Online Travel Market in Latin America Getting Ready for Takeoff

The market for consumer-based e-commerce in Latin America is far less robust than in the United States or Europe, and has been hobbled by the region`s relatively small (albeit growing) internet user population, low PC and credit card penetration rates, high internet access costs and the general population`s limited disposal income.As with other business-to-consumer (B2C) e-commerce products in Latin America, the target market for online travel services, at least initially, remains the top 15-20% of the population, whose spending power far outstrips the regional average.
At present, the online travel market in Latin America is currently one of the smallest in the world, and cultural diversity and local preferences present suppliers and travel agencies, both online and off, with considerable challenges. They only have to contend with two languages but must be able to handle payment in a variety of often non-convertible currencies.
For first movers like
, which has formed an alliance with (and received a strategic investment from) Yahoo! to provide travel services to users of Yahoo!`s Latin American sites, the region`s fragmented travel industry presents tremendous opportunities. Despegar now a presence in Argentina, Brazil, Chile, Colombia, Mexico, Uruguay, Venezuela, Spain and the US, and has also moved into the corporate travel market. According to Jupiter Research, Brazil will be the largest online travel market in the region over the next five years, accounting more than 50% of total Latin American online travel spending.
Consumer-based e-commerce in Latin America has been hobbled by consumer concerns about the security of buying products online and a lack of payment options. Therefore, to succeed in the complex online travel market, where the average purchase is considerably more expensive than most other products commonly sold over the internet, suppliers and agencies also need toll-free telephone access numbers in each country, staff trained in local travel markets and the ability to build trust among Latin American consumers wary about buying online. A high level of service and efficiency is especially important for the elite who make up the majority of the existing online consumer segment, as they are used to receiving preferential treatment from bricks-and-mortar merchants. Accordingly, Despegar and other leading travel sites like Viajo and Volando have established physical points of presence-in the form of call centers or bricks-and-mortar agencies (often in partnership with local travel agents). Viajo, for example, is the online division of Felgueres Travel. Despegar has a partnership with Carson Wagonlit, the world`s second largest traditional travel agency, although it hopes to eventually transition its customers into web-only users. On the supplier side, infrastructure improvements by hotel operators and changes to the regulatory environment, which have encouraged greater competition among airlines, should help spur demand for online travel products.
In Argentina, a survey undertaken by the market research firm D`Alessio/Harris in early 2000 indicated that 45% of Argentine internet users were using the internet to do travel-related research. However, a smaller percentage (8%) was actually buying travel products online. Mexican consumers, on the other hand, seem to be more comfortable purchasing travel products on the internet: according to study by Greenfield Online and the AsociaciĆ³n Mexicana de la Industria Publicitaria y Comercial en el Internet (AMIPCI), 29% of Mexican internet users had purchased a travel-related product in the 90 days preceding the survey. This higher percentage relative to Argentine internet users may be due to the fact that the Greenfield survey was conducted more recently (in the third quarter of 2000) than the D`Alessio/Harris survey. As in other markets, greater experience online generally translates into a lower level of concern about buying over the internet.