By Lorraine Sileo, August 6, 2002
With
the online travel market in Asia Pacific expected to reach $13.3 billion
in 2004, according to PhoCusWright, it is understandable why U.S. travel
companies are moving into the region. Online travel in the U.S. is getting
saturated, and the European market is growing slower than expected, forcing
many travel companies to look east for their next big opportunity. But
whether or not they succeed depends largely on how well they understand
this emerging marketplace.
The Asia Pacific online travel market is emerging, yet its fragmentation
and cultural nuances make it among the most complex in the world, according
to The Asia Pacific Online Travel Market: Tapping A Complex Market, published
by PhoCusWright Inc. last week. Culture, language,government, economy and
currency - not to mention travel patterns - will impact the success or
failure of online travel in the region.
The airlines, which initially drove travel e-commerce in the U.S., operate
much differently in Asia. There is little direct distribution, as
national carriers still depend on travel agencies to sell 95% of their
tickets. To date, only a few airlines have been aggressive in cutting commissions
to encourage travelers to book direct, such as Singapore Air and Air New
Zealand. But the advent of discount airlines in the region is making the
landscape more competitive and forcing major carriers to seek lower cost
distribution channels. This will result in the airlines (many of which
already sell 10-15% of their tickets online) to dominate the online travel
market in Asia for the foreseeable future.
To accelerate their online efforts, Asia Pacific carriers have been
quick to follow the Orbitz model -- which is to create a consortium and
sell a common brand. This strategy has led to the recent launches of two
new online services - Tabini (Japan) and Zuji (Singapore, Australia, others).
Travelocity is a co-owner and lead technology provider for the two sites.
Priceline was the first U.S. online travel agency to announce its intention
to enter Asia. Backed by Asia's leading conglomerate Hutchison Whampoa,
Priceline rolled out its service in Taiwan, Hong Kong and Singapore in
the first half of 2002.
Expedia won't be left behind. After four years as Expedia's UK managing
director, James Vaile was recently promoted to vice president, Asia Pacific,
signifying Expedia's renewed interest in the region. Vaile has called Asia
Pacific "the next emerging giant."
The greeting these new online travel agencies will receive will depend
a lot on how travelers in Asia ACCEPT new brands. Except for China, Internet
access is NOT a problem, as it was for early online pioneers in the U.S.
and Europe. As a matter of fact, broadband and mobile infrastructures in
key Asian markets are among the best in the world. Yet selling travel under
a new consumer brand is new to many Asians, who are used to purchasing
travel through mega-agencies and tour operators such as Chan Brothers (Singapore)
or Wing On Travel (Greater China). Unlike the U.S., where traditional agencies
have yet to exploit online channels for the leisure market, Chanbrothers.com
and Wingontravel.com are among the most successful travel agency sites
in Asia Pacific, according to PhoCusWright.
Different markets in Asia are in varying stages of maturity, including
Australia and Japan, which are the most developed. Only 1-3% of total travel
bookings in Asia are made online, but PhoCusWright projects the Asia Pacific
online travel market to grow between 60-70% annually for the next two years.
The bottomline, according to PhoCusWright, is that the Asia Pacific
region does represent opportunity - especially for discount hotel aggregators
(many of which are already successful), and vacation packagers (emerging).
But it is necessary to understand the travel trends in each market and
strategies of traditional players to fully exploit the opportunities available. |