Expect huge growth in the region's tourism through the end of the decade, thanks to rising incomes and the popularity of travel booking sites
When 29-year-old Sabrina Fu decided to spend a week exploring the ancient temple ruins of Angkor Wat in Cambodia, she turned to Chinese online travel site Ctrip.com. She long ago became sold on the convenience and ease of researching and booking her vacations online. "The first thing I do when I decide to go somewhere is to log onto the World Wide Web," says Fu, who works at a multinational company's Shanghai office.
With its emerging middle classes and rising disposable income, Asia has one of the fastest growing tourism sectors in the world. Still, the industry has endured some rough luck this decade, with the region's 2004 earthquake and resulting tsunami, sporadic terrorist incidents, and uncertainty about the direction of Avian flu.
Even so, plenty of destinations such as the Maldives, Bhutan, Thailand, and Cambodia saw their tourism businesses expand more than 10 percent last year, according to figures compiled by the Pacific Asia Travel Association. Indeed, the tourism sector accounts for more than 10 percent of the economic output of Australia, New Zealand, Hong Kong, Singapore, Thailand, and Malaysia.
One-third the size of the U.S. marketNot surprisingly, a number of regional online sites and established international ones hope to prosper from the Asia travel boom. To be sure, the size of the region's online travel market is still small compared to mature markets such as the U.S. Online travel sales which in Asia-Pacific are estimated to reach US$25.6 billion this year. That's only about one-third of the U.S. market forecast, according to New York Internet research firm eMarketer.
Yet online travel in the region is likely to experience explosive growth the rest of the decade. From 2006 to 2010, India is expected to grow at 271.6 percent annually, while Vietnam's online travel sector is forecast to expand 202 percent and China's and Indonesia's in the 70 to 83 percent range. (The biggest markets in revenue terms outside of Japan are India at US$300 million and China at US$200 million.) The U.S. online travel business, by contrast, will grow 17 percent on an annual basis during the same time.
Another crucial difference in the U.S online travel market, where sites such as Travelocity.com, Expedia.com, and Travelport.com are big players, is that the growth in new customers is quite slow, given most Americans already have Net access and are familiar with online travel planning.
Planting seeds for growthIn Asia, the race is on to capture the interest of the first-time user and build up some brand loyalty to sites. "In the United States, companies are fighting to take over consumers. But in Asia-Pacific, there is opportunity to acquire new users who are using the Internet for the first time," says Jeffrey Grau, senior analyst at eMarketer. "You want to plant the seeds now because that's going to be the future growth engine."
That's why the big international online travel sites are now ramping up their marketing and online service efforts in the region. Paris-based Carlson Wagonlit Travel, a worldwide business travel management company, has big aspirations for Asia. "The big four markets in Asia-Pacific, Australia, Japan, China, and India will see their online (managed business) travel adoption rate go up to 40 percent in three or four years," says Nicolas Pierret, director of global accounts for Asia-Pacific.
Site traffic is a leading indicatorInterActiveCorp (IACI), which owns Expedia and Hotels.com, invested US$166.7 million in 2004 for a 52 percent stake in eLONG), China's second largest online travel booking site by market share. Though eLong reported a US$2.1 million operating loss in 2006, Expedia is seeing Asia-Pacific markets represent a bigger share in its worldwide sales. In the first quarter, Expedia's bookings from Australia, China, Japan, Europe, and other countries grew from 25 percent of worldwide bookings to 29 percent. In revenue terms, that's about US$1.47 billion worth of business.
The Australian site HotelClub.com, acquired in 2004 by Orbitz Worldwide, witnessed the fastest growth in Asia-Pacific. "Traffic grew 70 percent and revenue grew 45 percent year to date in Asia Pacific," says Chloe Lim, managing director of HotelClub. "Some people focus on sales revenue, but traffic is actually the first sign of sales growth," says Lim.
China is estimated to overtake Germany and become the third biggest personal and business travel market by 2011, valued at about US$300 billion a year, according to eMarketer. (Last year, the Chinese market was worth US$134 billion.)
China's biggest online travel company is Nasdaq-listed Ctrip.com, with a 54.2 percent market share. Last year, it pulled in US$80 million in gross profit on US$100 million in revenues. Ctrip.com Chief Executive Officer Min Fan thinks online bookings will blow away the growth of the overall Chinese tourism industry. "The growth of online travel will be at least double the speed of travel spending growth," says Fan. "There is the Beijing Olympics in 2008 and the World Expo in Shanghai following [in 2010], which creates a beneficial environment for both international and domestic travel."
In China, right now at least, local players dominate. Ctrip and eLong enjoy a combined market share of 72 percent, and other, newer sites such as Qunar.com and Soobb.com are trying to get a piece of the action. The reason for the optimism is that the market penetration for online bookings is still quite small. "Only a very small percentage of travel transactions are done online in China," says Fritz Demopoulos, CEO of Beijing-based Qunar.com. "The prospects for future growth are encouraging."
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