At WIT 2016 Conference in Singapore last month, Lorraine Sileo, vice president research of Phocuswright, shared the key trends that mattered in online travel with Yeoh Siew Hoon, founder, WIT.
Q. What are the big global trends that you’ve seen in the past year?
Consolidation, circle of disruption, same old hotel battles, India/China vs the rest of the world
What have been the effects of consolidation on the OTA market? Is China the only market not dominated by global players?
There are still some thriving local players but they are few and far between. For example, the largest OTA in LATAM, Despegar, got a big investment from Expedia, but there are still some smaller, local players there (e.g, Viajnet expects 20% growth this year). Same in Russia, where over 30 local OTAs like OKTOGO and OneTwoTrip compete with Booking.com and Expedia. Some markets, like the Middle East, are virtually all global players.
But there have been signs of trouble – Unister in Germany has had a tragic ending and Hotel Urbano’s founders had to buy the company back from investors after failing to perform.
The reality is that there are two global giants and everyone else.
Q. And Asia?
Asia continues to be an outlier. The local and regional players thrive vs. global players, especially in China and Japan. And though there has been consolidation, whatever is happening has created a healthy marketplace.
Take a look at the online travel market growth for APAC vs. the rest of the world, and it’s ahead of most regions except the Middle East. Keep in the mind the Middle East is small, roughly one fifth the size of APAC!
Q. Consolidation hasn’t hurt market growth in China?
Well it might seem like Ctrip has taken over China with its acquisitions of competitors Qunar and eLong, and investments in Tunio, eHi, Tujia … more than a dozen consumer-facing travel brands. But it does have competition. There’s Alitrip, there’s Meituan-Dianping, hotel specialists.
Same in Japan … Rakuten and Recruit are leaders but there’s several other OTAs competing in the marketplace like iJTB and travel.jp/hotel.jp and ikyu.com. India has Cleartrip, MMT, Yatra, Goibibo. The point is that while there is consolidation and global players we still don’t see much impact on the growth of local and regional OTAs in Asia.
And the OTA market is Asia is still growing in double digits!
Q. Are China and Japan OTAs catching up to the U.S. giants?
Ctrip is the third largest OTA in the world, we can almost call it a global player in size even though it’s China-focused. Rakuten and Recruit are much smaller.
But next to the U.S., China and Japan have the largest OTA markets in the world, and China is twice as large as the third ranked market – UK.
Q. Will we see more consolidation in meta?
We’re still unsure if metasearch can stand alone – it will be interesting to see what happens with a Trivago IPO. Trivago is a strong brand, it spends a lot of money on SEM. Hipmunk was just acquired. But Skyscanner, HotelsCombined, Wego, Ixigo, all strong brands in their respective markets.
Q. What do you mean by circle of disruption?
The more things change… you know the rest. What was once disruptive is now mainstream.
Car hire has changed substantially but the car rental market is virtually the same, so car-hailing apps are just a new and different way of getting around.
Mobile is now commonplace. It’s not mobile first it’s mobile only.
And Airbnb, HomeAway and private accommodations – well they are not so “alternative” anymore. Here is some data, it’s from the U.S. market but it really is reflective of what’s going on.
First of all, private accommodation is bookable, just like hotels. Booking.com has already integrated apartments and home rentals seamlessly into its search results.
Rentals are just another part of the decision mix.
Only a very small percentage – 6% – of renters actually ONLY considered an Airbnb when renting. As Expedia integrates HomeAway and Airbnb acts more like a hotel operator – in terms of both distribution and services – we will see this blurring between the two that eventually will make them indistinguishable.
Q. Let’s look at some other markets yet to be disrupted – activities, multimodal, no one has solved destination selection.
There’s still a lot that’s unsolved.
We still need a better guest experience. When will keyless entry be mainstream? Personalized entertainment and room controls. Will the hotel know me so I just use an app to get my room set up the way I like it? Can I text my request for extra pillows or room service?
What is still fairly stagnant is the way we serve information – we are not yet seeing personalization, and first waves of AI have a long way to go. We need AI to work so we can create itineraries using voice or text requests. We have LOLA, PANA, GoHero. Travel companies Expedia, Kayak, Ixigo integrating search into FB Messenger. We have full text commands with WeChat and China Eastern for example. But it needs to get better.
And there is still the long tail that needs to be reined in, like activities. Activities remains one of the most interesting but frustrating businesses with thousands of small operators still offline.
And we need true working multi-modal, creating a seamless experience globally. One interesting sign was the fact that GoEuro just raised $45M in its latest funding.
And then destinations – the giants have really taken that on. Google is doing some interesting things with destinations. And of course there’s TRIP.
Q. Which market had the most disruption in 2015/16?
India and China… Let’s just look at some numbers to see what makes them unique.
India’s hotel marketplace is being transformed as companies like OYO Rooms try to create a legitimate marketplace of star-less, independent properties.
India’s OTA hotel growth is projected to be higher than any other APAC market, at 36% in 2016.
And China, of course, is disruptive based just on size alone. China has the fastest growing online market. While there remain concerns over an APAC slowdown due to China’s slowing growth rates, the region is growing faster than other world economies.
In both markets, travel gains exceeded GDP growth. Travel demand is strong and travel is growing both online and off.
Q. Same old story with hotels and OTAs? Are hotels gaining any ground?
Overall OTA hotel sales have grown at a much faster rate than the hotel industry, so when you ask yourself how sustainable is this growth, just look at history.
We don’t expect hotels’ loyalty rates, or Book Direct and Save tactics to make a huge difference in the marketplace in the near term.
Q. What distinguishes APAC from the rest of the world? What can we expect? And not expect?
In Asia, travel has already been reimagined. APAC leads all markets in mobile booking adoption. By 2017, mobile bookings will represent 37% of online travel gross bookings in APAC. Much of this is fueled by China intermediaries “mobile only” rates and the wildly popular messaging app WeChat (Weixin). Discounting has had a huge impact on the Chinese market and is beginning to affect India. Mobile has emerged as a new battleground for intermediaries in India. There’s been much investment in mobile web and apps in Japan.
What not to expect? Things to settle down anytime soo
Q. Where are the next pockets of growth?
You just have to look at online penetration to see where the biggest pockets of growth are. These are projections for 2017. Once you pass the 35% mark you are pretty much mature. So you can see those in darker green are APAC markets.
Smaller markets like Indonesia, Taiwan and Thailand are growing rapidly. Indonesia will be the fastest growing APAC online travel market through 2020. Indonesia, however, will account for just 2% of the APAC online travel market through 2020.
In the Middle East, the U.A.E. is set to become the world’s seventh largest online travel market by 2017. In Qatar, annual online growth will be nearly 30% from 2015-2017, with Saudi Arabia’s gains nearing 20%.
Most online travel markets within APAC will grow in double-digits through 2020, with the exception of Japan and ANZ. Once the online frontrunners in the region, these countries are experiencing slowing growth due to high online penetration.
Overall the online market in Asia will grow at double digits through 2020 – much faster than the market as whole. But eventually things will slow down as online becomes the “norm.” By 2020, the growth rates of the total market and the online market will be only four percentage points apart.