European Online Travel Agencies Phocuswright Navigating New Challenges MARKET RESEARCH • INDUSTRY INTELLIGENCE
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European Online Travel Agencies PhoCusWright Navigating New Challenges MARKET RESEARCH • INDUSTRY INTELLIGENCE Sponsored by: European Online Travel Agencies - Navigating New Challenges October 2011 All PhoCusWright Inc. publications are protected by copyright. It is illegal under U.S. federal law (17USC101 et seq.) to copy, fax or electronically distribute copyrighted material beyond the parameters of the License or outside of your organisation without explicit permission. ©2011 PhoCusWright Inc. All Rights Reserved 2 European Online Travel Agencies - Navigating New Challenges October 2011 Table of Contents Contents List of Figures Section One: 4 Figure 1 6 Figure 5 11 Key Findings, Overview and European Online Travel Domestic and International Methodology Agency and Supplier Website Travel Share of Online Leisure / Unmanaged Business Travel Section Two: 6 Figure 6 14 Gross Bookings, 2009 and European Travel Market Internet Sites Used in Projected 2012 Shopping Phase Overview Figure 2 7 Figure 7 15 Section Three: 10 Four Regions - Supplier vs. Website Selection Criteria Travel Component Dynamics OTA, 2010 and 2012 (US$M) Figure 8 16 Section Four: 14 Figure 3 7 Typical Travel Booking Online Travel Shopping and European Online Travel Methods Purchasing Trends (Leisure / Unmanaged Business) Growth Rates by Section Five: 18 Market (%), 2008-2012 Forces Shaping the Future of Online Travel Agencies Figure 4 10 Lodging and Air Traveller Incidence ©2011 PhoCusWright Inc. All Rights Reserved 3 European Online Travel Agencies - Navigating New Challenges October 2011 Section One: Key Findings, Overview and Methodology Key Findings • A range of issues threaten to disrupt the • Gross bookings for European online OTA landscape, including consolidation, travel agencies (OTAs) totaled € 23.6 access to content, suppliers’ direct billion in 2009, representing 35% of connect strategies, social, mobile and the online leisure and unmanaged metasearch. While there has been business travel market. By 2012, OTAs considerable variation in how European are expected to expand their share of OTAs have responded to these issues, the online pie to 37%. OTA share will some common patterns have emerged. maintain the largest share in Europe and the U.S. (40%) through 2012, although Overview OTA gains in APAC and LATAM will In many ways, the European online travel continue, with share in those regions market is qualitatively different from what growing to 31% and 34%, respectively. it was like just a few years ago. Travel suppliers – especially airlines – are boosting • In the wake of the global recession, their efforts to connect directly with their OTAs outperformed the travel market customers, threatening the traditional as a whole. Though the overall role of global distribution systems (GDSs) travel market fell by 11%, OTA sales and OTAs. Metasearch, another type of increased by 8%. Even supplier website intermediary, is trying to muscle its way bookings declined in the same period. into the marketplace. Acquisitions and PhoCusWright estimates that European consolidation continue to tighten the OTA gross bookings jumped another online space, and companies all along 16% to 27.3 billion in 2010. € the travel value chain are evaluating and • The European OTA landscape is highly testing the potential of social media and fragmented. With no single agency mobile technologies. Meanwhile, travellers dominating the market, the top five themselves are more demanding, tech- players combined account for less than savvy and (in the aftermath of the global half of all OTA bookings. A large number recession) cost-conscious than ever. of regional and local companies control European Online Travel Agencies: Navigating the remainder of the segment. New Challenges combines travel executive • European OTAs have unique strategies interviews with a consumer survey and in terms of the combination of travel robust market analysis to examine some of product(s) they offer; some remain air the key trends shaping the European online focused, others are lifestyle focused. travel industry. This paper emphasises Going forward, however, there is the issues most relevant to European consensus that dynamic packaging OTAs -- a diverse collection of regional represents a significant opportunity. and global players focused on a variety of travel products and customer segments. In • European travellers use OTAs addition to outlining fundamental trends extensively for online travel shopping, and issues, the paper explores the activities not just buying. Although travellers rely and strategies that OTAs are developing most heavily on general search engines, and deploying to remain competitive in this OTAs represent the second most popular highly dynamic business environment. type of website for used for shopping, easily ahead of travel supplier websites. ©2011 PhoCusWright Inc. All Rights Reserved 4 European Online Travel Agencies - Navigating New Challenges October 2011 Methodology In spring 2011, PhoCusWright interviewed Qualified ECTR respondents had to have executives from a range of leading European taken at least one overnight leisure trip online travel agencies, reflecting a mix in the past 12 months that included of global, regional and local companies. paid accommodations at least 100 km Executives were asked about their from home, air travel and/or rail travel. business goals, strategies, challenges and In addition, respondents had to have investments. This research is supplemented played an active role in planning their with findings fromPhoCusWright’s leisure trips. PhoCusWright received 2,405 European Online Travel Overview Sixth qualified responses (France 815, Germany Edition, which examines all segments of the 802, U.K. 788) and the respondent pool European online travel industry by market, can be projected with confidence to the and PhoCusWright’s Global Online Travel adult population with Internet access. The Overview Second Edition. error interval for analysis of the traveler population within each individual country is To provide a consumer perspective, +/-3.4% at a 95% confidence level. this paper also includes results from PhoCusWright’s European Consumer Travel Report (ECTR). In conjunction with the report, PhoCusWright fielded an online consumer survey in April-May 2010 through Global Market Insite, Inc., targeting the general French, German and U.K. population that has Internet access and travels for leisure. ©2011 PhoCusWright Inc. All Rights Reserved 5 European Online Travel Agencies - Navigating New Challenges October 2011 Section Two: European Travel Market Overview The global recession of 2009 wreaked and Italy catch up to leading markets like havoc on travel commerce around the Scandinavia and the U.K. world, and Europe was no exception. Total Supplier website bookings dominate online European travel gross bookings fell 11% to sales – but the gap with OTAs is shrinking, € 215 billion in 2009, as total U.S. bookings as the fragmented lodging sector fuels OTA dropped 15% on a dollar basis and the Asia share expansion. Although OTA share varies Pacific (APAC) and Latin America (LATAM) widely across markets, ranging in 2009 from regions suffered single-digit declines. A 30% in Scandinavia to 55% in Spain, gains modest recovery is clearly underway, as are expected across the board. In the short individual markets and sectors transition term, the sole exception is Germany, where from tending their wounds to regaining lost OTA share is projected to decline slightly ground. In 2010, the overall travel market through 2012, following strong recessionary in Europe was estimated to grow 2.2%, gains. In 2008, supplier websites captured though gains have been uneven across just over two thirds of all European online specific sectors and countries. In 2011, total bookings, compared to about one third for market growth is expected to accelerate OTAs. However, consumers’ search for a moderately at 3.6%. broader range of travel products at lower As in all major travel regions, the European prices benefitted OTAs throughout the online segment outperformed the overall recession. By 2009, OTA gross bookings travel market in 2009, highlighting a lack of € 23.6 billion represented 35% of online of market uniformity. In the midst of the sales, while supplier websites held on double-digit decline that plagued the to the remaining 65% (see Figure 1). By European travel industry in 2009, online 2012, OTAs are expected to expand their bookings actually grew 1.7%. In 2010, share of the online pie to 37%. OTA share the online market was projected to grow will remain largest in Europe and the U.S. 10.5%, in contrast to just 2.2% for the total (40%) through 2012, although OTA gains in market. Clearly, growth in the online space APAC and LATAM will continue, with share is outpacing the total market, and this trend in those regions growing to 31% and 34%, will continue for years to come as Internet respectively (see Figure 2). usage in less advanced markets like Spain Figure 1: European Online Travel Agency and Supplier Website Share of Online Leisure / Unmanaged Business Travel Gross Bookings, 2009 and Projected 2012 2009 2012 35% 37% Supplier Websites Online Travel Agencies 65% 63% Note: 2012 Projected Source: PhocusWright’s European Online Travel Overview Sixth Edition ©2011 PhoCusWright Inc. All Rights Reserved 6 European Online Travel Agencies - Navigating New Challenges October 2011 Figure 2: Four Regions - Supplier vs. OTA, 2010 and 2012 (US$M) Supplier OTA 37% 37% 41% 40% 29% 31% 27%