Italy Market Report May 2018

Italy Market Report May 2018 Visit Finland Country Representative Barbara Demartin

Semiannual Report ITALY Winter season 2017-18 and outlook for Summer 2018 CONTENTS Factors affecting the results of the Winter season 2017-18 Outlook for the Summer season 2018 Prospects for the Autumn/Winter season 2018-19 Trends and other relevant travel related topics Facts and figures - Market review data

Factors affecting the results of the Winter season 2017-18 Reasons for the increase/decrease in overall outbound travelling from your market? Economy and security situation Almost three months after the elections, uncertainty continues to dominate the political landscape. So far this year, the economy has held up in the face of political uncertainty, as data shows that despite a weak external sector, growth held up relatively well in Q1. Political uncertainty, combined with Italy's colossal public debt and already sizeable fiscal deficit, casts a shadow over the country s outlook. However, positive labor market dynamics and subdued inflation should support consumer spending this year. In 2017 the outbound trips for the Italians have increased: they travel more (63,448,000 +2.4% vs. 2016) with an increase of 3.6% (156,233,000 overnight in 2017) and an expenditure of 11,852 MIO (+9.7% vs. 2016) Source: Banca d Italia. After Fashion&Beauty, Tourism is the second industry for e-commerce: in 2017 the Italians spent $ 3,5 bilion (+15% 2016) on travel. Source: Hootsuite, trade magazine. New target segments In the Winter season, in addition to families with kids who want to go to Rovaniemi for Santa, there are 2 growing targets: small groups of friends of all ages and couples who want to see the northern lights. Customers who want to live the experience of sleeping in a ice room or in a glass igloo and, after a sauna, swim in the iced water are increasing too. Millennials are a new target segment more and more important: 80% say that the best way to know a destination is to live like the locals (Source: Airbnb). They like to live a unique travel experience, look for an adventure and create their own itinerary. By 2025 they will become 3/4 of the global workforce (Source: Allied Market Research) and by 2022 they estimate that the trips they will book online, will be $ 1,091 million (Source EY).

Factors affecting the results of the Winter season 2017-18 Reasons for the increase/decrease in travelling to Finland Finland s image as a travel destination Finland, in particular Lapland, is a strong destination for the Italian market (more than the competitors). Even though the products are always the same (snowmobile, huskies, reindeer excursions) the local destinations developed the offer with new special accommodations and increased capacity. Changes in accessibility TOs complain about high Finnair fares because the Italians are late bookers compared to other countries (i.e. Asiatic countries, Germany, etc.). On the other hand, TOs organized themselves with ITC flights to Lapland during the Christmas period (ITC => Giver, ITC => Alpitour/Viaggidea).

Factors affecting the results of the winter season 2017-18 Reasons for the increase/decrease in travelling to Finland Products that have been attractive Next to the classic winter activities (snowmobile, husky safari, reindeer safari, etc.) and searching the northern lights in several Lapland locations, Ruka-Kuusamo started to be promoted with additional activities like go-kart on ice and floating along the river. Experience-trips have been implemented thanks to the new special accommodation (i.e. Tree House hotel, new Nellim resorts, etc). Regions that have been attractive In the Winter season the musts are Rovaniemi, Kemi and the Inari area. Some TOs started to promote new regions like Ruka-Kuusamo, the National Parks of Oulanka and Pyhä, Kiilopää and the north part of the Lakeland. Campaigns, joint promotions results No campaigns and joint promotions have been done. Last November a fam-trip was done for some Italian tour operators (Easyweek, Boscolo, Nordic Light and Norama) in Rovaniemi-Luosto region.

Outlook for the Summer season 2018 The overall outlook of travelling to Finland for the coming Summer Increase/decrease and reasons for the increase/decrease Even though the economic situation in Italy is still critical because the new government has not started yet, 88% (+10% v. 2017) of Italians think to go on holiday this Summer and 1 in 2 have already booked. The holiday period for Italians is always the 3 rd quarter when schools are closed and when most of the companies close for 2/3 weeks in August. The length of stay and the average expenditure are increasing. During the Summer season the holiday average length of stay is 8.4 nights (double the other quarters). Most Italians want a new destination, 50% prefer a holiday at the seaside but there is an increase of 13% in green holidays. Source: ANCC-Coop (National Association Consumers Cooperative). New summer products Nature and culture are the musts for Finland the 40 National Parks with outdoor activities should be promoted more with active packages (trekking, kajak, bike) wild animal watching, foliage and mushroom picking, midnight sun and northern lights could be a good product for Summer and Autumn the Lakeland area, in particular Saimaa Lake is a destination to push taking advantage of the new Ryanair flight also we have Alvar Aalto itineraries for fly&drive City breaks based in Helsinki and Turku would be interesting with packages about design&museums, sailing through the islands, biking, mixing culture with nature, etc. New sales channels In the first months I just started to map the trade: who sells Finland, how and what. I met new TO/TA.

Outlook for the Summer season 2018 The overall outlook of travelling to Finland for the coming Summer What are the trends for the summer 2018? The Italians are optimistic and they will go on holiday in Summer 2018. The average expenditure will be about 1,776 per capita (+2% vs. 2017). Their holidays will be for stress reduction (54% vs. 38% in 2017), to spend more time with family and friends (44% vs. 4 in 2017), know new cultures (43% vs. 30% in 2017). The chosen accommodation: hotel 47%, holiday house 32%, B&B grew +2% more than 2017. Special attention to the European millennials interested in new holiday approaches: 59% rent a private house, 34% rent a room in a private house, 20% do home exchange. They are interested in new activities like ecotourism, responsible/sustainable tourism, be a guest in someone's home, camp in wild nature. Online feedback from other travelers is more important than professionals' suggestions. Source: Barometro Vacanze Ipsos - Europ Assistance Which are the traveler segments? New target groups could be: - families with kids: 4 holidays are in summer (double the other quarters) and the average length of their holidays has increased (8.4 nights). Most of them prefer Italy but they don t disdain to travel abroad. It s fake news that they search for low cost solutions: quality and enjoying leisure and relaxation are select criteria. Source: Bimboinviaggio.com - small groups of friends: share a trip with your friends improve the relationships and decrease the costs of the trip. 42% say that this permits them to visit places that, travelling alone, would be out of budget Source: Booking.com - active travelers: active tourism is increasing, Finland can offer several outdoor activities at different levels of difficulty - experienced travelers: they want to live the experience of an unforgettable trip, see the destination wonders, taste the local food. Live the experience instead of souvenir purchasing. Source: Booking.com

Outlook for the Summer season 2018 - luxury travelers: this segment is growing, in spite of the uncertain economic situation. It could be interesting to map the luxury resorts and services and be able to offer itineraries in different regions around the country with only luxury services. Ad hoc marketing opportunities TO cooperation, joint promotions In this first year, we have been able to start with small co-marketing agreements with only 3 TOs (Boscolo, Il Diamante, Norama): as we started late and most other TOs already planned their marketing activities. Some actions will be done before the end of June, the rest in September/October/November. These activities (webinars, newsletters, meetings with TA) will be focused on Lakeland, Coast&Archipelago and Lapland regions in Summer, Autumn and Winter seasons. Finnair needs to increase the passenger numbers from Italy: together with them, we are about to do a Summer/Autumn campaign with focus on the South of Finland (Helsinki, Turku and Tampere). TBC Events Last March Be Nordic was organized with Norway and Denmark: unfortunately we didn t have so many visitors as in the previous year because of the new location. But we think it is important to continue to organize it because it offers many opportunities of contacts with the trade (workshop), the press and professionals (seminar) and the final consumers through the several offered activities (food tasting, interviews with the locals, trips presentations, brochures distribution, etc.). We already started to think about next event. PR, social media: it is important that PR helps us in promoting new seasons and new destinations, different from Lapland. Considering that Italians don t have a good linguistic background, it would be important to have SoMe in the Italian language.

Prospects for the Autumn/Winter season 2018-19 The overall outlook of travelling to Finland What trends should be considered in product development to increase the demand in the Autumn/Winter season? Autumn is the period for watching and photographing the best northern lights. Photo tours (animal watching in particular bears, red-arange-yellow colors of foliage, the best northern lights colours are in autumn). For Winter it could be interesting to promote some areas not well known by Italians (Ruka- Kuusamo, Kittilä area, Lakeland with Saimaa and Kuopio areas) with new itineraries, with special accommodations (new exotic resorts, snow hotels, etc.), snow activities (huskies, snowmobile, etc.) and trips for more active tourists (crosscountry ski, snowshoes, mtn bike...). For Helsinki/Turku/Tampere we could offer more specific products: food tours (i.e. breweries and distilleries, local food tasting, cooking class), tour for families with kids (i.e. Moomin world, museums for kids, outdoors activities), design district, sauna tours in the newest sauna structures. Which present target groups should be considered to increase the demand? More attention should be given to honeymooners (special accommodations with roof in glass), photography lovers (wild nature and northern lights). For couples and small groups of friends who love snow activities, it could be interesting to expand the offer with new destination areas not yet well known by the Italian market (i.e. Ruka-Kuusamo, Kuhmo, Saimaa Lake, etc.). Which new target groups should be considered to increase the demand? Families with kids (Santa is all year around but what about watching bears or picking mushrooms in the forest in Autumn?) Active tourists of all ages could be an interesting target: promoting their love of nature, Finland is suitable also for not fit people, as it has a flat landscape.

Trends and other relevant travel related topics Trends Any new travel trends in your market? What s hot now in your market (BtoC and/or BtoB) There is a growing interest/trend toward Northern countries (i.e. cold is the new hot ). Source: Virtuoso American Express. For luxury travel, next to the classic destinations, Northern Europe is one ot the new trend destinations. Source: Quentin Desurmont. The typical trip is the city break (29% share). For this kind of segment, 40% of travelers prefer to book through a TA (vs. 27% for common trips) Source: World Travel Monitor ITB Berlin and IPK International. Green & sustainable tourism: in 2018, more travelers are becoming aware of how overtourism is ruining certain destinations and they will be looking for visiting other less known destinations to satisfy their wanderlust. Source: Trekksoft.com. Most Italians want a new destination, there is an increase of 13% for green holidays. Source: ANCC-Coop (National Association Consumers Cooperative). New distribution channels Your suggestion on how to develop business with them: what needs to be done? About the existing tour operators programming Finland, only a few of them are able to offer products different from the mass, it takes time to enter the consumers mind and buy their trust for something new. Some of them are very small (2-3 employees) and mainly focused on few destination countries, so if launching a new product or a new region doesn t work quickly, it s a risk for them. For this reason they prefer to go on with success regions, trying at least to differentiate the places in the same region (i.e. Agamatour). New small TOs are growing their interest for Finland, they want to know the destination and would like to have a better reletionship with Visit Finland for co-marketing operations (i.e. Blueberry and EasyWeek).

Trends and other relevant travel related topics New distribution channels (continue) In these last years big TOs (i.e. Alpitour/Viaggidea, Going/Bluvacanze) have started to promote Finland, more for mass tourism: the easiest products starting to sell are Rovaniemi and Saariselkä (Going starts this Winter season with some groups ad hoc). Also the TOs/TAs specialized in outdoor activities should be taken more into consideration with specific packages. Contacting the associations or the trade focused on culture, opera music or particular categories (i.e. architects) focused on design, etc could be another channel to develop. For all these new distribution channels the best support for promotion would be the fam-trips, then of course also webinars in coop with some specialized supplier. Online channels Channels where Visit Finland should be present and suggestions of how to be present By 2020 online bookings for tours and attractions will double (9 bil => $ 21 BIL). Most of them will be optimized for mobile devices. Source: Hootsuite, trade magazine. It is important to develop relationships with the main OTA channels in order to spread a basic knowledge of the destination with simple packages (i.e. city breaks). Visit Finland should be more visible to Italians and possibly in the Italian language: our webpage has less articles than the English version. We don t have an Italian Fabebook page (our competitors, Norway and Denmark, have one and consumers are very responsive)...but this would involve ongoing work to keep it alive and updated. At the moment Be Nordic Facebook page and Instagram are the only SoMe channel I am using: after the event, in agreement with Norway and Denmark, we decided to issue a post once a week and one week-end a month.

Trends and other relevant travel related topics Competitors actions Which countries have been active, where have you seen their promotion, what was the main message/content of the communication, competitors new products or activities with tour operators/sales channels Norway: invests a lot in marketing activities (i.e. fam-trips, co-marketing activities with main specialized TOs, active Facebook and Instagram pages, few brochures but with much practical info for consumers, contests, partecipation at TTG fair, etc.). Their website and brochures are in Italian. Iceland: they don t have a Tourism Board in Italy but the destination is easy to sell because of many scheduled tours and fly&drive are well organized by the local DMC, which are few but very strong in our market (the TOs have to add just the flight). In low seasons, Icelandair with Iceland Travel have an interesting offer of 4days for TO/TA who want to know the destination and start the business. Denmark: Copenhagen has a strong image and the Tourism Board invests a lot in digital marketing, the website is in Italian with much useful information. Sweden: for the trade, they closed both offices in Italy and Spain and didn t participate in the last Be Nordic event but they are present at Salone del Mobile in Milan. We are going to ask for their participation in the next Be Nordic event to be more massiv as Nordic countries and share the costs. TOs offer Winter packages in Swedish Lapland but there is no support from the Tourism Board.

Italy Nordic countries' share of Italian overnights 2017 Iceland 109 500 10 % Sweden 262 300 24 % Norway 232 500 21 % Denmark 344 700 31 % Finland 155 600 14 % 400 000 350 000 300 000 250 000 200 000 Development of Italian overnights 2009-2017 Denmark Finland Norway Sweden Iceland 150 000 155 600 Italian overnights, change % 100 000 Change 2017/16 Average annual change 2009-2017 50 000 7% 12% 7% 3% 6% 14% 13% 2009 2010 2011 2012 2013 2014 2015 2016 2017 0% Denmark Finland Norway Sweden Iceland 13

Italy 160 000 140 000 120 000 100 000 80 000 60 000 40 000 20 000 Italian overnights in the Nordic countries, winter season (Dec-Apr) 2009-2017 58 500 Denmark Finland Norway Sweden 160 000 140 000 120 000 100 000 80 000 60 000 40 000 20 000 Italian overnights in the Nordic countries, summer season (Jun-Aug) 2009-2017 60 500 Denmar k Finland Norway 200920102011201220132014201520162017 2009 2010 2011 2012 2013 2014 2015 2016 2017 Corresponding seasonal overnights not available for Iceland Change of Italian overnights by season 2017/16 Winter (Dec-Apr) Summer (Jun-Aug) 12% 13% 13% 10% 7% 5% Sources: Visit Finland Statistics Service Rudolf, Statistics Finland Statistics Sweden, Norway and Denmark - Denmark Finland Norway Sweden 14

Trends and other relevant travel related topics Free word I think Visit Finland needs to be more present in the market because most of the travel trade don t know Finland very well: few are the very specialized TOs with a good knowledge of all regions. The rest of TO/TA who already sell Finland mainly offer Lapland in Winter and scheduled tours combined with other countries in Summer, where Helsinki is the only Finnish location. A few DMC have started to offer some scheduled tours in Lakeland. About the TAs, most of them don t know it at all. Suggestions To start to be more present on the market and let them better know the destination, I suggest: improve the cooperation with Team Finland: they are a good team, proactive and positive and they really would like that Visit Finland becomes part of this team (not only with money contributions or co-participation at some event but also organizing something, in particular in Rome) improve the brand visibility and increase our participation in more events (i.e. Nordic Film Festival, Borealis, etc.) => more interested consumers => more demand more fam-trips for specialized TOs but also something for loyal Tas (related to a particular TO) or for OTAs to create new sales channels if Helsinki still has the special offer for travel agents to discover the capital in a weekend, they should promote it better increase the co-marketing operations with TOs: not only with the most important ones but also with the smaller who need our help in growing their products (i.e. Blueberry and Easy Week asked us to do something together)

Trends and other relevant travel related topics Suggestions (continue) promote better Finland as a green destination for active holidays: this kind of tourism is growing and some dedicated TOs need more attention. Furthermore, some sport portals would like to work with us (i.e. BikeItalia and Sport24) take into consideration not only Finland as a unique destination but also as a destination combination with Estonia (Tallinn), Sweden (Stockholm or Umea), Russia (St Petersburg without visa), Norway (North Cape) starting the trip from Finland => evaluating special rate with Finnair or other air companies

Italy Market review data

Outbound key figures 2017 Outbound Trips: 63,448,000 (+2.4% vs. 2016) Overnights: 276,835,000 (1.8% vs. 2016) Peak season: 3 rd quarter Top spending regions: Lombardy (30%), Lazio (1), Veneto (9%) SHORT HAUL EUROPE Trips 36,700,000 (+1.5% vs. 2016) Overnights 156,233,000 (+3.6% vs. 2016) Average stay Travel expenditure 4.3 nights 11,852 MIO (+9.7% vs. 2016) Source: Banca d Italia Sources: Bank of Italy

Italian visitors in Finland 180 000 160 000 140 000 120 000 100 000 80 000 60 000 40 000 20 000 0 Italian overnights in Finland 2000-2017 155 600 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Italian visitor rankings in Finland No. 14 in overnights in 2017 (155 600, +12%) No. 12 in travel receipts in 2016 ( 41 million, -15%) Spending per trip 453 (in 2017) Share of overnights by regions 2017 43% 14% 14% 28% Sources: Visit Finland Statistics Service Rudolf, Statistics Finland

Italian overnights in Finland 2017 Year 2017: 155 600 (+12%) Winter (Nov-Apr): 67 200 (+12%) Summer (May-Oct): 83 000 (+8%) 28% 44% 12% 2% 4% 46% 3% 2% 4% 2% 2% 2% 3% 2% 2% 37% 3% 2% 2% 5% 6% 55% 3% 3% Sources: Visit Finland Statistics Service Rudolf, Statistics Finland

Italian overnights in Finland Seasonal overnights in 2017-2018 Finland Winter 2017 (Dec-Feb): 39 200 (+10%) Spring 2017 (Mar-May): 26 800 (+17%) Summer 2017 (Jun-Aug): 60 500 (+7%) Autumn 2017 (Sep-Nov): 26 300 (+18%) Winter 2018 (Dec-Feb): 43 300 (+1) Lapland Winter 2017: 20 900 (+18%) Spring 2017: 6 300 (+33%) Summer 2017: 8 800 (+7%) Autumn 2017: 6 000 (+33%) Winter 2018: 23 100 (+1) Lakeland Winter 2017: 3 000 (+2%) Spring 2017: 3 300 (-6%) Summer 2017: 12 700 (+10%) Autumn 2017: 3 500 (+25%) Winter 2018: 3 300 (+10%) Coast & Archipelago Winter 2017: 3 200 (-16%) Spring 2017: 4 800 (+23%) Summer 2017: 9 100 (+15%) Autumn 2017: 4 600 (-2%) Winter 2018: 3 600 (+12%) Helsinki area Winter 2017: 12 100 (+10%) Spring 2017: 12 400 (+16%) Summer 2017: 29 900 (+3%) Autumn 2017: 12 200 (+19%) Winter 2018: 13 300 (+10%) Source: Visit Finland Statistics Service Rudolf, Statistics Finland

Italian internet searches about Finland 129 700 travel-related Internet (+13% versus 2016) Top 10 micro-brandtags: Seasonality of travel-related Internet searches concerning Finland 16 000, +2 % Nov-Dec 2016 Sep 2017 Dec 2017 14 600, +36% 10 500, +51 % 10 100, +1 % 8 500, -7 % Source: D2 Digital Demand