Online travel growth slows says top think tank

5th Dec 2008

Online travel growth has slumped to single digits according to
PhoCusWright. This is the lowest level since the influential travel industry research think tank began tracking online travel in 1998. It says online travel is experiencing the inevitable deceleration of a maturing market, but its annual growth will continue to outpace the total travel market through 2010. It predicts online leisure/unmanaged business travel will grow 9% in 2008 and 7% annually through 2010.
“As the economic outlook becomes increasingly bleak, the real question on the minds of many in the travel industry is, just how bad will it get for travel?” said Lorraine Sileo, PhoCusWright’s vice president of research. “Despite softening consumer spending and declining travel demand, online sales will continue to outpace total market growth as travellers increasingly shop and book online, seeking out better bargains.”

Key findings from PhoCusWright’s U.S. Online Travel Overview Eighth Edition include:
* U.S. leisure/unmanaged business travel bookings will reach nearly US$100 billion in 2008, more than one-third of the total travel market, and a 9% increase over 2007.
* Despite broad economic turmoil, softening consumer spending and declining travel demand, the U.S. online travel market is projected to grow far faster than the total travel market through 2010.
* Suppler websites and online travel agencies are expected to hold a share equilibrium through 2010 at 61% and 39%, respectively, but this equilibrium remains uneasy: intense competition and powerful economic trends are driving turbulent dynamics in online air and hotel sales.

* Market maturity is sparking - or compelling - significant innovation in consumer marketing, media revenue models, travel search and trip planning tools. The blurring of business models continues as the almighty transaction gives ground to eyeballs and ads.

* The impact of airline capacity cuts across the industry remains far from clear, as a rapidly deteriorating economic climate may further reduce demand and restrain airlines’ ability to raise fares.

* Online travel agencies are getting a mild counter-cyclical lift from weaker demand in the current tough economic climate; travellers are increasingly shopping online for better bargains.


* Dynamic packaging is experiencing a moderate resurgence as bargain-hungry consumers respond to the “book together and save” proposition.



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