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European Online Travel Report 2008
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European Online Travel Report 2008
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Transcript of "European Online Travel Report 2008"
1. European Online Travel Report 2008
EyeforTravel Research 7-9 Fashion Street London E1 6PX UK For queries contact: firstname.lastname@example.org www.eyefortravelresearch.com EyeforTravel Ltd, July 2008 2 © EyeforTravel Research. All rights reserved.
European Online Travel Report 2008 Table of Contents Table of Contents Executive Summary 9 Methodology 16 Chapter 1: European Travel Market 17 1.1 Trends 17 1.1.1 The European travel market in perspective blue 17 1.1.2 Online versus offline market performance blue 21 1.2 Online Penetration and credit card usage 26 1.3 Top European Online Travel Markets 33 1.3.1 Overall 33 1.3.2 United Kingdom 34 1.3.3 Germany 39 1.3.4 France 44 1.3.5 Nordic region 48 1.3.6 Middle European 52 1.3.7 Southern Europe 55 1.3.8 Eastern Europe 61 1.4 Forecasted Growth 65 Chapter 2: Travel Products in Europe 71 2.1 Transportation 72 2.1.1 Air transport developments 73 220.127.116.11 Overall 73 18.104.22.168 Online revenue and sales models; traditional airlines versus low cost carriers 76 22.214.171.124 Online revenue by market 80 2.1.2 Train transport 86 2.1.3 Other transport methods; car rental, car ferry and bus transport 90 2.2 Accommodation 94 2.3 Package Tour 105 2.4 Cruises 111 Chapter 3: Online Distribution 115 3.1 Intermediaries 115 3.2 Direct (Supplier) vs. Indirect (Online Intermediary) sales 119 3.3 Travel Technology 124 3.3.1 Opportunities 124 3.3.2 Challenges 125 Appendices, Glossary 129 3 © EyeforTravel Research. All rights reserved.
List of Figures List of Figures Figure 1: Global growth in outbound tourism, by region (including business travel) 17 Figure 2: European travel market size 18 Figure 3: European travel market, by country 19 Figure 4: Leading European outbound travel markets 19 Figure 5: European travel market, by sector 19 Figure 6: European travel market, by sector and country 20 Figure 7: Sector proportion of European travel market, by country 20 Figure 8: Leading destinations of European outbound travellers 21 Figure 9: European travel market size: online vs. offline 22 Figure 10: European travel market size: online vs. offline 22 Figure 11: European travel market size in 2007: online versus offline, by country 23 Figure 12: European travel market, by country 23 Figure 13: European travel market size in 2007: online versus offline, by sector 24 Figure 14: European online travel market, by sector 24 Figure 15: European online market growth, by sector 25 Figure 16: Sector proportion of European online travel market, by country, 2007 25 Figure 17: Sector proportion of European online travel market 26 Figure 18: Internet penetration: percentage of individuals who accessed the internet in the last 3 months 27 Figure 19: Broadband penetration, per capita, per country 28 Figure 20: Broadband penetration growth rate 2006-2007: per capita per country 28 Figure 21: Number and value of card transactions (excluding e-money function) 29 Figure 22: Total number of cards issued, per country 29 Figure 23: Number of cards issued per inhabitant (2006) 29 Figure 24: Effect of online research on brand chosen 30 Figure 25: Top 10 websites visited at least once a month by European internet users 30 Figure 26: Top 10 most popular products bought online by online shoppers 31 Figure 27: Percentage of individuals who ordered travel and holiday accommodation over the Internet in the last 12 months 31 Figure 28: Trends in online expenditure per online travel buyer, by country (€) 32 Figure 29: Countries as percentage of overall online market 33 Figure 30: Per capita online spend (€) 33 Figure 31: Trends in UK online travel market 34 Figure 32: Top UK holiday destinations 35 Figure 33: UK Online travel market in 2007, by sector 35 Figure 34: UK travel market sectors as a percentage of total travel market, 2007 36 Figure 35: Trends in UK online travel market, by sector 36 Figure 36: UK online travel market, growth rates, by sector 37 Figure 37: Trends in UK online travel market, direct versus intermediary sales 37 Figure 38: Trends in UK online travel market, direct versus intermediary sales as percentages 38 Figure 39: Most popular travel websites in 2007 38 Figure 40: Trends in German online travel market 39 Figure 41: Top German Holiday destinations 40 Figure 42: Trends in German online travel market, by sector 40 Figure 43: Trends in German online air travel market 41 Figure 44: German Online travel market in 2007, by sector 41 Figure 45: German online travel market, growth rates, by sector 42 Figure 46: German travel market sectors as a percentage of total travel market, 2007 42 Figure 47: Largest tour operators in Germany 42 Figure 48: Trends in German online travel market, direct versus intermediary sales 43 4 © EyeforTravel Research. All rights reserved.
European Online Travel Report 2008 List of Figures Figure 49: Trends in German online travel market, direct versus intermediary sales as percentages 43 Figure 50: Largest Travel agencies 44 Figure 51: Trends in French online travel market 44 Figure 52: French Online travel market in 2007, by sector 45 Figure 53: Trends in French online travel market, by sector 45 Figure 54: Trends in French online air travel market 46 Figure 55: French online travel market, growth rates, by sector 46 Figure 56: French travel market sectors as a percentage of total travel market, 2007 47 Figure 57: Trends in French online travel market, direct versus intermediary sales 47 Figure 58: Trends in French online travel market, direct versus intermediary sales as percentages 47 Figure 59: Most popular OTAs in France 48 Figure 60: Trends in Nordic online travel market 48 Figure 61: Trends in Nordic online travel market, by sector 49 Figure 62: Nordic travel market sectors as a percentage of total travel market, 2007 49 Figure 63: Trends in Nordic online air travel market 50 Figure 64: Nordic Online travel market in 2007, by sector 50 Figure 65: Nordic online travel market, growth rates, by sector 50 Figure 66: Trends in Nordic online travel market, direct versus intermediary sales 51 Figure 67: Trends in Nordic online travel market, direct versus intermediary sales as percentages 51 Figure 68: Trends in Middle European online travel market 52 Figure 69: Trends in Middle European online travel market, by sector 52 Figure 70: Middle European travel market sectors as a percentage of total travel market, 2007 53 Figure 71: Middle European Online travel market in 2007, by sector 53 Figure 72: Middle European online travel market, growth rates, by sector 54 Figure 73: Trends in Middle European online travel market, direct versus intermediary sales 54 Figure 74: Trends in Middle European online travel market, direct versus intermediary sales as percentages 55 Figure 75: Southern European online travel market, by country, 2007 55 Figure 76: Trends in Southern online travel market - total 56 Figure 77: Trends in Southern online travel market - by country 56 Figure 78: Southern European travel market sectors as a percentage of total travel market, 2007 57 Figure 79: Southern Online travel market in 2007, by sector and country 57 Figure 80: Trends in Southern online air travel market 58 Figure 81: Trends in Southern online travel market, by sector 58 Figure 82: Southern online travel market, growth rates, by sector 58 Figure 83: Trends in Southern online travel market, direct versus intermediary sales 59 Figure 84: Trends in Southern online travel market, direct versus intermediary sales as percentages 59 Figure 85: Top Spanish high street travel agents, 2007 60 Figure 86: Most visited Spanish travel websites (‘000) 60 Figure 87: Trends in Eastern online travel market 61 Figure 88: Trends in Eastern online travel market 62 Figure 89: Trends in Southern online travel market, by sector 62 Figure 90: Eastern online travel market, growth rates, by sector 63 Figure 91: Trends in Eastern online air travel market 63 Figure 92: Eastern Online travel market in 2007, by sector 63 Figure 93: Trends in Eastern online travel market, direct versus intermediary sales 64 Figure 94: Trends in Eastern online travel market, direct versus intermediary sales as % 64 5 © EyeforTravel Research. All rights reserved.
List of Figures Figure 95: European travel market size - online versus offline 65 Figure 96: European market growth rates, past and future 66 Figure 97: Trends in European travel market, by sector, past and future 66 Figure 98: Internet penetration, last three months 67 Figure 99: Percentage of individuals who ordered travel and holiday accommodation over the Internet in the last 12 months 67 Figure 100: Trends in European Online travel market 68 Figure 101: Trends in European Online travel market, by country 68 Figure 102: Growth rates European online market, by country 68 Figure 103: European Online travel market, by sector 69 Figure 104: Online distribution, by country 70 Figure 105: European Travel market, by sector 71 Figure 106: European Online travel market, by sector 72 Figure 107: European transport market size in 2007: online versus offline, by sector 72 Figure 108: International airline passenger traffic market shares in 2007, by region, in terms of Revenue Passenger Kilometres (RPK) 73 Figure 109: Air passenger traffic in Europe 2007 (actual ticketed passengers) 73 Figure 110: International scheduled passenger traffic 74 Figure 111: International scheduled passenger traffic, capacity and load factor 74 Figure 112: Jet fuel prices on May 23rd 2008 75 Figure 113: Trends in the European airline ticket market, by type 76 Figure 114: Airline market growth, by type 76 Figure 115: Europe’s largest airlines, by total scheduled passengers carried 2005-2007 77 Figure 116: Trends in air ticket sales - Online versus offline 78 Figure 117: Percentage of airticket sales online 78 Figure 118: Trends in online airticket market, by type 79 Figure 119: Top traditional airlines (brands), by overall scheduled passenger revenue, 2007 79 Figure 120: Major European Low Cost Carriers by estimated online revenue 80 Figure 121: European airticket market, 2007, by type and country 80 Figure 122: Trends in online airticket market, by country 81 Figure 123: Online percentage of all sales, by country 81 Figure 124: Online air ticket sales, by type and country 82 Figure 125: European airports, passengers 83 Figure 126: Top 25 European airports, according to low cost arrivals in the first 6 months of 2007 84 Figure 127: Low Cost Carrier movements and market shares in Europe 85 Figure 128: Trends in European Train travel market, by country 86 Figure 129: Trends in European train ticket sales - Online versus offline 87 Figure 130: Percentage of train ticket sales online 88 Figure 131: Trends in online train ticket market, by country (2007) 88 Figure 132: Trends in online train ticket market, by country 88 Figure 133: Proposed high speed rail network 88 Figure 134: Trends in European transport market, by sector 90 Figure 135: Trends in European ‘other’ transport sector, by country 91 Figure 136: European ‘other’ transport sector 2007, by country 91 Figure 137: Online European car rental and car ferry markets, by country 92 Figure 138: Trends in Online car rentals, by market 93 Figure 139: Trends in Online car ferry sales, by country 93 Figure 140: Trends in UK Online coach ticket sales 94 Figure 141: Top 25 European airports, according to low cost arrivals in the first 6 months of 2007 95 Figure 142: Average hotel prices in 2007, compared to 2006 96 Figure 143: Average hotel room prices in 2007, by country 97 6 © EyeforTravel Research. All rights reserved.
European Online Travel Report 2008 List of Figures Figure 144: Trends in European hotel market, by sector 97 Figure 145: Trends in European hotel market, by country 98 Figure 146: Trends in hotel stays, by country (million nights spent) 98 Figure 147: Trends in European hotel expenditure, by country 99 Figure 148: Trends in hotel expenditure - Online versus offline 99 Figure 149: Trends in hotel expenditure - Online versus offline as percentages 99 Figure 150: Percentage of hotel sales made online in 2007, by product and country 100 Figure 151: Growth rates in online hotel expenditure, by country 100 Figure 152: European online accommodation market 2007, by sector and country 101 Figure 153: European online hotel distribution, by country 101 Figure 154: Top hotel chains by estimated online sales in the European market 102 Figure 155: Europe’s largest hotel chains 103 Figure 156: Europe’s largest hotel brands 104 Figure 157: Trends in European package tour market, by sector 105 Figure 158: Trends in European hotel market, by country 106 Figure 159: Package tour participants 2007, by country (‘000 people) 106 Figure 160: Trends in European package tour expenditure, by country (€ pp) 107 Figure 161: Trends in package tour expenditure - Online versus offline 107 Figure 162: Trends in percentage of package tour sales - online vs. offline 108 Figure 163: Percentage of package tour sales made online in 2007, by country 108 Figure 164: Growth rates in online package tour expenditure, by country 109 Figure 165: Online package tour sales, by country 109 Figure 166: European online package tour distribution, by country 110 Figure 167: Top tour operators by estimated online sales in the European market 111 Figure 168: Trends in European cruise market 111 Figure 169: European cruise market 2007, by country 112 Figure 170: Trends in European hotel market, by country 112 Figure 171: European cruise passengers, by country (‘000s) 113 Figure 172: Cruise destinations, by country (%) 115 Figure 174: European intermediary online revenue, by sector 116 Figure 175: Trends in European intermediaries, by sector 116 Figure 176: Trends in European online intermediary revenue, by country 117 Figure 177: European intermediary online revenue, by country as percentages 117 Figure 178: Online intermediaries 2007 in the European market 118 Figure 179: Online intermediaries in the European market, by country 118 Figure 180: Trends in online distribution proportions 119 Figure 181: Trends in online European distribution 120 Figure 182: Distribution in European online travel market, by sector 120 Figure 183: Trends in online distribution, by product 121 Figure 184: Proportion of each distribution method, by travel product 121 Figure 185: Trends in air ticket distribution 122 Figure 186: Trends in hotel distribution 122 Figure 187: Distribution in European online travel market, by country 123 Figure 188: Proportional distribution in European online travel market, by country 124 Figure 189: Proportional distribution in European online travel market, by country 127 Appendix A List of Low Cost Carriers in Europe by country 129 Appendix B Annual leave by country 130 7 © EyeforTravel Research. All rights reserved.
8 © EyeforTravel Research. All rights reserved.
Executive Summary European Online Travel Report 2008 Executive Summary European consumers travel more The European market accounts for a vast majority of international travel, sustained by a healthy and growing economy, an abundance of countries at its doorstep and the associated tendency of Europeans to take many trips abroad. A steady rise in GDP and spending power accompanies this parallel increase in travel. Even with looming global depression and rising oil prices, the European economy as a whole continues to perform well and 2007 travel revenue exceeds the previous year’s financial figures by 4%, approaching an estimated Euro 256 billion in sales. The UK and Germany remain the biggest source markets. Emerging travel markets in Eastern and Southern Europe As Eastern and Southern European GDP and spending power grows, they too are now tapping into the former luxury that is travel. Over the 2002-2007 review period, compound annual growth rates in expenditure have been highest in Southern and Eastern Europe, at 5%. Growth in online travel is also markedly more pronounced in these regions, where lower saturation rates of both internet penetration and travel expenditure have left more room for development. Online Travel Agents are starting to target CEE as a third wave target market. The sector breakdown of the overall European travel market remains stable Airline tickets accounted for a third (33%) of all European travel expenditure in 2007, followed closely by accommodation (32%). Package tours make up just under a fifth (18%), whereas other transport trails slightly behind accounting for 14% of travel expenditure. These proportions have remained relatively stable over the years. A regional analysis of the European travel markets has continued to reveal diverse patterns in terms of overall travel product expenditure as well as distribution. Air tickets account for the majority of sales in most markets apart from Germany, the UK and Middle European markets are the biggest spenders on airline tickets, whereas other countries spend more on other transport for example. Healthy marketplace for European hotels The European hotel sector is currently looking very healthy indeed, boosted by increased demand and supply. Occupancy rates have remained fairly stable but ADR and RevPAR have increased indicating better value sales. Europeans spent an estimated EUR 81 billion on accommodation in 2007, including travel within and outside of Europe. The majority is spent on hotel accommodation and other accommodation such as camping, hostels, etc make up 18% of the total. Southern Europeans spend the most on accommodation and next up are the Germans and these markets account for half of all hotel nights in Europe. However, it is the UK that spends over the average on accommodation pppn. 9 © EyeforTravel Research. All rights reserved.
Executive Summary Expanding demographic of Internet users Around 20% of European households now have broadband connections, highest penetration in Nordic and Middle Europe and fastest growth recognised in Eastern and Southern European nations. Well over half of Europeans have claimed to have accessed the Internet in the last 3 months, 5% more than 2006 and a CAGR of 11% over the last 5 years. The Nordic region is the most internet savvy, with 81% internet penetration. Growth is more accelerated in the less saturated markets of Eastern and Southern Europe where online populations have grown with a CAGR of 22% and 13% respectively over the last 5 years. Growth in credit card penetration in Europe has been reported and the number and value of card transactions has been growing at a 13% CAGR since 2000. The online sales ‘revolution’ is not only extending to the emerging markets, there is a marked democratisation of the internet within all markets, with different population segments going online, notably the female population and ‘silver surfers’ who are looking for different products, creating new opportunities for marketing. The European online travel market reaches EUR 50 billion The relatively steady growth of the overall European travel market since 2002 masks a true explosion in online sales. The steady growth over the past 5 years is in fact fully accounted for by its online channels, as offline sales neither increased or decreased, with a CAGR of 0%. The online market has grown at a 41% CAGR in the 2002-2007 review period. Online market expenditure on travel products approached an estimated Euro 50 billion in 2007, a more than five fold increase from just under EUR 10 billion in 2002, representing a substantial CAGR of 41%. Online sales now account for a fifth (20%) of all travel sales, coming from under a twentieth (4%) in 2002. Offline travel expenditure still accounts for the vast majority of sales, but remained relatively stable in 2007, at around EUR 205 billion. The online market is closing in on the offline market in Europe but there still remains much room for growth in the online marketplace. Marked online growth in the hotel sector All online travel market sectors grew at least a fifth in value in 2007, though the hotel sector saw the fastest growth at 36%, as suppliers are becoming increasingly internet savvy and marketing their inventory through a variety of distribution channels. Plus, intermediaries and GDS’s are tapping into the vast array of independent hotels Europe beholds, by continuously increasing their inventory. There has been a six fold increase in online hotel sales in the last 5 years and reached EUR 9.5 billion in 2007, a 43% CAGR over the review period. The UK is currently the market leader for online hotel sales. Online sales now account for 12% of overall European expenditure on hotels and other accommodation and is expected to rise to around 21% by 2011. Other accommodation remains predominantly booked offline, with just 5% online penetration. However hostel intermediaries, led by the two leading consolidators in the market, have made spectacular progress with an 87% CAGR over the last 5 years. The European accommodation market is somewhat different from the US in terms of direct vs. indirect online distribution and currently 70% of sales are indirect. This reflects the fragmented nature of the European hotel market, dominated by independent rather than chained hotels. 10 © EyeforTravel Research. All rights reserved.
Executive Summary European Online Travel Report 2008 Airlines continue to dominate the European online travel market Low Cost Carriers have had a significant influence over the size and growth of the online travel market in Europe. In fact, the airline sector currently makes up over half of the online travel market in Europe and the near exclusive online distribution of LCCs and rapid growth in this type of transport has certainly been a key driver. Traditional carriers are certainly following suit and improving online presence. Travel verticals reveal different distribution patterns but all reveal growth in the online channel Airline ticket sales are now more evenly distributed between online and offline channels, whereas the vast majority of hotel bookings are made offline. Hotel beds are still largely distributed via offline channels due in part to supply side dynamics and a large proportion of independent and family owned hotels which are yet to be distributed online. Online booking of cruise holidays is negligible so far, but in light of a recent boom in this type of holiday, opportunities for online branding and marketing are extensive. The train sector has seen the most continuous growth figures over the last five years, with a CAGR of 46%. It is the airline sector that remains to generate the most online revenue, reaching EUR 27 billion in 2007. UK remains largest online travel market The UK remains the single strongest performing market in terms of revenue and achieving nearly double the online ales of its closest contender Germany. The size of the UK online travel market has grown 18% on the previous year and account for 29% of all travel market value, trailed by Germany and France, all together making up about 62% of all online expenditure. Growth rates have slowed down but the UK remains one of the most dynamic markets, driven by innovative players and savvy customer base. The Nordic region has the highest amount of online sales and the UK is a close second, whereas Eastern European residents spent just 12% of all travel related products online. Germans spend the least per capita online Germans are second in Europe in terms of overall travel market value but they spend the least per travel buyer out of the leading travel markets in Europe. The online travel market has grown in Germany by 24% but still only accounts for 15% of overall travel sales. The figures here indicate enormous room for expansion. Regions continue to perform differently The French online travel market is third largest in Europe and has been growing at a faster pace than Germany and the UK, though values are lower. The Nordic region (Denmark, Finland, Iceland, Norway and Sweden) is arguable the most digitalised in Europe. The region boasts the highest proportion of online bookings, at 31% online penetration. Middle Europe (Netherlands, Belgium, Luxemburg, Switzerland, Austria and Republic of Ireland) hides some variety when it comes to travel buying behaviour. But all in all they are responsible for 10% of the total European online travel market, reflecting a 24% growth over 2006 and a substantial CAGR of 40% over the last 5 years. Southern Europe (Spain, Italy, Portugal and Greece) accounts for 13% of the European online travel market and 11 © EyeforTravel Research. All rights reserved.
Executive Summary Spain has the major share of that. The internet is definitely gaining more importance, as is travel, and hand in had the online travel markets are growing. Suppliers are adapting their businesses and taking advantage of online sales platforms. Tremendous growth expected in Eastern European travel markets Eastern Europe accounts for just 3% of the total European online market, generating EUR 1.5 billion in 2007. Internet and broadband penetration are very low, posing a structural barrier for immediate growth, however the online travel market is set to grow tremendously over the next few years. An interesting pattern has surfaced in the analysis of spend per online travel buyer, with Eastern European e-travellers spending one of the highest per capita values. It is suggested that luxury or higher end products may currently dominate the online market here through broadband connections being limited to richer households. As connectivity expands in the region more mainstream products are expected to take off. More European markets set for an explosion in online travel Conditions for online travel buying are at their best in Nordic countries and the UK, where practical settings through the adoption of broadband and credits cards are complemented by cultural and supply side factors - notably trust in e-payment systems and an ever increasing number of online suppliers. Slower take up of online travel buying in Southern Europe and France are due to less digitalised societies and scepticism towards e-buying. However, e-travel is becoming more and more prevalent in these countries. In Eastern Europe we find conditions similar to that of Southern Europe a few years ago, where internet penetration is booming and travel suppliers are joining the hype, setting conditions for growth. UK expected to lose some market share in the European online travel market As internet broadband and credit card penetration continue their hold over the daily lives of Europeans, e-commerce will become more prevalent in countries that are currently more aversive to the trend. Growing exposure to online buying and subsequent trust is expected to develop steadily, as well as the amount of travel buyers in each market. The online travel market is forecast to grow at a CAGR of 14% until 2011, as growth rates slow in more mature travel markets. Growth will be ruled by innovation and diversification and accelerated by the expanding travel markets both online and offline in Southern and Eastern nations. The UK is expected to lose some market share in the overall European online travel market as other regions start to gain prominence. Room for brands to develop online In terms of direct vs. indirect distribution, little change is expected over the review period. In the more mature markets, the major players have become known and are even starting to consolidate. In markets with strong intermediaries more sales will continue to go through the brand names. Whereas in Nordic countries with less established OTAs there is a stronger direct distribution pattern and suppliers will continue to sell most of their travel product direct. Eastern Europe is a case apart, as the market is still relatively open, 12 © EyeforTravel Research. All rights reserved.
Executive Summary European Online Travel Report 2008 and whether direct or indirect, the travel industry is called upon to build strong brands for the future. Fastest growth seen from LCCs and cruise Europe has a large number of LCCs and a rapidly expanding market. The UK accounts for nearly a quarter of total European air sector revenue. Eastern European airline sectors have grown substantially and have been driven significantly by LCC home grown brands. Low cost ticket sales have grown the quickest over the last 5 years in Europe at a 29% CAGR and cruises also grew in importance too at a 13% CAGR. Other sectors, however, did just marginally well, growing in line with the general economy indicating the overall European travel market is maturing. It is the online market where we find substantial growth rates. Airline sector pushed further to increase efficiency through online distribution platforms The transport sector as a whole accounts for the largest amount of sales in the European travel sector, accounting for 48% of sales at a valued of EUR 121 billion. The majority of this (73%) is sold offline. Profit margins are increasingly pressurised in the airline sector and companies are striving to maximise their efficiency. Restructuring distribution is one way airlines are tackling this and online channels are therefore receiving increased attention and their ancillary revenue strategies are helping to push online sales for other sectors too. Rail travel gaining prominence In light of current issues in the air transport sector relating to rising fuel prices, inconvenience of check-in, additional security measures and growing environmental concerns, rail travel is certainly gaining popularity amongst European travellers. Although the offline market is expected to stagnate, the online market will continue to do well, especially in Southern Europe. The development of the European high-speed rail network is also something to be watched. Online sales are catching up in other sectors such as car rental and car ferries and Germany performed particularly well in the online car rental sector, aided by strong direct sales and price comparison sites. Fragmentation in the car rental sector is a major barrier to online distribution and as in the hotel sector strong brand names are advantageous here. Traditional packages are making way for ‘experience’ travel and the offline market is declining in favour of online sales The focus is on ‘travel experiences’ and an increasing demand for dynamic packages and more niche travel products. The traditional European package tour across Europe seems to be stagnating at an estimated EUR 46.5 billion. An exception can be noted for Eastern Europe where all in one packages are seeing signs of growth. The Germans currently consume the highest volume of package tours, though spending less per person. Eastern Europe has seen a CAGR of 10% over the last 5 years, but the UK for example is losing ground with a negative CAGR of 6%. The stagnation in the market is strongly due to the erosion of offline sales. 13 © EyeforTravel Research. All rights reserved.
Executive Summary There is a very healthy growth in the online package tour market, a CAGR of 40% (2002 - 2007) and an expected 16% over the next 4 years. The online penetration in the package tour sector is now at 15% and expected to reach 28% by 2011. The market is demanding tour operators to be innovative in dealing with the challenges in their sector as a multitude of direct suppliers are tapping into the tour operators’ customer base and the focus on ancillary revenues is driving the value of dynamically packaged products. The markets vary enormously in terms of the role of intermediaries in the package tour sector, with reasons behind this being the strength of existing brands in the offline market. At the start of 2007 the merger of the biggest tour operator’s show signs of restructuring led by these challenges. Rising demand for cruise products Cruises are making their way into the hearts of Europe’s new travel generation and although it remains the smallest sector, it has seen the largest average growth rate in the overall travel market, at 13% over the last 5 years. It now accounts for an estimated EUR 6 billion. The UK and Germany account for the majority of the revenues, but growth can be seen in Southern European countries, especially Spain and Italy. The vast majority of cruises are still booked offline. Online travel agents remain an important distribution channel for Europe Online travel agents still have a significant role to play in Europe. High fragmentation of travel product in Europe continues to spur the survival and growth of the indirect channel and creates a healthy environment for OTAs. Intermediaries generated estimated revenues of EUR 16.8 billion in 2007, about 34% of the online travel market. Intermediary revenue is expected to keep growing at a similar rate of the total online travel market. Airlines account for a large proportion of OTA sales (46%) and around 36% are hotels. Hotels are expected to continue to account for the largest growth figures, as the large number of intermediary sales find their way online. Intermediaries have the highest revenue in the UK, in line with higher online sales in general. Growth has once again been pronounced most in Eastern and Southern Europe. Intermediaries lack strength in the Nordic and Middle European markets, where they were bypassed by direct suppliers. In Europe the top sectors for online revenue, airline and accommodation, have nearly diametrically opposed distribution patterns. The vast majority (72%) of air tickets are sold directly to the consumer and in the accommodation sector, the vast majority (70%) of online revenue is channelled through intermediaries. Regionally there are noted differences in penetration of intermediaries. Direct sales are responsible for the majority of online sales in all markets, however their relative share varies significantly. The European Online Travel Report 2008 investigates these differences. Chapter One examines the overall performance and developments in the European travel market including online vs. offline distribution as a regional whole and by sector. Internet penetration, broadband penetration and credit card use are also reviewed. The chapter presents an in-depth discussion of trends in the top markets and other regions - UK, Germany, France, Nordic 5, Spain, Italy, Portugal, Eastern Europe, Middle Europe and Southern Europe and also looks at forecasted growth. Chapter Two explores the travel 14 © EyeforTravel Research. All rights reserved.
Executive Summary European Online Travel Report 2008 sector distribution trends – airline, car rental, cruise, car ferry, rail, accommodation and package tours. Chapter Three explores the role of the online intermediaries and provides an analysis of the main OTAs and their activities. There is also a discussion of the direct vs. indirect distribution trends in the different markets and the report ends with a brief look at travel technology and the role of the GDS in EMEA. 15 © EyeforTravel Research. All rights reserved.