Online travel markets in the US, Europe and the Asia-Pacific region are at various stages of development, which means they each have things that are working — valuable lessons to teach one another.
The US is the world’s largest and most mature market — growth is strong, but slowing. Europe, at less than half the size of the US market, still has a great deal of upside potential, because while the UK, France and Germany are approaching maturity, Southern and Eastern Europe are only now developing. The real excitement, however, is in the Asia-Pacific region, one quarter the size of the US market, where China and India are at the early stages of their ascent into becoming market powerhouses.
"Markets at different stages of development can be laboratories for learning," says Jeffrey Grau, eMarketer Senior Analyst and author of the new report, Online Travel Worldwide: A Mosaic of Separate Markets.
More so than perhaps any other online category, while national borders mean very little, regional online buying patterns and attitudes can’t be ignored.
"How consumers pay for online purchases is a measure of a country’s e-commerce infrastructure and a sign of local business customs," says Mr. Grau. "France relies heavily on online credit card payments, neighboring Germany favors bank transfers. In China, use of cash-on-delivery exceeds credit card payments for online purchases. This is exacerbated by an under-developed financial system that holds back the country’s e-commerce development. Even with these exceptions, credit card payment remains the principle method for making online purchases in the world’s advanced e-commerce economies."
"When it comes to estimating the size of the online travel market, research organizations apply different definitions and methodologies, making an apples-to-apples comparisons difficult," says Mr. Grau.
Using Europe to illustrate the point, the Centre for Regional and Tourism Research (CRT), a Denmark-based organization that promotes tourism through research, measures total online travel sales, while PhoCusWright combines online leisure and unmanaged business travel sales and Forrester Research’s scope is just online leisure travel sales. The countries covered also vary, although Western Europe clearly represents the bulk of European online travel sales.
"All three research organizations show the European online travel market growing at a faster rate than the US market," notes Mr. Grau. "And growth in the East will be even more robust."
PhoCusWright forecasts 28.4% growth in online leisure/unmanaged business travel sales in the Asia-Pacific region between 2004 and 2007. Last year sales totaled $15.9 billion; by 2007 they should reach $25.6 billion.
"It is a serious yet common mistake for firms entering foreign markets to underestimate the impact of regional differences," says Mr. Grau. "An equally egregious error is to miss trends that transcend geographic boundaries."