The Incredible Shrinking Taiwanese Twentysomethings
A few days ago I was at a conference in Taipei where I presented data about the major shifts in the Taiwanese market. I compared the outbound traveler data from the first half of 2009 to the first half of 2002. Both 2002 and 2009 were preceded by events that negatively affected the travel industry (i.e. September 11, the financial crisis, and H1N1). As the total outbound travelers January-June was 3.7M in 2002 vs. 3.8M in 2009, it appeared that those events had a similar degree of impact on the overall market and I could compare them to see the shifts.
There were a few insights that I shared at the conference based on this analysis, including how outbound destinations shifted in this time period due to the opening of direct flights between Taiwan and Mainland China this year. However, the most interesting insight to me was this: for all age groups, the relative % of market remained the same except for the 20-29 year-olds vs. the 50-59 year-olds. The 20s group experienced a 15% decrease v. the 50s that had a 44% increase.
To ensure that this wasn’t an aberration for 2009 only, I also compared the first half of 2008 (a more prosperous time) with 2002. It turns out that while the overall market grew by 19% in 2002, the 20s segment grew by only 2%. In fact, every other age segment grew by double digits except for the 20s. Meanwhile, the 50s grew by 53% between 2008 and 2002.
The data is counter-intuitive. Travel is about discovery, and we associate that with something that younger people would be excited about. But the data suggested just the opposite. As the 20-29 year-olds are the youngest of the independent travelers (below 20 the travel activities tend to be largely as a result of family travel), they are an important bellwether segment to observe. And the data showed bad news. I shared this with a few Taiwanese friends and industry insiders and they were puzzled and surprised. No one had a good explanation for what was going on even though there were quite a few plausible suggestions related to the economy.
The down trend bothered me so much that I did some more research in the last few days. Here’s what I found.
According to government statistics, The population of 20-29 year olds in Taiwan from 2002 to 2008 decreased by about 6% whereas the population of 50-59 year olds increased by about 44%. However, the % of 20 year-olds and the % of 50 year-olds who traveled remained relatively constant in these years (monthly, about 3% of the 20s vs. 4% of the 50s). Taking the additional data into account, it made sense that:
- In absolute numbers, there were now many more Taiwanese in their 50s than 20s traveling to destinations outside Taiwan, whereas in 2002 the numbers were about the same
- The reason for this may not be behavioral or socio-economic, but simply due to the decrease in the overall population of 20 year-olds in Taiwan from 2002 to now versus the increase in the overall population of 50 year-olds during the same period
A 29 year-old in 2008 would have been born 1979. I decided to look and see the birth rate of Taiwanese babies from 1979 through present day to see how that will impact future population. What I found was alarming.
The birth rate in Taiwan has been in sharp decline. For example, there were more than twice as many babies born in 1979 than in 2007. The chart on the left shows the population of 20-29 year-olds for the next 20 years.
This means that in 2027, there will be 35% fewer Taiwanese in their 20s than today.
If the percent of people who travel stay roughly the same and there is no big influx of people immigrating to Taiwan to offset the decline, then this segment of travelers will severely impact the travel industry as they grow older and move into the older (and more affluent) age categories of the 30s, 40s, and 50s.
I think the travel industry in Taiwan needs to reconsider their strategy targeting outbound Taiwanese travelers, starting with how to attract young travelers and win their loyalty. Also, with the young population declining, Taiwanese airline and hotel operators need to have a better strategy for attracting inbound travelers.
Further, destinations like Japan and Hong Kong where a large number of Taiwanese visit should also take note. It’s kind of downhill from here.
While on the one hand I was glad to see that young Taiwanese people are still out discovering the world, I was sad to realize that there are going to be fewer Taiwanese people in the future.
Countdown to Brand Karma Day on October 19
Invitations to Brand Karma Day have been sent out, and we’ve begun preparing for the event. Given the emergence of social media as a critical component of branding, we thought it’d be a good idea to share what we’ve learned in the last 12 months with our clients, partners, and friends of the company. Brand Karma Day will take place on Monday, October 19, the day before Web in Travel (October 20-23), which opens ITB Asia (October 21-23).
Brand Karma Day has been designed to help hoteliers turn their social media into a strategic asset. We’ll cover 3 topics:
- The Numbers Crunch — This session kicks off Brand Karma Day and will be a good foundation for anyone whose brands are impacted by social media. We’ll discuss the numbers behind social media, their implications, and recent best practices. Also for the first time, we’ll share the results of our analysis on the Asia-Pacific hospitality market.
- Chatter Clutter — The 2nd session builds on the insights from the first session and focuses on the operational aspects of the customer experience, including both the physical attributes (or hardware), and services. We’ll explain the “Diamond” framework that integrates guest satisfaction surveys with Brand Karma data, and show brand owners how they can use it to prioritize operational improvements.
- Money Matters — The final session brings it all together by focusing on how hotel owners can use social media to increase RevPar. We’ll teach brand owners about Swing Travelers and how to micro-target them. As a part of this, we’ll show brand owners how to identify and communicate their operational differentiators versus their competitors to create more value in their rates.
I hope you can all make it! To register, go to Brand Karma Day
Swing Travelers
Like swing voters, swing travelers could hold the key to your hotel beating this economy.
Most hoteliers’ performance is measured not only by absolute revenue, but also market share. Swing travelers can make all the difference in market share.
Let me use a simple example to illustrate the importance of swing travelers. Let’s say there are 10 travelers making a reservation today and 2 hotels in your city, yours and your competitor’s, and normally you’d get 5 travelers each. That means you and your competitor each have 50% market share.
If your hotel wins 1 traveler from the other hotel, then your market share would be 60% and your competitor at 40%. That’s a 20% difference in your favor. Now let’s calculate RevPAR. Assume that both hotels have 10 rooms, all travelers stay 1 night, and the ADR for is $100/night. Your hotel would achieve a $60 RevPAR vs. your competitor’s $40 RevPAR. In fact, for your competitor to achieve the same RevPAR as you they would have to increase their ADR by 50% — to $150/night to achieve the same RevPAR as yours just to make up for the loss of 1 swing traveler.
Now, let’s suppose that your competitor manages to attract 1 new customer to the market, the market share would be 6/11 vs. 5/11, which is 55% vs. 45% in your favor. To achieve the same RevPAR as you they’d still have to raise their ADR to $120/night vs. your $100/night. In fact, your competitor would have to attract 3 new customers to the 1 that you swung over originally to win market share back. In other words, in this simple example your competitor would have to grow the market by 30% (increase the number of travelers from 10 to 13) as a result of 1 swing traveler, in order to win against your hotel.
No wonder brands like Holiday Inn and Hyatt are not slowing down to win share despite the downturn.
How many swing travelers are there? According to loyalty research and consulting firm, Colloquy, the total number of memberships from US travelers in hotel loyalty programs increased 26% to 161.9M memberships from 2007 to 2008. This increase happened despite a sharp drop in demand in the second half of 2008. While I believe first-ever loyalty memberships might account for some of that increase, the remainder comes from travelers that registered for their 2nd, 3rd… nth membership, making them swing travelers. And remember, this is just amongst the segment already considered to be most loyal.
Carroll Rheem, Director of Research at PhoCusWright, recently said,
“The era of transparency ushered in by the Internet evangelizes faith in content, not faith in brands. Companies need to understand the Long Tail of travelers and how its disloyal constituents make decisions: they don’t care about miles or points, can easily find another flight and don’t need a hotel flag to tell them what their experience is going to be like.”
Swing travelers are looking for stay experiences that fit their personal needs. Because most hotels are using pricing as a strategy, impressive discounts are now the norm, not the exception. What swing travelers are looking for then are the differentiators that give them the value they seek within a comparable price range. Do you know what your differentiators are and are you communicating them loudly and clearly where travelers are researching where to stay?
Just for fun, I pretended to be a swing traveler looking for “hotels san francisco” on Google to see the ads that come up from hotel suppliers (I excluded the OTAs because they all uniformly tout discounts). Removing identifiable info, below is the text of the first 8 hotelier ads I found:
- There’s more to enjoy! Book unique offer. Instant Service 800-XXX-XXXX
- Official Site. Book Now for Great Rates & Our Exclusive Packages!
- Official Site. [brand name] San Francisco Hotel. Book Online.
- Stay at [brand name] in San Francisco. Best rates online. Book online now!
- Boutique [brand name] Hotel in Downtown San Francisco. Book online now!
- Book a luxury hotel in the heart of San Francisco & enjoy access to all
- Why pay high prices downtown? Free hot breakfast & airport shuttle!
- San Francisco. Great locations. Free internet & breakfast bar.
What’s remarkable to me is that half of them (1-4) are virtually indistinguishable because they don’t offer anything meaningful other than to let the consumer know they can book online. But the fact is these ads come from 3 different hotel suppliers (2 and 3 are different brands from the same hotel management company). The other half offers some differentiation, but boutique and luxury are much less specific than free breakfast, free internet, and free airport shuttle. Incidentally, 7 & 8 are actually from the same brand, 7 is an individual property where 8 is the brand ad.
I don’t think swing travelers would be convinced by the non-specific ads. The way consumers think about the total price isn’t just the room, but all the costs associated with a stay. Breakfast, internet, and transportation all make the value greater because it means less additional money out of a traveler’s pocket. In recognizing their short attention span, those ads clearly communicate the differentiations that really matter in a direct and concrete way.
A swing traveler would almost always follow-up by reading reviews about the quality of the breakfast, the speed and reliability of the internet, and the timeliness of the airport shuttle. Hence communicating the differentiations is only half of it, hoteliers need to make sure they’re backed up by solid reviews from previous guests. Or alternatively, communicate in these ads what their guests have already complimented them on.
We’ve looked at one channel to win the swing traveler’s attention, and hopefully, their business. But there are other ways. The biggest paradigm shift that hoteliers must undergo is to market to and win the swing travelers one at a time by focusing on their specific needs. Massive blocks of reservations and contracts with corporate clients, both fundamental business drivers in the past, are becoming increasingly rare and don’t deliver like they used to. Like the swing voters that determined many elections in the past… swing travelers will be the group that determines who wins in many markets.



