PROPENSITY FOR UK AND GERMAN TRAVELERS TO ADAPT TRAVEL INTENTIONS DUE TO RISING AWARENESS OF CLIMATE CHANGE ISSUES Prepared

For: Department of Resources, Energy and Tourism instinct and reason consultants: David Donnelly instinct and reason 20 Poplar Street Surry Hills NSW 2010 2nd May 2008 J858

Table of contents

Executive Summary ........................................................................3 Study Objectives ............................................................................5 Methodology...................................................................................6 Main Findings .................................................................................7 Section 1 Overall Context for the Two Markets.............................8 Section 2 - Choice Experiment ...................................................... 13 Section 3 - Segmentation Results ................................................. 20 Stage of Change Segmentation ..................................................... 23 Experience Seeker Segment ......................................................... 25

Executive Summary
The purpose of this study was to improve understanding of the whole of market views in the UK and Germany, on climate change issues in general, as well as the extent to which tourism (and air transport in particular) is seen to be contributing towards climate change, and whether this effects actual or intended travel behaviour. The study also sought to improve understanding of what information consumers wanted in relation to climate change and travel and how that could best be communicated to them. To this end qualitative research was conducted in the UK to assist in the development of a survey which was conducted with 1000 long haul travellers in both the UK and Germany. The study found that, overall, the German long haul travel market is more sensitive than the UK market to a wide range of issues to do with the environment and flying. Three key consumer attitudes are significant in the results of the study. Firstly, a large proportion of the market in both countries consider the environment to be very important and not worth taking a risk on. Secondly, in contrast to this, there is a strong view in both markets that travelling [long haul] is a way of rewarding yourself, of doing things and of enjoying life. As such, the demand for long haul travel is relatively price inelastic as people are reluctant to give up something so important to them. Thirdly, there is a strong tendency to blame others, or to expect others to take action, rather than accepting personal responsibility. Almost two thirds (63%) expressed the view that there are far bigger carbon culprits than me. The main defence mechanism at work is that; If I try and do the right thing all year then I shouldnt need to worry about what I do on holidays. In summary, there is significant consumer concern in both markets about the environment, and this is beginning to affect the way consumers behave with regard to environmental issues in day to day life. However, with regard to long haul travel, the promise of an experience of a life time, buries consumers concerns for the moment. However, there is a dissonance

between attitudes and behaviours for a sizable segment (41% in the UK and 44% in Germany), and this is an unstable position. The potential threat is that behaviour will eventually fall into line with attitudes relating to climate change and the environment, and impact more directly on destination choice. The research shows that if Australia provides opportunities for action that allow travellers to deal with their concern for the CO2 they produce, the negative impacts outlined below can be negated. This is particularly true where consumers can see the actual environmental benefit of the offset they purchase. Increasing price of a ticket to Australia negatively affects demand for Australia as a destination, and this effect is significant. Placing a voluntary carbon offset on the cost of the ticket has relatively little effect. Increasing the cost of a carbon offset from 10 to 100 on a 1,000 air ticket reduces demand by around 2%. It is a similar result in Germany. Making the offset compulsory and increasing it from 10 to 100 reduces demand by a further 4%. The compulsory element also has a relatively low negative impact as many people in both markets claim they would actually feel better if their travel was offset. In addition the majority, in both markets, believe everyone should have to pay. The promotion of particular features of Australia was enough to overcome the negative impacts on demand. A number of propositions were tested. While all had some positive effect on demand, some had a much higher impact. The propositions tested were: If you pay for the carbon offset, 11 trees would be planted as an offset for your trip There are over 700 eco-certified operators in Australia Eco friendly accommodation is available in Australia Eco friendly transport is available in Australia Australia is the worlds top nature destination

Study Objectives
The study objectives were to understand the whole of market views in UK and Germany, on climate change issues in general, as well as the extent to which tourism (and air transport in particular) is seen to be contributing towards climate change, and whether this affects actual or intended travel behaviour. In addition the research was required to cover a range of related issues connected to the primary research objective. This included: The level of awareness of climate change issues in each market Whether climate change awareness is affecting consumer decision making and purchasing behaviour The extent of the view that tourism, (including transport; with air transport in particular) contributes to negative climate change impacts and Whether this view is contributing to changes in travel behaviour (both short and long haul) Whether this view is resulting in a reduction in the likelihood of the consumer travelling overseas (both in general and to Australia) Awareness of the growing opportunity to purchase carbon offsets Whether carbon offsets address consumer concerns adequately; and How the imposition of price increases would affect demand (again both short and long haul). The study needs to deliver a relative price elasticity of demand model for each market How could negative climate change perceptions be countered What information is required and how can it be most efficiently and effectively provided.

Methodology
Study overview The following diagram shows the overview of the project. Stage 1 2 3 Details Knowledge sharing and planning session Briefing of qualitative researchers in UK Triads in UK (small group discussions with three participants holding different views) Surveys in UK and Germany Outcome Ensured the project built on existing knowledge Ensured the survey was well informed Identified consumer insights to inform the survey and choice model experiment

Provided a robust data base to allow for sizing of the markets concerns and an analysis of the key segments for Australia. A marketing experiment using discrete choice modelling to develop a relative price elasticity model of demand

Marketing Experiment

Main Findings

Section 1 Overall Context for the Two Markets

Travel intentions Australia ranked first in the UK and second in Germany in terms of a long haul destination they had heard a lot about recently. Almost one in twenty long haul travelers (4%) in both Germany and UK claimed that their next long haul holiday was going to be in Australia. Long haul travellers in both countries wanted to experience local food and wine, shopping and bushwalking. These activities were closely followed by experiencing events and festivals; cultural events and the ability to go out to nightspots. The German market was also highly interested in photography, environmental activities and visiting gardens. These results reflected similar views obtained from Tourism Australias on-going brand tracking studies, consequently heightening the confidence in the sample used for this study. Planning behaviours Consumers in the UK market commenced planning for long haul holidays a little earlier than in Germany, with 21% planning such a holiday 1-2 years before. In Germany this was only 14%. Almost half the long haul market in both countries (44%) planned their long haul holiday 6-12 months before they actually travelled. Overall, the flights for long haul holidays were mainly booked between 3-12 months prior to the trip, in both countries (74% in the UK and 68% in Germany). Again the UK market was a little earlier with 5% booking the airfares 1-2 years ahead of the journey. It was only 1% in Germany for this lead time. Booking travel About one third of long haul travelers booked all their internal travel before they left home (34% in the UK and 28% in Germany) with a further third booking some of it prior to leaving home, and some when they get there (32% UK and 36% Germany). 16% of UK travellers and 21% of German travelers booked when they were actually at the destination. A small minority booked their internal travel as part of an overall package (13% in the UK and 12% in Germany).

Biggest influences on destination choice in the UK Value for money drives choice in the UK market followed by the recommendations of family and friends. Then the issue of cost is recognised as playing a role being restricted by what I can afford. The fourth issue for those in the UK is the needs of those they travel with, and the fifth is the intrusion of work commitments and lack of holiday entitlements. Biggest influences on destination choice in Germany The German long haul traveller sees the main influence on their choice as being the cost. They cite being restricted by what they can afford as being the number one influence. They then cite value for money destinations followed by concern about the threat of terrorism. In a similar vein the political and economic stability of the region enters their thinking, and then the recommendations of family and friends. What is the appeal of Australia to those in the UK and Germany? When thinking of Australia, the UK long haul traveller thinks of the fabulous beaches; unique wildlife and habitats and having an experience of a lifetime. This explains, to some degree, why the research in both the qualitative and quantitative stages showed a relatively price inelastic market with regard to the impact of carbon emissions. In both markets, people indicated they would be unlikely to change the trip of a lifetime for an extra few dollars in a carbon offset scheme. Similarly the German long haul traveller also sees, as their strongest association with Australia, the chance of having an experience of a lifetime; 88% of the entire long haul market in Germany strongly agrees with this view. How do they think they will experience Australia? The German long haul traveler is considerably different to the UK traveller in this regard. Almost three in ten (57%) of the German travelers would plan to tour around Australia visiting many different regions. Only 32% of UK travelers imagine they would experience Australia this way. UK travellers plan to visit a couple of regions (38%) and several different cities (16%). This is only 25% and 6% for the German travelers, respectively. Attitudes to the Environmental and flying challenges Overall, the German long haul travelling market is more sensitive than the UK, to a wide range of issues to do with the environment and flying.

Three key attitudes are significant in the results of the study. Firstly; the environmental priority is significantly different. Almost half the German market (46%) consider the environment to be incredibly important and not worth taking a risk on. This view is only held by 31% of the UK long haul travelling market. Secondly; there is a strong view in both markets that travelling is a way of rewarding yourself, of doing things and of enjoying life (70% in Germany and 59% in the UK). As such, travel is one activity likely to be relatively price inelastic as people will only reluctantly give up something so important to them. Thirdly; and this occurs in most social issues, there is a strong tendency to blame others rather than accepting personal responsibility. This issue is no different. The identical score was measured in both markets with almost two thirds (63%) expressing the view that there are far bigger carbon culprits than me. The defence mechanism at work for consumers, which came through clearly in the group discussions and is reflected in the survey results, is around the idea that If I try and do the right thing all year then I shouldnt need to worry about what I do on holidays. In summary, there is significant concern in both markets about the environment and climate change issues, and this is beginning to affect the way individuals behave with regard to environmental issues in day to day life. At the moment, with regard to long haul travel, the promise of an experience of a life time, buries the concerns of the great majority in both markets. Of concern to Australia is that there is a dissonance between attitudes and behaviours for a sizable segment of the market (around 44%), and this is an unstable position for individuals and the community. Therefore, the threat exists that behaviours will fall into line with attitudes and increasingly impact on destination choice. As a result, there is a need for Australia to provide opportunities for action that will allow travelling behaviour to be in line with their concern for the environment and climate change issues.

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Already there is an indication, that for European holidays, people are choosing train over plane for environmental and climate change reasons. Three in ten (30%) of the German long haul market (14% in the UK), claimed they would not take any more short haul flights as trains are a better alternative. Behaviours regarding the Environment Behaviours to reduce environmental impact are evident with much of the UK long haul travelling market claiming to live a lifestyle that does minimal harm to the environment (33%) [47% in Germany], recycling all I can (68%) [58% in Germany], actively choosing not to have a car or avoid using it (23%) [24% in Germany], using trains for short haul trips (23%) [36% in Germany], using public transport at every opportunity (24%) [27% in Germany] and paying extra when they fly long haul for a carbon offset (15%) [20% in Germany]. Attitudes to carbon offsets Again, the strongest response from both markets was to avoid personal responsibility. More than half the market in the UK (51%; and 50% in Germany) indicated that it was the airlines that must take responsibility for offsetting their CO2. Furthermore, there was a strong view that everyones got to do it (52% in the UK and 50% in Germany). Equity in the application of any offset approach would be essential. However, there was also a significant proportion who claimed they would actually feel better about flying if their CO2 was offset. (31% in the UK, and 29% in Germany). It needs to be clearly understood this is a polarising issue at the moment with 39% of the UK long haul travelling market not wanting to pay the carbon offset cost. It was 37% in Germany. Attitudes to Tourism The long haul travellers in the UK and Germany were not completely convinced that the tourism industry is both good for the environment, nor that Australia leads the world in green tourism products. The UK long haul travellers were more supportive of the tourism industry than the German market. Nearly half in the UK (47%) agreed that Tourism

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is a vital industry that protects natural assets and 42% werent sure. Germany only 35% agreed, with 49% neutral.

In

About one in five in both markets agreed that Australia leads the world in green tourism product (18% in the UK and 21% in Germany). Again the vast majority were neutral about the idea rather than disagreed with it (74% in the UK and 67% in Germany).

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Section 2 - Choice Experiment

Choice modeling is typically used by companies wishing to identify the dynamics of customer choice in a category or market. It relies on an integrated behavioural theory of decision-making, incorporating Lancastrian consumer thinking (from the field of psychology) and random utility theory (from economics). Essentially it is based on the fact that consumers make choices based on trade-offs between features inherent in a service bundle; and there is a relative importance of attributes that is inferred in the choice. Respondents were asked to indicate whether they would travel to Australia given a range of hypothetical scenarios, where the following variables changed: Fare (cost of the ticket to Australia) Cost of carbon offset Whether the carbon offset was a choice or was compulsory for all Length of the trip Whether eco friendly accommodation available Whether eco friendly transport was available Accessible, easy to use carbon footprint calculator 5 communication messages about offsets A A trip to Australia produces 3 tonnes of CO2 each way B If you pay for the carbon offset, 11 trees will be planted to offset your carbon emission on this trip to Australia C Long haul flights to Australia use the most modern and efficient aircraft D There are over 700 eco certified operators in Australia E Australia has 30 tourism eco operators that are green globe accredited 2 communication messages about Australia F Australia is the worlds top nature destination G Australia has 17 world heritage sites

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On the basis of this experiment, the proportion of the choice driven by each variable was discovered: Variable The fare Length of time on the trip Offsets message B Whether the cost of carbon offset is compulsory or not Eco friendly accommodation is available Cost of full carbon offset Offsets message D Eco friendly transport is available Accessible, calculator easy to use carbon footprint UK % 27 21 9 7 6 5 5 5 5 4 4 1 1 0 100 Germany % 41 25 5 1 3 5 2 5 2 5 3 3 0 0 100

Offsets message A Australia message F Offsets message C Australia message G Offsets message E

The impact of increasing the cost of the ticket As the cost of the air ticket doubles from 500 to 1,000, UK demand falls from 42% to 22% (a 20% decline) with a voluntary low carbon offset of 10. In Germany, demand falls from 18% to 14% as the cost of the ticket rises from 1200 to 2000 with a voluntary and low carbon offset of 10. Increasing ticket price affects the demand for Australia significantly. The impact of increasing the cost of carbon offset The study shows that if a voluntary carbon offset was made available and, even if this carbon offset was set very high (At 100 in the UK and 100 in Germany) on a 500/1200 ticket, demand would fall 2% in the UK and 1% in Germany. This fall is directly attributable to the cost of the increasing carbon offset.

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If ticket prices were higher at 800 and 1500 then demand falls 2% in the UK and 1% in Germany, attributable to the increasing cost of the carbon offset. Similarly, if ticket prices were even higher at 1000 and 2000 demand still falls only 2% in the UK and 1% in Germany attributable to the cost of the carbon offset. The market is inelastic across a broad range of values for very high voluntary carbon offsets. The impact of a compulsory carbon offset The experiment also shows that if there was to be a compulsory carbon offset applied, and again, even if this carbon offset was set very high (at 100 in the UK and 100 in Germany) on a 500/1200 ticket demand would fall 7% in the UK and 1% in Germany. If ticket prices were higher at 800 and 1500 demand falls 6% in the UK and 1% in Germany attributable to making the carbon offset compulsory. Similarly, if ticket prices were even higher at 1000 and 2000 demand still falls only 4% in the UK and 1% in Germany attributable to making the carbon offset compulsory. The market is inelastic for very high voluntary carbon offsets.

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The impact of targeted marketing The experiment also shows that some marketing messages were very powerful in affecting demand. In particular; the message If you pay for the carbon offset, 11 trees will be planted to offset your carbon emission on this trip to Australia was capable of reversing any loss of demand in the UK and Germany caused by a compulsory and significant carbon offset.

Percentage point change in take-up

The fact there are over 700 eco certified operators in Australia was also a powerful message in the UK and had considerable influence over demand for Australia. On the threat side of the equation the realisation that a trip to Australia produces 3 tonnes of CO2 had a significant dampening effect on demand.

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Impact on demand of the carbon offset (at the base case) The following chart shows the impact on demand of increasing the cost of the carbon offset.
/

Percentage point change in take-up

Please note: The chart shows (Euros) for the German market curve; and (Pounds) for the UK market curve.

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Impact on demand of the ticket price (at the base case) The price of the ticket is the dominant factor in choosing Australia. The following chart shows the impact on demand of increasing the ticket price.

Please note: The chart shows (Euros) for the German market curve; and (Pounds) for the UK market curve.

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Impact on demand of the length of holiday One key element affecting demand for Australia is the length of the holiday. The following chart shows the impact on demand of increasing the length of the holiday.

Demand

Weeks

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Section 3 - Segmentation Results

Not everyone thinks exactly the same and the average results often hide areas of significant concern. To try and look beyond the average long haul consumer, three segmentation analyses have been undertaken on the data. They included: An attitudinal and behavioural segmentation (To identify the size of the market, where attitudes and behaviours are in dissonance; and thereby to quantify the size of the threat to Australia should behaviours (i.e. not travelling out of concern for CO2 emissions) change) The staged model of change (To size the market in terms of precontemplation of the CO2 issue; contemplation of the issue; preparing for change to their travel behaviours, actually taking action to alter their travel behaviours) The experience seeker segmentation (To examine the impact of this issue on the global target audience)

Attitudinal and Behavioural segments

The Indifferent The Indifferent

Dont think the environment is of critical concern, nor are they taking any action remotely of environmental benefit when it comes to travel

Watching and waiting Watching and waiting

See the environment as critical but are not currently taking much action. Awareness is there but they are not choosing to change yet

Doubting Thomas Doubting Thomas

Less likely to see the environment as critically important and not worth taking any risks, yet are acting by avoiding the plane in Europe and booking eco friendly accommodation.

Disciples Disciples
Environmental is critically important and not worth taking the risk, and they are already booking eco friendly accommodation and avoiding the plane in Europe

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UK 8%

GER 15%

UK 5%

GER 4%

Disciples Disciples Environment is a Environment is a critical concern critical concern

Doubting Doubting Thomass Thomass Environment Environment NOT critical NOT critical

behaviour

41%

44%

46%

36%

Watch Watch Environment is Environment is a critical concern a critical concern

Indifferents Indifferents Environment Environment NOT critical NOT critical

attitudes

Germany The following chart shows the impact on demand of increasing the cost of the carbon offset by segment.

Demand

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UK The following chart shows the impact on demand of increasing the cost of the carbon offset by segment.

Demand

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Stage of Change Segmentation The stages of change model is a well used model of behavioural change. The various stages are illustrated in the following chart.
stages stages 1. pre-contemplation 1. pre-contemplation 2. contemplation 2. contemplation 3. preparation 3. preparation 4. action 4. action 5. maintenance 5. maintenance 6. relapse 6. relapse details details
I dont believe in climate changewhat has it got to do with me sometimes I wonder what will happen if all they say comes true Ive looked at some of those calculators that tell you how much CO2 you produce Ive chosen to use the train whenever I travel in Europe as opposed to flying I always take the carbon credit option when I buy an airline ticket I used to worry about it more than I do now

The majority in both markets are in the pre-contemplation and contemplation stages as shown in the following chart. Variable Pre-contemplation Contemplation Preparation Action Maintenance and relapse UK % 27 21 9 7 6 Germany % 41 25 5 1 3

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Germany change in demand as cost of carbon offset increased The following chart shows the change in demand as cost of carbon offset increased.

Demand

UK - change in demand as cost of carbon offset increased The following chart shows the change in demand as cost of carbon offset increased.

Demand

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Experience Seeker Segment

The experience seeker has been Tourism Australias target global audience since 2005. They are people who seek to understand and interact with the culture of places they visit. Germany - change in demand as cost of carbon offset increased The following chart shows the change in demand as cost of carbon offset increased.

Demand

UK - change in demand as cost of carbon offset increased The following chart shows the change in demand as cost of carbon offset increased.

Demand

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