfares to Canada and

a 4% increase in lodging costs2 will lead to an 11% increase in total trip cost.

The 150th anniversary of Canadian confederation will be celebrated in 2017, with high-

profile events across the country

Among the top events will be National Aboriginal Day (June 21), Saint-Jean-Baptiste Day: Fête

nationale du Québec et de la Francophonie canadienne (June 24), Canadian Multiculturalism Day

(June 27), and of course July 1 – Canada Day.

A continuing perception of Canada as a “safe” destination

Destination Canada effectively spoke to this marketing tactic early in 2016. 21% of travel agencies stated that Canadian travel was above average in

2016; more than 10% of travelers surveyed said they visited Canada in 2016, and nearly 20% said they plan on visiting Canada in 2017.

1 GBTA, p. 3.2 Ibid., p. 11.

In the case of Canada, reasons for making this projection include:

A 4.4% increase in

airfares to Canada and

a 4% increase in lodging

costs will lead to an 11%

increase in total trip cost.

43


Who’s Traveling to Canada, By Age40%

35%

30%

25%

20%

15%

10%

5%

018-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older

35%

37.5%

20.99

%20%

13.24%

25%

20.83%

18.34%

23.72%

17.3%

16.24%

19.19%

13.76%

7.14%

0.68%

0%

Except for older Baby Boomers, Canadian travelers tend to cluster toward the younger end of the age spectrum. What do older Boomers have in common with younger travelers? Cost-consciousness. Canada’s position as an affordable alternative to Europe boosts travel among these key travel constituencies.

44

Canada is growing in popularity as a destination for adventure travel

Virtuoso’s rankings of the top adventure destinations for 2017 put Canada – the Arctic and the Arctic Circle, specifically – fifth3.

Continued demand for cruises via the inside passage, and related tourism in Canada

North American cruise-ship capacity is expected to hold fairly steady in 20174; however, Cruise Industry News projects a slight increase in occupancy in

2017, which will have a residual impact on the Canadian travel market.

The affordability of travel to Europe and the Caribbean

When a traveler can fly to Paris for less than $400, why go to Montreal? The continued affordability of travel to Europe will have an impact on the

number of Canadian vacations that aren’t pure road trips.

The lack of a true disruptive air carrier exerting downward fare pressure on flights to Canada.

Currently most flights between the U.S. and Canada are on American or Canadian legacy carriers. There is no WOWAir for U.S.-Canada air travel.

3 “Adventure travel: The Hottest Destinations and Trends.”4 “2016-17 Annual Report,” accessed Oct. 24, 2016, at http://www.cruiseindustrynews.com/flip/cina16/mobile/index.html#p=9.


45

A 1% stronger Mexican peso against the American dollar5

This projection was made before the 2016 election and may change based on the Trump administration’s actions toward Mexico and economic

development in the country.

Higher costs

A 4% increase in airfares to Mexico and a 2.6% increase in lodging costs are driving a 3% increase in

total trip cost6.

A strong cruise market, including the Mexican Riviera

The most recent edition of the Cruise Line Industry Association annual report projects strong

demand growth for cruises to western Mexico, and moderate demand growth for cruises to eastern

Mexico7.

Moderately strong indications from agency and consumer survey respondents of increased travel to Mexico

Almost 14% of consumers said they plan to travel to Mexico in 2017, and one-third of travel agencies said they consider Mexico to be a hot destination.

5 GBTA, p. 3.6 Ibid., p. 11.7 “2016 Cruise Industry Outlook,” accessed Oct. 24, 2016, at http://www.cruising.org/about-the-industry/research/travel-agency-outlook

In the case of Mexico, this is driven by:

Almost 14% of consumers

said they plan to travel to

Mexico in 2017.

46

Resort popularity

Mexican resort areas continue to be popular for honey / babymooners, destination weddings and bachelor/ette parties. One-quarter of travelers and

about one-fifth of travel agencies said these types of travel would be hot in 2017, and Mexico is a prime destination.

Lingering Zika fears

The days are past where Zika had the power to decimate travel to a country. But it can contribute a small amount of decline to an affected region.

Political instability

State-level instability has led to State Department travel warnings for many Mexican states. The parts of Mexico most popular with American tourists

are largely safe. The other parts of the country are much less safe. However, if crime and instability in Mexico spill over to areas popular with tourists,

or continued violence elsewhere in the country grabs the headlines, it will impact travel to Mexico.

Increased risks of hurricanes and other severe storms due to global warming

The government’s Geophysical Fluid Dynamics Laboratory says global warming is affecting the frequency and severity of hurricanes and other storms8.

Mexico frequently bears the brunt of these storms. The increased possibility of very severe storms striking Mexico and adversely impacting travel must

be worked into any calculations regarding travel to the country.

8 Geophysical Fluid Dynamics Laboratory, “Global Warming and Hurricanes,” accessed Oct. 24, 2016, at https://www.gfdl.noaa.gov/global-warming-and-hurricanes/


47

25%

20%

15%

10%

5%

018-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older

12.37%

12.5%

6.8%

20%

7.11%

15.74%

12.68

%12.5%

24.52%

12.03%

22.16%

16.16%

9.93%

7.14%

0.48%

0%


Who’s Traveling to Mexico, By Age

Cost and convenience are obvious drivers in high-than-expected levels of Mexican travel among key younger constituencies.

Travel-insurance sales to Americans traveling within the United

States in 2017 will increase 4.07%.

Note: Calculations on sales of travel insurance to Americans traveling

within the U.S. are not figured into the data on overall market sizes

and growth stated earlier in this report.

United States

We Project

49

More trips

According to the U.S. Travel Association, the number of domestic person-trips will increase 1.3% in 2017 – 0.5% for business trips and 1.6% for leisure

trips1. Those numbers may be conservative. According to BHTP research, 32% of travelers surveyed said they will take more domestic vacations in 2017

than in 2016, and 30% said they will take more domestic business trips.

Higher airfares

The GBTA projects a 0.5% increase in domestic airfares2. More importantly, Skift projects that

domestic airlines will continue to closely monitor flight supply and will strive to keep planes full and

discount fares at a minimum3.

Higher gas prices

The Energy Department projects a 5.4% increase in gasoline prices in 20174. This has only a marginal

effect on travel-insurance revenue, since most road trips are uninsured, and the cost of gas for a rental car is not part of a trip-cost calculation. However,

this could eventually mean higher costs for other forms of transportation, including air travel.

1 “U.S. Travel Forecast,” accessed Jan. 19, 2017, at https://www.ustravel.org/system/files/Media%20Root/Document/Research_U.S.%20Travel%20Forecast%20Summary.pdf2 GBTA, p. 8.3 Bachman, “Cheap Airfares Are About To Vanish As U.S. Airlines Tighten Capacity.”4 “Short-Term Energy Outlook,” accessed Jan. 19, 2017, at http://www.eia.gov/outlooks/steo/.


Domestic person-trips will

increase 1.3% in 2017 –

but these numbers may

be conservative.

50

Higher lodging costs

There will be a 4.7% increase in U.S. lodging costs in 2017, according to the GBTA5. Multiple dynamics play into this calculation, including an all-time

high in occupancy, mergers and acquisitions, and the effect of Airbnb and other private lodgings6. Because the sharp rise in occupancy is not consistent

with the dramatic increase in supply contributed by Airbnb and other disruptors, we believe the total cost increase will be closer to 3.5%.

Uncertainty on the number of insured trips

Due to a lack of clarity in the data, we cannot project with certainty that the number of domestic trips covered by travel insurance will increase in 2017.

A projected decrease in the number of low-end travelers

We project that the elimination of tax credits and other incentives tied to the Affordable Care Act will lead to a decline in the number of older, fixed-

income travelers and other lower- to middle-class travelers. However, because they take fewer trips and more uninsured trips, we project this impact to

be slight.

5 GBTA, p. 12.6 Deloitte Center For Industry Insights, “Travel and Hospitality Industry Outlook 2017,” accessed Jan. 19, 2017, at https://www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/us-cb-2017-travel-hospitality-industry-outlook.pdf.


51


United States Travel By Age100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

018-24 25-34 35-44 45-54 55-64 65-74 75-84 85 or older

98.91%

100%

83.38%

90%

99.31%

94.44%

85.73%

87.50

%

97%

92.48%

87.09

%85.86

%

78.44%

78.57%

100%

100%

Travel within the U.S. is simple and convenient for travelers of all ages.

52

Fewer vacation days taken

Despite efforts to counteract this phenomenon, more than half of Americans don’t take all of their vacation days – and Millennials are the worst at not

taking their vacation time7. Most often vacation days are spent traveling domestically. This continues to exert a slight drag on domestic TI sales.

The attractiveness of overseas destinations

In short, the better (and cheaper) Amsterdam or Iceland or the Caribbean appear to be, the less

attractive American destinations look by comparison. And as outlined earlier, overseas destinations

look very attractive indeed, terror threats notwithstanding.

Potential for domestic civil unrest

We cannot rule out the possibility of significant domestic civil unrest this summer. This will have its

greatest impact on foreign travelers coming to America, but will have a negative impact on domestic

travel as well.

7 Berger, Sarah, “Most workers leave paid vacation time unused, a Bankrate survey finds,” accessed Jan. 19, 2017, at http://www.bankrate.com/finance/consumer-index/money-pulse-1216.aspx.

More than half of

Americans don’t take all of

their vacation days – and

Millennials are the worst.

53

Quantitative ResearchIn preparation for this report, more than 5,700 travelers and 3,500 travel agencies were invited to take a survey asking about their travel habits, their travel business, their experiences in 2016, and/or their expectations for 2017. Ninety-six agencies and more than 570 travelers responded to the survey. While the confidence level is considerably greater for the consumer survey than the travel-agency survey, the confidence levels in both surveys are sufficient to draw large-scale conclusions from the results.

Other Statistical SourcesThe travel-and-tourism statistics from the Department of Commerce (http://travel.trade.gov/research/programs/i92/index.html) provide a month-by-month report of U.S. citizen travel to international regions. Because these statistics are historical, monthly, valid, and detailed, they provide a highly accurate picture of Americans’ travel patterns over time and help us accurately project Americans’ travel habits – and travel-insurance buying preferences – in 2017.

Literature Review Sources consulted in preparing this report included travel-trend reports from the Global Business Travel Association, Sojern, IATA, Cruise Lines International Association, and cruisemarketwatch.com. MMGY’s “Global Portrait of American Travelers” was particularly helpful.

Building the ModelData from these sources were used to create detailed models of trip costs to various regions, to extrapolate out the Commerce Department statistics, and to make projections on percentage of covered trips, traveler ages, and travel-insurance cost as a percentage of trip cost. These projections were used to calculate total 2017 travel-insurance sales, and then those figures were compared against last year’s figures to chart percentage change.

Questions on the research?Please contact us directly:Berkshire Hathaway Travel ProtectionAttn: Marketing1145 Clark StreetStevens Point, WI [email protected]

Berkshire Hathaway Travel Protection (BHTP) is a registered trademark and a subsidiary of Berkshire Hathaway Specialty Insurance (BHSI), a leader in specialized casualty and liability insurance. Reproduction or distribution of this publication in any form without BHTP’s prior written permission is prohibited. The information contained herein has been obtained from sources believed to be reliable. BHTP disclaims all warranties as to the accuracy, completeness or adequacy of such information. The opinions expressed herein are subject to change without notice.

Appendix: Research Details

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