The State of the Travel Market

Posted on 17. May, 2011 by in Stats & Trends, Verticals

What in January seemed like a great start to the year, with record number of online travel, fell off a cliff in April. The latest data from Nielsen Netview shows that unique audience to the travel category declined by 6% YOY in April. The airline industry saw the largest drop with 26% followed by hotels with 16%.Google also shows a similar trend in terms of flight searches with airlines suffering during Easter and April and failing to reach up to last year’s figures, illustrated by the graph below from Google.So what’s behind this? The escalating fuel prices and air passenger duty (APD) have dramatically increased the cost of long-haul flights. The pretty steep figures are likely to discourage travellers beyond Europe and increase the pressure on airlines and long-haul tour operators. Moreover, recent political unrest in the Middle East saw oil prices reach a staggering $122 a barrel this month, which forced a number of airlines to raise fuel surcharges. Fares are likely to rise even further next year with the introduction of the EU Emissions Trading Scheme (ETS), which is bad news for travellers and travel companies alike.

Also the package holiday market is slow, the package search queries on Google were down 17% in Q1 and the number of bookings is reported to have fallen by 15% YOY in April, according to GFK Ascent. In terms of destinations Egypt, Tunisia and Morocco are obviously missed out on by UK travellers but Turkey seems to be the biggest looser as consumers opt for Spain and Greece, the big winners this year.

Again this summer the industry is expecting a growing numbers of travelers to choose a “staycation” despite some economic recovery. The sales of camping equipment are at a record high already. This has also been driven by the low value of the pound. It’s good news for the Brits staying at home that the weather is yet again predicted to be record-high this summer, with scorching barbeque temperatures forecasted for June, July and August. I do hope they get that right this year!

One third of global travel booking to be conducted online by next year

The global travel market is still showing very positive signs in terms of growth. One third of global travel bookings will be conducted online by the end of 2012 according to Phocuswright. Online booking is highest in the US and Europe, which represent more than three quarters of all online sales. However, online booking is expected to boom in APAC and LATAM and the combined online share of US and Europe will continue to decline, only making up of 73% of the global travel market by next year. Europe is predicted to grow by 10% this year, outperforming the 8% growth projected for the US, ahead of the UK travel market’s paltry growth prediction of 6%. Today it’s other, less mature online travel markets that are growing at a much higher rate, with APAC at 17% and LATAM at a staggering rate of 36%While travel companies are trying to profit from the opportunities that lie in less mature markets, and all eyes are on the sleeping giant China, where online travel bookings are growing at 27%.

As the travel industry is still tensely waiting for how the Google-ITA marriage will pan out, a similar coalition has taken place in China according to a press release on Bloomberg today. Tencent Holdings, China’s largest internet company, has bought a $84.4 million stake in Elong, China’s second largest online travel agent after The two companies, Tencent and Elong, plan to form a partnership to develop online travel products and distribute Elong to Tencent’s 674 million online community users in China. Both Google and Tencent are looking beyond their core competences to ensure they keep growing and it will be interesting to see how these coalitions will change the dynamics of the online travel market.

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