The European online travel market

Posted at April 7, 2009 by Juliette

The European travel market is the world’s largest regional travel market in gross bookings, and 2007 was a year of healthy growth. Though the full effects of the 2008 global economic crisis remain to be seen, the year has finish strong. Although 2009 and beyond will bring both challenges and opportunities; the fallout from financial market meltdowns and the maturation of online travel will depress the lift online travel will receive from consumers seeking the price transparency of Internet channels. However, according to The European Online Travel Overview[1] indicates continued strong growth for online travel in Europe. Online leisure and unmanaged business travel is projected to nearly double. Some key findinds:

Online bookings for leisure and unmanaged business travel accounted for €59 billion, or 25% of the European travel market in 2007.
European online travel growth is lulling into maturity. Growth rates exceeding 50% are now history in the European online travel market as even the least developed markets, Spain and Italy, only increased online revenues by 35% in 2007.
Traditional Airlines will start to exceed LCC growth online. While LCC online growth is rapidly slowing due to longstanding online success, traditional airlines are expected to experience a lesser slowdown in growth for the next few years.
Countries like Portugal and Greece currently have low user penetration—in the range of 35-40%—but with a population exceeding 10 million inhabitants, they offer the strongest future growth potential for online travel.
U.K. and Scandinavia, the two most developed markets in the region, now have the lowest rates of online growth in Europe.
The European rail segment offers comparable total travel time, less security hassle, convenient station locations and less environmental impact, making it a direct competitor of LCCs.
Tour operators are gearing up. They have strong brands and new technologies which may enable them to become true competitors for OTAs in the online market in Europe. Contrary to all other supplier segments and OTAs, the tour operator segment is going to increase its growth rates substantially in the coming years.

France[2]: In addition to being the most visited country in the world, France has a strong domestic travel market. French tourism had a very good year in 2007; hotels in particular saw significant growth in occupancy and average daily rates (ADR). While booking levels remained steady (or, in some cases, grew slightly) across all segments through mid-2008, the repercussions of the year’s worldwide financial crises remain to be seen.

Italy: Italy is Europe’s fifth largest travel market in 2007. It is one of the world’s largest travel spenders – seventh in outbound tourism spend in 2007, according to the World Tourism Organization (UNWTO) – as well as a major world market for inbound tourism.

Spain: Spain is the second largest travel market in the world, welcoming more than 59 million international arrivals in 2007, according to the Spanish Tourism Institute (IET). The country ranks 12th worldwide and sixth in Europe in outbound travel.

Of the €50 billion spent on tourism in Spain last year, a major portion was on domestic travel. As tourism accounts for approximately 11% of Spain’s gross domestic product (GDP), the industry is hugely important to the country’s overall economy. In 2008, average tourist spending in Spain has increased to an average of €857 per stay, but the length of stay is shorter than in the previous years. Exactly how the economic downturn of 2008 will affect the Spanish travel market remains to be seen.

Germany: Germany is the third largest travel market in Europe. As the worldwide leader in outbound tourism spend (only the U.S. is comparable), the travel industry is an important driver of the domestic economy. Similar to the U.K., travel market gross bookings in Germany are not very affected by economic conditions, as Germans spend a considerable amount of their disposable income on holidays regardless of the economy. Corporate travel also remains strong, as many German companies forecasted strong growth for 2009, partially based on high-volume export contracts.

UK: Inbound visitor numbers to the U.K. remain relatively steady. While initial forecasts for 2008 predicted an increase in 2008, current economic uncertainties call this into question. In particular, the appreciation of the pound against the U.S. dollar is an issue, with visitor numbers from the U.S. expected to drop. However, as the euro has gained strength against the pound, travel to Britain is more affordable for Europeans than it has been in many years. Dwindling demand is also likely to be offset by the continued growth of low-cost airlines, the U.K.’s popularity as a short-break destination, and the enlargement of the European Union (EU) from 15 to 27 countries.

Mobile Services in Travel:

The mobile environment is continuing to grow. Networks are getting faster and devices are becoming more capable and easier to use. Consumers are becoming more comfortable using their mobile device for business and leisure. However, there is a huge diversity of mobile device types and network capabilities, making it difficult to deploy applications that take maximum advantage of the device’s capabilities to deliver the optimum user experience. In planning, booking and taking a trip, the consumer needs information that often comes from many different sources, requiring access to a number of servers with different user interfaces and login requirements. With the limited navigation tools on the mobile device, this can be problematic.

Despite these issues, the number of companies providing mobile solutions in travel continues to grow, deploying a variety of business models and implementation approaches. This article examines the state of mobile technology and considers options for travel companies to engage the mobile marketplace.

[1] European Online Travel Market, 2006-2010, Published August 2008, Phocus Wright
[2] French Online Travel Overview, 4th Edition, Dec 2008, Phocus Wright