The online leisure market –
which business model will
dominate?
Daniela Wagner
Global Managing Director,
OctopusTravel
The online leisure market – which
  business model will dominate?
                or
  Is there a future for the travel
  ...
Agenda



1. Online travel – the opportunity
2. Advantages of the intermediary
3. Flexible distribution
4. Knowing your cu...
The Opportunity

• In 2006, World Travel and Tourism is
  expected to post US$6,477.2bn of economic
  activity

• World Tr...
Growth in International Online Travel

International Online Travel volume will continue to expand rapidly with gross booki...
B2C Online Travel Industry
             Significant Growth Across Geographies
$ billions


                               ...
UK example

 Internet use in UK rose by over 9% to
 29.3 million in 2005
 Almost 40% of UK shoppers have
 shopped online i...
There are some radical changes underway

                     • Uncertainty
                     • Changes in Demand
     ...
Biggest change of all: the lines are blurring….
Changes in behaviour


   Lowcost airlines have driven change
   Traditional players have entered online
   space
   Tour ...
Changes in Booking Patterns

 By 2007 PhoCusWright predicts that
 tour operators will have an 18% share
 of the UK’s onlin...
So how does the intermediary fit in?
Advantages of the Intermediary

• Travel companies need intermediaries to be an
  extension of their business to help them...
Content – The Cendant Opportunity
Content
Information
Flexible Distribution – key to our success


What’s worked for OctopusTravel?


1. B2b2c strategy (GTA)
2. Consumer direct...
www.OctopusTravel.com
HotelClub Member Dollars
Orbitz TLC
RBS

•   No set up fees
•   Generous commissions
•   Easy to track sales (online management reports)
•   Marketing support...
AGENT PROMOTIONS
Affiliates

  60% of our business is B2B2C
  Partnerships with around 80 airlines and other
  partners
  Benefits for Octo...
Affiliate Partners
easyHotel

            •Partial XML solution to
            improve SEO
            •Promotions via EasyGroup
            ...
Strategic Partnerships – Nectar

                Improved account management
                process
                Incre...
Some new business in 2006
Franchise Strategy

Why Franchises?
• Speed to market
• Shared risk and resource
• Local knowledge and contacts
• Plan in ...
Franchise Marketing
              Poland          Greece




                                       Poland
Austria




   ...
Challenges – it’s not plain sailing!

 Industry wide challenge: risk of
 commoditisation
 Increasing competition in market...
Is there a future for the intermediary?



  • The market opportunity
  • Content and technology
  • Flexible Distribution...
Key Considerations

                                 Market positioning

                     Own the                     ...
The online leisure market –
which business model will
dominate?
Daniela Wagner
Global Managing Director,
OctopusTravel
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The%20online%20leisure%20market%20which%20business%20model%20will%20dominate

  1. 1. The online leisure market – which business model will dominate? Daniela Wagner Global Managing Director, OctopusTravel
  2. 2. The online leisure market – which business model will dominate? or Is there a future for the travel intermediary?
  3. 3. Agenda 1. Online travel – the opportunity 2. Advantages of the intermediary 3. Flexible distribution 4. Knowing your customer
  4. 4. The Opportunity • In 2006, World Travel and Tourism is expected to post US$6,477.2bn of economic activity • World Travel and Tourism activity is expected to grow by 4.2% a year between 2007-2016 • In 2016 it will virtually double to US$12,118.6bn (Source: World Travel and Tourism Council)
  5. 5. Growth in International Online Travel International Online Travel volume will continue to expand rapidly with gross bookings exceeding US levels by 2006. Leisure & Unmanaged ($ Mn) 2002 2003 2004 2005 2006 2007 Europe - Gross Bookings 9,471 15,621 23,616 35,178 51,168 69,077 Growth Rate - 65% 51% 49% 45% 35% Asia Pacific - Gross Bookings 4,780 8,089 12,100 15,900 20,400 25,600 Growth Rate - 69% 50% 31% 28% 28% Total Europe and Asia 14,251 23,710 35,716 51,078 71,568 94,677 Growth Rate - 66% 51% 43% 40% 32% US - Gross Bookings 28,710 39,358 52,771 65,957 78,472 90,243 Growth Rate - 37% 34% 25% 19% 15% Source: Phocuswright. Notes: United States/Canada, Europe and Asia Pacific represents 93% of the worldwide internet population. Phocuswright forecast for Europe in Euros: 2002 €7,700; 2003 €12,700; 2004 €19,200; 2005 €28,600; 2006 €41,600; ; 2007 €56,100 Assumes $ / € = 1.23 as of November 26, 2004.
  6. 6. B2C Online Travel Industry Significant Growth Across Geographies $ billions U.S. $110 45% $129 Highest online penetration, yet still 56% $137 growing $95 2005A 2007E Online Offline Europe Largest overall travel market; $188 73% $217 online under-penetrated 27% $70 $35 2005A 2007E Online Offline APAC Lowest online penetration, but 90% $220 $196 most rapid growth 10% $26 $16 2005A 2007E Online Offline
  7. 7. UK example Internet use in UK rose by over 9% to 29.3 million in 2005 Almost 40% of UK shoppers have shopped online in past 6 months 75% rank low price as very important 90% are prepared to spend time finding best value for money
  8. 8. There are some radical changes underway • Uncertainty • Changes in Demand Inbound • Changes in Supply • Changes in Technology and Infrastructure • Changes is Business Domestic models …The complexity remains (search, assemble, package, price, sell, add, change, fulfil) … The pressure, options Outbound and risks are greater than ever.
  9. 9. Biggest change of all: the lines are blurring….
  10. 10. Changes in behaviour Lowcost airlines have driven change Traditional players have entered online space Tour operators and hoteliers are marshalling marketing resources around branded websites New loyalty schemes (co-branded alliances with credit card companies) Travel belongs to everyone – supermarkets, sports clubs, insurance companies, financial institutions, media
  11. 11. Changes in Booking Patterns By 2007 PhoCusWright predicts that tour operators will have an 18% share of the UK’s online market compared with 12% in 2005. Online travel agencies will see drop from 36% to 31%. Hotel direct sales will increase to 12% of all online hotel sales (6% in 2004).
  12. 12. So how does the intermediary fit in?
  13. 13. Advantages of the Intermediary • Travel companies need intermediaries to be an extension of their business to help them position and sell products. • Controls inventory but doesn’t own it – manageable risk (minimal pre-buys). • Can manage the business up and down according to demand. • Chamelon ability – flexible distribution • Multiple suppliers so can expand and diversify product portfolio • Not constricted by bundling (air, hotel)
  14. 14. Content – The Cendant Opportunity
  15. 15. Content
  16. 16. Information
  17. 17. Flexible Distribution – key to our success What’s worked for OctopusTravel? 1. B2b2c strategy (GTA) 2. Consumer direct website 3. Travel agents (RBS) 4. Affiliates 5. Franchises
  18. 18. www.OctopusTravel.com
  19. 19. HotelClub Member Dollars
  20. 20. Orbitz TLC
  21. 21. RBS • No set up fees • Generous commissions • Easy to track sales (online management reports) • Marketing support – promotional material, • incentives, roadshows, educationals • Customisation included co-branded websites • and XML • Flexible payment methods such a direct debit • ABTA bonding 8 account managers supporting over 4,800 UK travel agents
  22. 22. AGENT PROMOTIONS
  23. 23. Affiliates 60% of our business is B2B2C Partnerships with around 80 airlines and other partners Benefits for OctopusTravel - global penetration to large volumes of customers - minimal advertising and marketing spend • Benefits for Partners - strategic account management - tailor made solutions/one stop shop - access to competitively priced hotels - seamless customer journey
  24. 24. Affiliate Partners
  25. 25. easyHotel •Partial XML solution to improve SEO •Promotions via EasyGroup companies (EasyWatch) •Solus email campaigns created exclusively for client …135% YOY revenue increase
  26. 26. Strategic Partnerships – Nectar Improved account management process Increased business reviews Homepage coverage, Cashback promotions, exclusive offers Working with other Cendant brands (ebookers) …53% YOY revenue increase
  27. 27. Some new business in 2006
  28. 28. Franchise Strategy Why Franchises? • Speed to market • Shared risk and resource • Local knowledge and contacts • Plan in 2006 to roll out to 12 new markets …YOY growth of 190%!
  29. 29. Franchise Marketing Poland Greece Poland Austria Romania Poland Romania
  30. 30. Challenges – it’s not plain sailing! Industry wide challenge: risk of commoditisation Increasing competition in market place from many different angles Pressure on commission levels reducing supplier margins – impact on price Big partners seeking own direct inventory solutions (complete or partial) Availability – technology – innovation!
  31. 31. Is there a future for the intermediary? • The market opportunity • Content and technology • Flexible Distribution • Maximising customer relationships – differentiation and personalisation
  32. 32. Key Considerations Market positioning Own the Own the content customer Customers? Products? Own the capability Geographies? Channels? Capabilities Business Architecture Customer Innovation insight Innovative / Industrialised flexible Ensure core Drive process business Distinctive structures Capabilities are in place Customer Flexibility service Insightful Resources Channel management
  33. 33. The online leisure market – which business model will dominate? Daniela Wagner Global Managing Director, OctopusTravel

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