No place like home
The world economic downturn has prompted many more consumers to holiday within their own country, but accidents can happen even at home. Robin Gauldie examines whether the growth of domestic tourism offers opportunities for insurance companies to create and market new products to cover people holidaying in their homeland
First published in ITIJ 130, November 2011
The world economic downturn has prompted many more consumers to holiday within their own country, but accidents can happen even at home. Robin Gauldie examines whether the growth of domestic tourism offers opportunities for insurance companies to create and market new products to cover people holidaying in their homeland
In 2011, holidaymakers from around the world fell victim to attacks by sharks in the Seychelles, Australia and the Russian Pacific, polar bears in Svalbard, car and coach crashes in Turkey, the bombing of a casino by narco-terrorists in Mexico, kidnap in Kenya and other dramatic, headline-grabbing events.
However, it’s not the fear of accidents abroad that has driven the recent surge in domestic holidaymaking around the world. It’s simple economics. Higher taxes and soaring fuel costs have pushed up the cost of flying, just at a time when many families in key outbound tourism markets such as the UK, US, France and Germany are being forced by recession and inflation to cut back on household spending. The ITB World Travel Trends Report 2010/2011, produced by IPK International for the German trade show company Messe Berlin, shows a six-per-cent decline in outbound travel from the UK, a 3.4-per-cent fall from the US and zero growth from Germany. The latest British Lifestyle report from the UK market intelligence company Mintel says British sales of foreign holidays hit a 10-year low last year.
Domestic bliss
The outbound sector’s loss, though, has been domestic tourism’s gain. For many, a holiday in their own country has never been more attractive, and many national and regional tourist authorities are keen to reinforce the trend by increasing their promotional efforts in the home market.
“The UK travel and tourism market felt the full force of the UK and global recession in 2009,” notes the 2010 Travel and Tourism Market report published by the market intelligence provider Keynote. In the first three months of 2010, Keynote said, the number of trips increased by 3.7 per cent to 21.8 million, and most sources agree that despite blips the trend continues.
“The top line is that during 2010 there were 56.6 million overnight holiday trips taken by Brits in the UK,” says Sarah Long, strategic communications manager at VisitEngland.
That figure is actually down by seven per cent compared with 2009, but Long says this needs to be put into context, because 2009 was the best year ever for leisure tourism in the UK. “2010 figures are actually higher than any year pre-recession,” she says. “Domestic tourism is still experiencing double-digit growth and we are confident that it is a long term trend.”
Traditionally, the UK has always been a disproportionately strong outbound tourism market when compared with most other developed economies. For the travel industry, selling Britain to British holidaymakers means contending with factors such as an uninspiring climate and high accommodation costs. Until recently, it has sometimes seemed cheaper for Britons to holiday abroad than to stay in the UK, but a weak economy and a shaky pound have made England, Scotland, Wales and Northern Ireland look more attractive to their own citizens.
“Domestic tourism is experiencing double-digit growth”
The trend towards domestic tourism is also observed in other major markets where the domestic market has always been very strong, such as France and the US, which are demonstrably an easier sell for their own nationals than is the UK. French holidaymakers seeking summer sun can choose from the shores of the Mediterranean or the Atlantic; in winter they can enjoy skiing on Alpine or Pyrenean pistes, and France is of course an inexhaustible cultural destination. Similarly, Americans have their pick of palm-fringed Caribbean, Pacific and Atlantic beaches virtually all year round, scenery that ranges from Rocky Mountain ranges to the deserts of the southwest or the lush farmlands of New England, and the world’s greatest purpose-built visitor attractions.
As any actuary knows, the home is where a great many accidents happen, not least because people feel safe and secure there and as a result take fewer precautions than they should. The same mindset influences people travelling within their home country: language, traffic rules, road signs, food and drink, and all the rest of the holiday and travel infrastructure are familiar.
Danger lurks
But domestic tourism is not without its issues – a factor that many people taking a holiday in their own country fail to consider. According to the latest annual consumer trends survey carried out by the research company Arkenford for the Association of British Travel Agents (ABTA), 55 per cent of UK holidaymakers do not purchase travel insurance when holidaying in the UK, leaving them without cover for cancellation charges and other costs. In contrast, only 19 per cent of UK holidaymakers risk travelling abroad without insurance.
“Although taking out travel insurance should be one of the first things on the list when travelling abroad, it is often not even considered for trips made within the homeland,” warns Alexandra Honore, sales and marketing co-ordinator at International Passenger Protection, a specialist in insolvency protection cover.
British holidaymakers travelling abroad on a package holiday are covered by the UK’s Air Travel Organisers Licensing (ATOL) provisions, but ATOL does not apply for trips with the UK, as Honore points out: “Not all providers include insolvency cover, so there is a commercial advantage for insurers to complete their range of cover by fulfilling their customers needs according to the new domestic holiday trend,” she says.
Ben Smart, corporate and travel sales director at Mondial Assistance UK, warns clients against being lulled into a false sense of security: “It’s easy to think you don’t need cover for a holiday in the UK, but it’s better to be safe than sorry”, Smart says. “Whether they are forced to cancel a trip due to illness, unemployment or other unforeseen circumstances, insurance can cover otherwise non-refundable deposits and charges such as car hire and accommodation.” The items people are packing for holidays have also changed in recent years, and expensive high-tech items need to be taken care of too. “In addition,” added Smart, “people have so many gadgets these days, that the cost of replacing smartphones, MP3 players and ebook readers could really break the holiday budget. Many of these items could be covered by household insurance, but it’s best not to assume protection. We urge people to check the terms and conditions of a home or annual travel insurance policy before they take a UK holiday, as it will be well worth it if the worst should happen to gadgets like laptops and digital cameras. Holidaymakers need to be aware that leaving travel insurance off the holiday checklist could be a costly mistake.”
55 per cent of UK holidaymakers do not purchase travel insurance when holidaying in the UK
Granted, the UK is less subject to natural calamity than many long-haul holiday destinations, but even it is not immune from heavy weather. Last winter, blizzard conditions caused chaos over much of Britain, paralysing road, rail and air transport and disrupting the travel plans of thousands of people. In the US, where major cities as well as remoter areas may be affected by extreme weather events, earthquake, wildfires or volcanic eruption, travel plans are even more vulnerable.
“Emergency preparedness is no longer the sole concern of earthquake-prone Californians and those who live in the part of the country known as ‘Tornado Alley’,” states the US Federal Emergency Management Agency (FEMA). “For Americans, preparedness must now account for manmade disasters as well as natural ones.”
Awareness on the up
Travel industry spokesmen report an increasing awareness of the need for travel insurance on the part of US consumers, including those planning to travel domestically. The US Travel Industry Association’s Travel Insurance Market Survey indicates growth in sales of travel insurance of 14 per cent between 2008 and 2010. “No vacation is immune to the possibility of cancellation, interruption or delay,” said Mike Ambrose, president of Travelex Insurance Services. However, Ambrose notes growth in sales of travel insurance in the US, partly due to innovative insurance products tailored to the needs of clients taking shorter trips. “Most travellers have first-hand experience with unplanned expenses such as cancelled flights, lost baggage or missed connections due to weather,” he says. “They realise that travel insurance is a smart investment even for their less costly excursions.”
Worldwide, vacation activities ranging from winter sports to climbing, caving, kayaking, diving and mountain biking are all on the increase, leading to an increase in claims and demand for emergency medical services.
Arguably, holidaymakers are more likely to take part in such activities in their own country – where they may feel more confident in safety procedures – than abroad. But all have their attendant risks, and even apparently easy-going activities such as hill walking or a trip to the seaside can lead to drama.
Just a couple of miles off the coast of Northumberland in northeast England lies Lindisfarne. Home to a small island community and a picturesque ruined abbey, it is a popular destination. Around 100,000 visitors each year drive across the causeway that connects it to the mainland – and each year, some are caught on the causeway by the rising tide on their return journey and must be rescued by local lifeboat or Royal Air Force helicopter. In the first eight months of 2011, 29 people were rescued and their nine vehicles written off.
In destinations such as the US and France, domestic holidaymakers are well aware that services such as helicopter rescue or mountain stretcher recovery may come with a hefty price tag attached. In France, helicopter medevac for an injured skier or walker may cost around €2,500 per hour. In the US, a medevac flight out of the Grand Canyon, one of the nation’s iconic natural wonders can cost more than US$4,000. In Australia, search and rescue services are, by and large, operated by charitable foundations, which would not charge a domestic holidaymaker for their rescue.
There is a commercial advantage for insurers to complete their range of cover according to the new domestic holiday trend
In Britain as well, people are long accustomed to free provision of emergency medical services. Within the UK, a comprehensive network of voluntary or state-provided emergency rescue services operates free of charge to accident victims (and insurers). Mountain Rescue and Royal Air Force (RAF) helicopter medevacs are free, although each helicopter rescue mission costs the taxpayer around £12,400 per flying hour. And it seems that while holidaymakers are becoming more adventurous, many are failing to provide cover for themselves.
According to the UK Mountain Rescue service’s 2009 annual report, Mountain Rescue teams were called to 1,054 incidents in 2009, compared with only 609 in 2004. Over the same period, the number of fatalities resulting from such incidents increased from 25 to 37, while injuries increased from 376 to 667. Helicopters attended some 449 incidents in 2009.
“There seems to be no let-up in the annual increase in incident figures,” notes Mountain Rescue (England and Wales) statistics officer, Ged Feeney, pointing to a 21-per-cent increase between 2008 and 2009. He asked: “Could that be a consequence of the recession and the advent of the ‘stay-cation’?”
Amid concerns that domestic tourism is putting an ever-increasing strain on Britain’s emergency infrastructure, how long can the UK taxpayer be expected to go on footing the bill for services such as mountain rescue teams and search and rescue (SAR) helicopter missions carried out by the RAF and Royal Navy? Last year (2010) Ministry of Defence (MoD) teams were called out on almost 2,000 SAR missions. Even if each mission lasted just one hour, the annual cost of such operations is at least £25 million. The MoD does not recover costs for rescues where life is at risk, but can recover costs from other government departments and, in the case of medical evacuations, from health authorities that request military assistance in transferring patients between hospitals.
A case could be made that the taxpayer – and the charity volunteers who provide services such as mountain rescue and lifeboat operations – are in effect subsidising holidaymakers who require aeromedical rescue. In some ways, that might be no bad thing for the insurance industry, concentrating the minds of domestic holidaymakers on the need for travel insurance.
“There are no MoD plans at present to change our charging policy,” states an RAF spokesman, Wing Commander Martin Tinworth.
Meanwhile, the future of Britain’s SAR services, whose helicopters are due for replacement by 2016, remains unclear. In 2010, the Team Soteria consortium – comprising CHC, Thales UK and equity partner RBS – won the tender to take over British SAR services as part of a £6-billion, 25-year private finance initiative which would have seen Soteria providing around 24 S-92 aircraft to replace the armed forces’ elderly Westland Sea Kings, staring in 2012. The deal collapsed late last year, following allegations of some improprieties in the bidding process. RBS withdrew from the consortium, which has apparently been placed in abeyance. The MoD says it would be ‘inappropriate to comment’ on the state of the process.
As the global economy claws its way out of the latest trough, international travel is recovering – but not at the expense of domestic tourism. Homeland holidaymaking continues to grow, and in key markets it offers new opportunities for the broader travel insurance industry.