Online Travel Agency 2016

Travel Agency 2016

Online travel agencies perform strongly again in 2015 The year 2015 was another good year for the online travel agency (OTA) industry, which experienced sound economic development. Expedia, Inc. and The Priceline Group, the two leaders in this industry, performed strongly, although it was the China based company Ctrip that saw the third largest increase for the Group.

In the next few years, new online travel booking keys such as Google and TripAdvisor are anticipated, which are currently challenged OTA' s in the area of travel brands and even pose a dis-intermediation scare. It is hoped that OTA' s will meet this demand by transforming their businesses and moving their emphasis from online-only booking companies to providing service throughout the travel time.

Travel research conducted by Euromonitor International shows that worldwide online travel agency revenues continued to perform strongly in 2015, rising 19% to $246 billion. Taking into account the US dollar's sharp rise of 10 percent in 2015 compared to the previous year, growth in US dollars was lower.

Revenues in the Asia-Pacific Asia Pacific segment, which rose 43% to $79 billion in 2015, contributed to this development. The Asia-Pacific area, which is already the biggest global travel seller, almost matched North America's $83 billion in revenues from North America, surpassing Western Europe with $67 billion.

However, the development of revenues from trading with North America and Western Europe was 11% and 9%, respectively, in all global markets in 2015. Online travel agencies' powerful showing will be maintained in the 2015-2020 timeframe with a 12% increase in revenues to $434 billion.

The Asia-Pacific region is likely to continue to be the most important driving force behind this development with a 20 percent share of the total over the next five years. In 2015, Expedia reinforced its position as the world leader in OTA booking revenues thanks to a strong 21% increase in total revenue, which enabled the business to achieve booking revenues of $61 billion.

The development was supported by both internal expansion and the Orbitz takeover in September 2015. Not including Orbitz Worldwide Inc. brand entries since the takeover of the business, the Expedia Inc. brands' expected 14% rate of brand equity expansion in 2015 was still very high. Organically, this increase was higher than that of its arch-rival The Priceline Group, also due to the fact that almost two-thirds of Expedia's order intake was in the US, where the firm occupies a dominating market share in the OTA segment and was therefore not adversely affected by the strengthening of the US dollar.

Expedia's worldwide OTA market-leading position is set to be further reinforced in 2016, when Orbitz full-year entries will be reflected in the company's total revenues, which are estimated to exceed $70 billion. In addition, the Expedia Inc. results do not contain either of HomeAway's large acquisitions in 2015.

The HomeAway is valued to be generating a significant amount of reservations in the shortterm rental class, well over $10 billion, although only a portion of them are generating through an online referral scheme, while a portion of them through a subscriber scheme. Expedia's clear leadership position is that of a leading company that builds a powerful footprint in all major online travel segments, which includes meta-search via Trivago, business travel via Egencia and, since December 2015, short-term rental via HomeAway.

Expedia divested its controlling interest in eLong to Ctrip and a syndicate of finance firms in May 2015 because it is difficult to compete with local businesses in China: its strategic direction in the fast-growing Asia market is now built on its own partnership with Ctrip and eLong and on the local brand expansion.

Priceline Group continued to be number two in the OTA segment in 2015, although it was the leader in sales and income due to its solid positioning in this area. Priceline Group booked a very sharp 37% increase in the 2006-2014 season, boosted by the exceptional performances of its Booking.com affiliate, which enabled the Group to become the dominating actor among online accommodation brokers in Europe.

Expedia posted strong underlying sales and earnings in 2015 for the first year in 10 years. This was largely due to the strengthening of the US Dollar, however, with Priceline Group's order intake - almost 88% of which was earned outside the US in 2015 - increasing by 10% in US dollars, but by around 25% on a currency-adjusted basis.

In 2015, the company's performances will remain very good after adjustment for exchange rates, thanks to its Booking.com, Agoda.com and RentalCars.com-companies. Booking.com and Agoda.com in particular are becoming increasingly popular with travelers in Europe and Asia for their accommodation bookings. Over the past few years, Priceline Group has significantly reinforced its market share in the fast-growing segment of short-term letting, not through acquisition like Expedia, but through internal expansion.

Booking.com in particular is focusing more and more on this sector, with 380,000 offers by the end of 2015, while in May 2014 it introduced the Villas.com label, which specialises in vacation homes and competes directly with Airbnb. Expedia Inc's best rival, Expedia Inc,'s powerful 2015 performancerelated by both acquisitive and internal expansion, could be a driver for The Priceline Group to consider an important takeover in the coming month, with TripAdvisor as a possible goal.

OTA, the fastest performing OTA in 2015, was Ctrip, which increased by an astonishing 58% to a total book value of USD 27 billion, fuelled by China's buoyant home and overseas travel market. Today, Ctrip is the third OTA worldwide leader and is expected to be able to ask Expedia Inc. and The Priceline Group for worldwide lead by 2019.

Ctrip' s ascent defines a landscape in which Expedia dominates in North America, The Priceline Group in Europe and Ctrip in Asia. While Ctrip has so far focused on the China that is now the fastest expanding in the world, it could also open up global networks in the coming years and leverage its strengths in the fast-growing wireless channel: According to the firm, around 70% of Ctrip's flight and hospitality reservations were booked through its application in 2015.

Ctrip' s role was further reinforced in 2015 by an exchange of shares with Baidu, which gave the Group a 45% interest in Qunar, and by the purchase of a majority interest in eLong as part of anĀ investing group. These two transactions ended the end of the pricing battle in the China travel sector, which had had a strong effect on profit margin until 2015.

Over the years, OTA's competition has become fiercer and the smaller player groups have suffered from the emergence of the world' s top providers, especially in the field of hotels. In recent years, this has led to significant consolidations, with Expedia purchasing Travelocity, Orbitz and Wotif in particular. Airbnb, not a traditional U.S. Airbnb, but a peer-to-peer broker, is growing rapidly thanks to the growing appeal of peer-to-peer short-term rents, while other actors such as the eDreams Odigeo Group are concentrating on the aviation industry, where profit margin is lower.

There is also an increasing number of meta-search actors, pressure from the hotel industry to step up the number of hotel customers making instant reservations and, above all, the introduction of travel booking technologies. Indeed, OTA' s are currently being challenging by businesses such as Google and TripAdvisor, which recently began to offer instant booking on their Sites.

Both these gamers and people like Facebook are the ones who are nearer to the consumer and are able to draw a large number of people to their pages with the aim of keeping them up to and beyond the time of making the reservation and following them on their travels. With TripAdvisor, the aim is to win the travelers' trust, but with Google, the long-term aim seems to be to disintermedise the travel sector in order to become the main producer of travel reservations.

First and foremost, it will be crucial to always be one step ahead of travel technological innovations if OTA' s will be able to successfully counter the threats posed by technological actors. Today, the leaders in OTA are among the most innovating in the travel sector and defending their positions would make the dis-intermediation threats posed by purely technological providers unlikely.

Second, the travel consumer is moving away from the demand for travel service to sophisticated travel experience due to the trend towards mobility, peer-to-peer and personalization. Furthermore, the increase in the use of the wireless network also leads to a change of emphasis from the pre-voyage period to the travel period, with travelers searching for information and making bookings during the travel via wireless equipment.

In light of these two developments, OTA' s are likely to shift their businesses from online-only travel agents to tour operators that offer consumer service throughout their travel experiences, which includes, in particular, booking, travel assistants and in-destination travel service and staff.

CeMoDirect is a leading supplier of international market information with locations in London, Chicago, Singapore, Shanghai, Vilnius, Santiago, Dubai, Cape Town, Sao Paulo, Tokyo, Sydney and Bangalore and a team of 800 analyst professionals around the world. In Euromonitor International's travel sector review, we cover a broad spectrum of sectors that include tourism streams and expenses, accommodation, transport, auto rentals, cruises, tourism activity, travel agents, online and travel on-the-go.

Fotocredit: The online travel agency Ctrip is the third largest worldwide after Expedia and Priceline.

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