Lorraine Sileo
Lorraine Sileo, senior vice president, research of Phocuswright, kicked off the “OTAs – The Coming Wave” session at the WIT Conference by painting the big picture of how OTAs were evolving. Here’s a recap of what she shared on stage.
Q: Your study shows one quarter of travel is now booked online in APAC. How different is the US story from the APAC one?
Lorraine: Both markets are evolving quite differently. The US online travel market shot up rapidly, going from zero billion dollars in 1997 to surpassing US$35 billion by 2003. Within the first six years, 34% of all US travel was booked online.
APAC is a collection of unique markets – some accelerating faster than others technologically and economically. Overall APAC online travel sales surpassed the US$35 billion mark in 2008 – five years after the US reached that milestone – so you can say APAC is about five years behind the US.
Q: Yes, but Asia is catching up fast, right? It won’t be five years behind for very long – in fact, perhaps one day it will surpass the US.?
Lorraine: Right, the big difference is growth.
Over the past seven years the APAC online market grew 206% vs. just 44% for the US. And you can see over the next two years APAC online growth will be more than double that of the US.
US online penetration is barely moving the needle now that it’s near 45% (excluding corporate) – so it’s hit a wall. It really makes us wonder if that 45-50% mark is where it stalls because there are many offline processes – corporate, groups, cruise/tour – even in the States, that aren’t going away.
APAC, on the other hand, has not yet reached 30% penetration. This gives you an idea of how much farther it has to go … If it keeps up this pace it will catch up to the U. in a few years, but surpassing it is another question altogether – because there are limits.
BTW – The greatest online growth is from China and India but all regions in APAC will be growing much faster than the US, which is at single digit.
Q: So OTAs – the coming wave – what’s the new wave? Is there a new type of OTA emerging? The HTA – Hybrid? With Priceline gobbling everything they can find, TripAdvisor and Expedia doing likewise, are we entering a phase where we will see a handful of Godzillas and thousands of Minions fighting for scraps?
Lorraine: There are two big OTA stories now. The first one is local vs. global and how that’s playing out in emerging markets. The second is how OTAs are faced with new competition from meta – which we’ll talk about later. (in the Search section).
The slide you’re looking at now puts in perspective the size of OTAs – they represent 8% of airline sales and 15% of hotel sales in APAC.
Q: Let’s talk about the global vs local story. Will it always be about a local play? Because if you look at Australia, even before its acquisition of Wotif, Expedia was already gaining share … their longterm approach of building customer experience and brand eventually wins?
Lorraine: First of all, to answer your question – APAC isn’t like any other region.
There is a misnomer that even surprised us when looking at the numbers. We tend to think the big guns like Booking and Expedia are killing the small, local incumbents but that’s not true in Asia. When looking at gross bookings for leading OTAs in the region overall, roughly 80% of the OTA market is made up of local, home grown players like MakeMyTrip, Wotif (now Expedia), Rakuten and Ctrip. To put this in perspective, in Europe, global players represent two thirds of total OTA bookings.
But keep an eye on them. In 2008, global OTAs were just 8% of the market.
Now they’re closer to one fifth.
And of course globals have their hands in the local market – There’s Booking.com investing in Ctrip, Expedia’s investment in eLong and acquisition of Wotif. Now these calculations did not take that into account, so naturally this is the way for global OTAs to get local.
Q: So there’s got to be consolidation coming right?
Lorraine: While local players are strong domestically (and for outbound) there will be consolidation. It’s just inevitable. In APAC – just in the hot, hot hotel space – there’s Agoda, AsiaRooms, AsiaWebdirect, Booking, eLong, Hotels.com, HotelClub, Ikyu, Jalan/Recruit, PegiPegi, Rajakamar.com, Rakuten, Wotif, Ctrip.
The US is a US$50 billion OTA market with just three players, so how do we think these others can survive?
Q: What do locals have to do to defend their turf then?
Lorraine: The next struggle is how well they can advance internationally – don’t forget Expedia and Priceline would be stagnant if they never expand globally. Local players especially in small markets need to figure that out. The challenge is to scale domestically and expand globally – while fending off the major players.
And major players aren’t just the global giants. What’s even more interesting, at least in China, is not global vs. local but Internet travel giants vs. local travel players with the likes of Alibaba, Tencent and Baidu.
The post OTAs – The Coming Wave: Lessons from abroad and local nuances appeared first on WIT.