Online travel: Age of Asia?
Travel is on the rise in Asia. Is this really the opportune time for businesses in the region to take advantage of the travel boom?
At the Web in Travel annual conference in Singapore organized by WebinTravel.com since 2012-2017, much of the discussion covered the many different viewpoints in the industry. But one thing was common in the event attended by representatives from Expedia, Air Asia, TripAdvisor, Priceline, Google Travel, Amadeus and Accor. Travel in Asia is on a rising trend. But is this really the opportune time for the region’s travel-oriented businesses? Let’s take a look at each key factor.
The online climate in the region
How about the ratio of Asia Internet users to the world? According to About.com, the world population at the end of 2011 is as follows:
- Asia – 4,055,000,000 (Over 4 billion)
- Africa – 1,108,500,000 (Over 1 billion)
- Europe – 729,871,042 (including all of Russia)
- North America – 522,807,432
- South America – 379,919,602
- Australia – 20,434,176
- Antarctica (negligible)
Many of the more developed nations in North America and Europe already have a high Internet penetration, having converted most of their population into Internet users. Their space on the Internet has little room for growth.
But look at countries in the Orient. As the Internet penetration in these countries continue to grow, the balance of power on the Internet will start to shift.
The World Tourism Organization has the following forecasts. Arrivals are reaching the historic 1 billion mark by the end of the year. Emerging economies will regain the lead with stronger growth in Asia Pacific and Africa (4% to 6%), followed by the Americas and Europe (2% to 4%).
Tourist arrivals to Europe reached 503 million in 2011. Asia and the Pacific reached a total of 216 million international tourists. The Americas have 156 million in total. South America and North America, hit the 100 million tourist mark in 2011. Africa maintained international arrivals at 50 million.
APAC continues to be the fastest-growing travel region globally. China’s rising travel market will overtake Japan’s by 2013 as the region’s biggest. Travel consultancy PhoCusWright projects high single-digit growth for the overall APAC travel market through 2013, when it will reach US$ 357 billion — a 64% increase over 2009.
Asia recently rose in rank in the world travel map. In the top 10 world most visited cities, Asia has 5 hosts: Singapore (5th), Kuala Lumpur (6th), Hong Kong (7th), Dubai (8th), and Bangkok (10th).
For the top 10 earning destinations in 2011, Asia has its first step up with three delegates: China (2nd), Macau (9th), and Hong Kong (10th), and amounts to a total of US$ 103.5 billion, or 10% of the total world travel expenditure of US$ 1.03 tillion. There is still lots of room to grow, as even now it lags behind the US and some European counterparts.
As to how much much money the top Asian travellers spent in 2011: China is at third (US$ 72.6 billion), Japan ninth (US$ 27.2 billion), and these account for nearly 10% of the worlds travel expenditure, just at the beginning of its uptrend path.
One thing seems clear, reports CNN Money: the fragmented and largely untapped Asian market is a golden opportunity. Online travel bookings accounted for just 22% of the Asian market in 2010, well below the 32% in Europe or the 38% in the United States, according to PhoCusWright. And analysts predict that while online travel in the West is leveling off, Asia’s tourism industry is just taking off.
The online travel booking market in Asia Pacific is expected to hit a value of US$ 51.6 billion in 2011 and will grow by 30% to 40% a year going forward, according to industry sources — such as PhoCusWright and Expedia — that look at the online travel market in Australia, China, Japan, India, Indonesia, Malaysia, New Zealand, Singapore and Thailand.
Air Asia Expedia CEO Dan Lynn has observed that Asian consumers are increasingly looking to buy travel online. If you look at the overall percentage of tickets bought online, in the US its at 40%, in Europe 30%. In the Asia Pacific, though even in the most mature markets like Singapore, it is still in the 20% to 25% range. In other markets, the figure is down to the single digits still. So there is still a huge growth potential.
The local Asian ways
For travel companies banking heavily on APAC’s online travel prospects, auspicious signs abound. Here are five reasons to count on robust growth in emerging markets, according to PhoCusWright.
1. Emerging economic engines
The ascendance of powerful emerging markets is powering travel’s growth across the region. China and India bucked global recessionary trends in 2009 as their gross domestic products (GDPs) grew 9.1% and 5.7%, respectively. Economic growth means rising disposable income and a growing middle class with an increasing demand for travel services.
2. Fortuitous fragmentation
While branded hotel chains are investing heavily in APAC and account for a significant amount of the future pipeline, their share of supply remains small versus independents. Fragmentation beckons online intermediaries, signaling a major opportunity for the online channel.
3. Low-cost carriers lead the way
Although traditional airlines continue to garner the lion’s share of APAC air bookings, low-cost carriers (LCCs) are steadily transforming the region’s air market – and luring travelers online. Air will be the fastest-growing travel segment across APAC through 2012, fueled by the rapidly expanding LCCs.
4. Hello, world, I am ready to travel now
In the U.S. and Europe, the rise of online travel required marketers to overcome the inertia of well-established offline booking patterns, and this offline share shift accounted for the majority of online growth. In APAC’s emerging markets, however, online travel growth is largely fueled by first-time travelers, many of whom will have their initial travel booking experience online. Travel demand has long outpaced supply, and a growing population of new travellers, with rising disposable income and a strong desire to travel, is enthusiastically embracing online booking.
5. No computer, no problem
Just over one in five people in APAC currently have access to the Internet, and infrastructure challenges and low credit card penetration have slowed online travel’s march. But for some prospective travelers, the rise of mobile technology offers a solution, as 3G and wireless broadband access surge ahead, and innovative mobile payment gateways empower bookings. While significant mobile booking volume is still several years away, the coming game of mobile leapfrog will ultimately yield a win for online travel.
Besides China and Hong Kong among the top ten Asian countries for international tourist arrivals, South East Asia dominate with four countries: Malaysia, Thailand, Singpore, Indonesia (together with Vietnam, Laos, Cambodia), showcasing that it’s an attractive travel hub in region with beautiful landscapes, diversified cultures, delicious food, and interesting activities for tourists at a low price.
From the above data, we can incur that even with a relatively smaller Internet penetration of 27.5%, Asian Internet users already account for 44.8% the world’s total Internet population with an impressive number of more than one billion people.
The world is coming to Asia, and the middle class members from amongst India, China and Southeast Asia’s 3 billion population are now starting their first travel experience abroad going to neighbouring countries within the region. While the consumer spending here totals to just 10% of the global travel-related spending, there is an upward trend.
Global giants like Expedia and Air Asia are already forming joint ventures, such as AirAsia Expedia, which can better enable them to capitalize on the travel boom in the region. Priceline has likewise made its first step into the doors of APAC, by acquiring online hotel booking group Agoda. Booking.com has recently expanded its partnerships with many countries here, such as AustralianWotif.com, which has teamed up with Vietnam’s Thien Minh Group to form iVivu.com.
Goliaths have already made their moves, so the Davids –the startups and smaller companies — will need to make their disruptive moves in the mysterious East.