Some 32.1 million US households are expected to use the Internet to book their vacations this year, spending US$63.6 billion, says US-based Forrester Research in a
recent report. By 2009, Forrester predicts, the number of US households buying vacation packages online will reach 46.4 million, with a total spending of nearly US$111
Online travel in
Asia Pacific is also picking up speed, and not just in traditional markets such as Japan and Australia. Research consultancy marketSHARE estimates
that the online travel market in the region will grow to US$16 billion in 2006, from US$8 billion in 2003. The consultancy also estimates that by the end of the year, more
than 29% of bookings in the region will be made online, compared with just 3.5% in 2002.
It’s a trend that Abacus International has noticed in its own booking figures from Abacus travel agents who have gone online – by May, the company had already
reached its target for online segment bookings for this year, double that achieved in 2004. Taiwan and Hong Kong were the biggest contributors with travel agents in
Korea beginning to jump on the bandwagon, says the company.
“These figures are very encouraging and are by no means the peak, suggesting that there is still immense growth potential in online travel“ said Abacus President and
CEO Don Birch.
Combination of factors contributing to growth in online travel
The growth in online travel, while recent, has been on the cards for some time. An online travel survey conducted by online travel company ZUJI in 2003 found that 49% of the 3,253 respondents in Singapore were already using the Internet to purchase their air tickets and make hotel reservations.
Not surprisingly, a major factor behind this growth is simply greater Internet connectivity. With Internet penetration levels continuing to rise steadily throughout the Asia
Pacific region, the result is more Internet-savvy travellers.
MakeMyTrip.com Founder & CEO Deep Kalra notes that India’s Internet population is growing by leaps and bounds, “There are currently 33 million active Internet users
in India and given the fact that the user-base is growing by over 30% per annum, it is expected to cross 100 million by 2010.”
MakeMyTrip.com, already successful in the US-to-India market, is planning to tap the burgeoning resident Indian market with the launch of its travel portal in India this
month. Pointing to the impressive number of tickets sold online (approximately 10,000 daily) on the Indian Railways’ website and the recent success of websites like Air
Deccan and SpiceJet, Mr Kalra says that the market is ready for buying uncomplicated travel products such as air tickets, hotel rooms, short-haul packages and
weekend breaks online.
This is true for Singapore, which has one of the highest Internet penetration levels at 65% according to figures from the Infocomm Development Authority of
Singapore. Online travel company ZUJI recently reported a 200% growth in sales year-on-year for 2004 and fully expects to double its sales volume again this
The arrival of low cost carriers (LCCs) in the region can also be linked to contributing to the rise in online travel. Today there are 16 budget carriers in the region, an
amazing figure considering the first, AirAsia, only began operations in 2001.
In line with their strategy of maximising revenue and minimising operating costs, LCCs adopt an online-centric sales model, eliminating the need for the more traditional
physical “customer-facing” set-up.
ZUJI notes that this sales model, together with the media hype associated with their entry, drew many new customers who had never tried booking online before to the
Internet, resulting in a flood of new online travellers.
As their low ticket prices fulfils pent-up demand from the low-income traveller, more travellers have become familiar with the LCC’s modus operandi, thereby displaying
increasing confidence in and propensity for online booking.
A side effect of this familiarity with online booking is online price comparison. As marketSHARE notes, searching for information online is becoming a basic social trend
throughout the region, leading to a constant search for the best prices. ZUJI, for example, has seen its bookings increase for both low cost carriers and traditional carrier
airlines, as more travellers trawl the Internet for the lowest ticket fares.
Said Ms Ellone Chan, Director of
Singapore-based travel portal P2P Travel Exchange, “When we first set up operations three and a half years ago, there
weren’t many options available to Singaporeans wanting to research and book online. P2P Travel Exchange is now the first local online travel agent to offer real-time
flight booking capabilities, which has been very welcomed by local travellers. We’ve since seen our customer base increase more than twofold, suggesting that
Singaporeans are really embracing the online travel experience.”
The online traveller – hard to pin down
But while the Internet is highly regarded as an information store, “look, not book” continues to be the typical traveller’s attitude towards online travel agencies.
PhoCusWright’s latest Consumer Travel Trends Survey shows that nearly half of US online travel shoppers looked at online travel agencies, but ultimately purchased
direct from an airline, with three in 10 purchasing direct from a hotel or car rental company.
The choice of channel, says PhoCusWright, depends on the consumer’s travel buying considerations, with consumers selecting the purchase channel for leisure travel
based on unique or qualifying characteristics of their trip. So where price is the top-most consideration, online travel agencies win out as they offer the lowest prices.
But on the flip side, supplier sites triumph when travellers require customer service or want the flexibility to change their travel plans.
Furthermore, online travellers are a difficult group to pin down and therefore cater to, say industry experts. Prior to the arrival of LCCs, online travellers were typically
young, between the ages of 25 and 34, had high incomes with no major commitments such as children, which enabled them to easily get away.
Today, however, ZUJI says that demographic is being broadened by new users, including lower-income singles and small families who book budget air travel and hotel
About the only thing you can pin down is their travel preference. According to ZUJI, online travellers tend to go for “intense travel” vacations, preferring to visit one city
for a short break rather than two cities- or hotel-hop. Some 64% of ZUJI’s bookings in the first half of 2005 were for trips of one week or less in duration. This is
reaffirmed by Abacus which notes that online bookings tend to be for short holidays, rather than the “big holiday” of the year.
Regardless of its relatively small size, it’s a market that travel agencies can’t afford to ignore, says Abacus, and the company is already stepping up its efforts to help
traditional agencies get into the online travel business.
Just last month, Abacus launched WebConnect, a technology that enables travel agents to connect their websites to Abacus’ content and functionalities, to create their
own customised look and feel on a website that provides online travellers with real-time access to search and make bookings for air, hotel and car content as well as
travel insurance and package holidays.
In addition to providing value-added tools and content, Abacus is also working with technology partners to offer a variety of seamless end-to-end solutions. flightsXML
Private Limited, a technology solutions provider to the travel industry, is first of such technology partners to use Abacus’ toolkit to develop FaresWhiz (XML Edition).
FaresWhiz (XML Edition) affords travel agents the added flexibility to develop their own high-volume web booking engine for the real-time fares, flight schedules, seat
availability, and tax information through Abacus, whilst allowing full integration with the agency’s existing fares and membership databases.
“The idea behind our Internet solutions,”
said Mr Birch, “is really to empower our travel agent partners to develop an online presence according to their needs and their
customer’s needs. It’s about integrating the offline and online operations to help them to better manage their business and reach out to a broader customer segment. We
know that consumers are increasing shopping across multiple channels, so the modern traveller uses traditional means for one journey and the Internet for another,
depending upon need.”
But while it is a growing market, Abacus believes that for the next decade at least, there remain obstacles to online travel completely replacing the traditional travel
agency cum supplier model.
For one, there is still public apprehension towards the concept of e-booking and e-confirmation. Some Asian cultures still prefer to have things in “black and white” and
remain uncomfortable without physical evidence of their travel arrangements.
Online payment is another obstacle – whether it’s with security issues, the lack of a credit card or just a preference for paying in person. Some travellers prefer to make
physical payments as that “legitimise” their transactions.
Another major obstacle is the Asian traveller’s preference for package buying. Even though it may be cheaper to book their air tickets and hotel reservations separately,
this requires more effort and time, and Asians would rather complete all their travel bookings on one site and in one go.
However, these obstacles may be less of an issue as a new generation of travellers take to the skies. Forrester is predicting that the first “web generation” of
travellers, young adults aged 18 to 24, will influence massive changes in how travel is distributed, marketed and sold in the future. This is the generation that grew up with
computers in their homes and for whom communication means email, short message service (SMS) or internet relay chat (IRC) rather than face-to-face conversations.
For this group, brand loyalty matters less than getting the best deal and long-standing relationships will fall by the wayside in the face of new attractions. According to
PhoCusWright, with the online traveller’s buying considerations being dependant on the type of trip and with whom they are travelling, there will be a greater demand for
customised marketing as travel companies seek to offer a wider range of personalised packages.
Already, in the US, travel companies are beginning to invest millions in web site redesigns this year, says Forrester. From navigation improvements to more meaningful
enhancements in merchandising, personalisation, complex functionality, new forms of payment and dynamic packaging, the idea is to create a stronger and richer user
experience that fulfils more of a traveller’s planning and buying needs.
And if you get it right, the online traveller can prove to be a loyal customer, as ZUJI can attest. The company’s booking patterns show that almost half of all online
bookings and purchases on its web site are made by repeat customers, proving that brand loyalty may not be so elusive after all.
“When it comes down to it, it’s still about relationships. Especially in this region where personal recommendation is central to decision-making, the
Asian traveller, young or old, wants a source he or she can rely on. Be it offline or online, good advice is good advice.”
concluded Mr Birch.
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