US $2,495.00

PhoCusWright's U.S. Online Travel Overview Seventh Edition

November 2007
US $2,495 CA $3,054 £1707 €1793

The U.S. travel market entered a new era of channel balance in 2007. This was the first year that more travel was purchased online than offline in the U.S. While online travel continues to grow faster than the market as a whole, the maturity of the channel has led to a significant slowdown in growth compared to the torrid pace of the past.

While online sales continue to grow, the pace is not the same for certain segments of the market. Depending on the channel (online travel agency or supplier-direct Web site) or the product (point-to-point air, chain hotel, cruise, complex itineraries), online is still in various stages of development. Consumer marketing is more complex due to search, social media and other Internet outlets that need to be more closely aligned with a holistic marketing program.

PhoCusWright's U.S. Online Travel Overview Seventh Edition continues the detailed tracking of the largest online travel market in the world, which PhoCusWright has sized and analyzed by segment and channel since 1999.

Report Overview Table of Contents Methodology

REPORT OVERVIEW ^top

The U.S. travel market entered a new era of channel balance in 2007. This was the first year that more travel was purchased online than offline in the U.S. While online travel continues to grow faster than the market as a whole, the maturity of the channel has led to a significant slowdown in growth compared to the torrid pace of the past.

However, the gap between online and offline will continue to widen as more and more travelers shift behavior to online shopping and buying. But the future is less about share shift and more about the realization that consumers will continue to use multiple channels as long as they are available to them and the price differential is acceptable. This price differential, if there is one, will be measured against the convenience of using one channel versus another, various perks, relationships with brand, and the type and complexities of the trip.

While online sales continue to grow, the pace is not the same for certain segments of the market. Depending on the channel (online travel agency or supplier-direct Web site) or the product (point-to-point air, chain hotel, cruise, complex itineraries), online is still in various stages of development.

Consumer marketing is more complex due to search, social media and other Internet outlets that need to be more closely aligned with a holistic marketing program.

Key Findings Include:

While suppliers are gaining share in most segments (air, car, hotel), online travel agencies are competing via packaging and add-ons, corporate tools, distressed inventory, international expansion in Europe and Asia, independent hotel properties, U.S. chains, and cross-product and provider customer service initiatives.

Online travel agencies are lagging in integration of Travel 2.0 tools and will need acquisitions or partnerships to catch up even as they labor to develop targeted marketing based on their massive stores of consumer behavior data.

Alternative monetization of traffic will in the medium term reduce the overall significance of gross bookings to the bottom line for online agencies.

Search and metasearch continue to work in favor of suppliers as they drive traffic to their Web sites to book after their comparative shopping experience.

All travel companies must embrace the consumer desire to shift among online and offline channels.

Packaging components such as air, car, hotel plus local tours, spa treatments, golf, events and other destination services allows hotels and online travel agencies to upsell the customer and combat commoditization. To date, this is best done by online travel agencies, although hotels are increasing their efforts.

TABLE OF CONTENTS ^top

Section 1
Overview: Online Channel Fosters Expections that Suppliers Alone Cannot Match

Section 2
Size of the Market: Online Channel Growth Approaches Overall Rate

Section 3
Online Travel Agencies: Supply Pressures Impact Domestic Growth

Section 4
Airlines: The End of the GDS Wars (or Is It?)

Section 5
Hotel & Lodging: Channel Mix Stabilized but Hotels Press Gains with Consumer Engagement

Section 6
Car Rental: Suppliers Drive Traffic With Targeted Marketing, Enhanced Site Offerings

Section 7
Packaged Travel: Suppliers Unravel Online Agency, Tour Operator Packaging Efforts

Section 8
Rail: Online Direct Strategy Pays Off, but Packaging Solution Is Elusive

Section 9
Cruise Lines: Suppliers Pick Up Speed as Cruisers Gradually Take to the Web

PRELIMINARY TABLE OF TABLES
U.S., Europe and APAC Online Penetration: Total Online Travel Gross Bookings as a Percentage of Total Regional Travel Markets, 2005-2008
U.S., Europe and APAC 2005 Total Travel Gross Bookings Share and 2005-2008 Online Travel Gross Bookings Share
Mean* Frequency of Purchasing Simple vs. Complex Travel Online
Selected Internet Companies Focused on Travel 2.0 Consumer Tools
U.S. Travel Market by Channel and Sector: Offline and Online Leisure/Unmanaged Business and Corporate Gross Bookings, 2005-2009
U.S. and European Travel Markets Growth by Channel, 2005-2008
U.S. Leisure/Unmanaged Business and Corporate Travel Market Total, Online and Offline Share, 2007
U.S. Travel Market by Channel and Sector Share: Offline and Online Leisure/Unmanaged Business and Corporate Market Share, 2005-2009
U.S. Online Leisure/Unmanaged Business Travel Market by Segment, 2005-2009
Percent of Total U.S. Online Leisure/Unmanaged Business Travel Market by Segment
U.S. Online Leisure/Unmanaged Business Travel as a Percentage of Total Travel Market: Online Penetration (Rates Only) by Segment, 2005-2009
U.S. Online and Total Leisure/Unmanaged Business Travel Gross Bookings and Growth Rates, and Total Online Penetration by Segment, 2005-2009
U.S. Online Leisure/Unmanaged Business Travel Market by Channel, 2005-2009
Internet Channel Mix by Segment, 2007 and 2009
Supplier Shopping vs. Buying Behavior: Use of Supplier Call Centers, 2005 and 2006
Influence of Non-Transactional Sites on Travel Purchase Decisions
U.S. Online Travel Agency Gross Bookings by Segment, 2005-2009
U.S. Online Travel Agency and Supplier Web Site Leisure/Unmanaged Business Gross Bookings and Channel Growth, 2005-2009
U.S. Supplier and Online Travel Agency Share of Online Leisure/Unmanaged Business Travel Gross Bookings
U.S. Supplier and Online Travel Agency Share (Leisure/Unmanaged Business Travel) of Total Travel Gross Bookings
U.S. Online Travel Agency, Supplier Web Site, Total Online Travel Market and Total Travel Market Growth Rates, 2006-2009
U.S. Online Travel Agency Gross Bookings by Segment, 2005-2009
U.S. Online Travel Agency Gross Bookings Segment Share
U.S. Online Travel Agency Gross Bookings Segment Share (from U.S. Suppliers Only) vs. Total Travel Market Gross Bookings Segment Share, 2007
Top U.S. Online Travel Agency Gross Bookings, U.S. and International, Jan.-June 2007
Top Six U.S. Online Travel Agencies, Market Share, 1999-2007
U.S. Online Travel Agency Company Market Share
Leading U.S. Online Travel Agency Brands Total Gross Bookings (US$M) and Growth Rates, Jan.-June 2006 and 2007 and 2Q06 and 2Q07
Hitwise Upstream Traffic at Major U.S. Online Travel Agency Brands
Usual Channel and Usual Online Channel for Travel Shopping and Purchasing, 2005 and 2006
Online Component Frequency, by Method Usually Purchased, 2005 and 2006
Online Component Frequency, by Method Usually Purchased, 2005 and 2006
Value Perceptions of Different Web Site Types
U.S. Airlines Internet Leisure/Unmanaged Business Gross Bookings, 2005-2009
U.S. Airlines Leisure/Unmanaged Business Gross Bookings and Channel Growth, 2005-2009
U.S. Airlines by Brand: Leisure/Unmanaged Business Gross Bookings, Total, Online, by Channel and Growth, 2003-2006
Shopping vs. Buying Behavior, Air Purchases
U.S. Hotel & Lodging Internet Leisure/Unmanaged Business Gross Bookings, 2005-2009
U.S. Hotel & Lodging Leisure/Unmanaged Business Gross Bookings and Channel Growth, 2005-2009
U.S. Hotel & Lodging Internet Sales by Channel, 2005 and 2009 (U.S. Only)
Shift in Major U.S. Chain Channel Mix of Reservations
Usual Way Online Travel Buyers Purchase Hotels Online
The New Travel Distribution Landscape
U.S. Car Rental Internet Leisure/Unmanaged Business Gross Bookings, 2005-2009
U.S. Car Rental Internet Leisure/Unmanaged Business Gross Bookings and Channel Growth, 2005-2009
Shopping vs. Buying Behavior, Car Rental Purchases
U.S. Packaged Travel Internet Leisure/Unmanaged Business Gross Bookings, 2005-2009
U.S. Packaged Travel Internet Leisure/Unmanaged Business Gross Bookings and Channel Growth, 2005-2009
Estimated U.S. Market Share of Online Packagers, 2004 and 2006
“Usual” Online Purchase Method by Type of Purchase
U.S. Rail Internet Leisure/Unmanaged Business Gross Bookings, 2005-2009
Amtrak.com Sales, 2005-2009
Amtrak Passenger Sales by Channel
U.S. Cruise Internet Leisure/Unmanaged Business Gross Bookings, 2005-2009
U.S. Cruise Leisure/Unmanaged Business Gross Bookings and Channel Growth, 2005-2009
Comparison of Online Travel Agency and Cruise Line Consumer-Direct Bookings: Total and Online, 2006
Cruise Lines Offering an Online Consumer Booking Engine and Post-Booking Services
Total Cruise Gross Bookings by Channel, 2003 and 2006

METHODOLOGY ^top

Market Size and Forecasts

PhoCusWright has been tracking the financial results of the online travel industry since 1998. PhoCusWright’s estimates and forecasts cover U.S.- based online travel businesses, including travel suppliers (airlines, hotels, car rental companies, packagers, railways and cruise lines) and online travel agencies. They also include sales from non-U.S. travel suppliers that are transacted via U.S.-based online travel agencies. All figures are in U.S. dollars unless otherwise stated.

Both consumer and unmanaged business travel services are included in the following market size and forecast figures. Unless otherwise indicated, all online gross bookings and share figures refer to leisure/unmanaged travel. Unmanaged business travel refers to all air, car and hotel expenses associated with business travel in firms that do not have a travel policy dictating the channel, type of travel, supplier or fare/rate uses. Corporate online booking systems such as Sabre/GetThere and Amadeus/e-Travel are excluded from this analysis (for more information on the corporate travel market, see PhoCusWright’s Corporate Travel Distribution: Key Markets).

PhoCusWright builds its estimates and forecasts from discussions with more than 80 travel executives regarding their companies’ Internet sales, marketing and technology investments, challenges, strategies and expectations. Their responses have been vetted and aggregated to determine market size for supplier Web sites and online travel agencies. Additional data were obtained from Securities and Exchange Commission documents and other company reports.

Figures for 2005-2006 are based on actual company results. Projections for 2007-2009 are based on company interviews, consumer research and market developments. PhoCusWright also considers historical growth and economic trends when developing its forecasts. Estimates and projections are for gross bookings – the retail value of travel sold over the Internet – after cancellations. Figures for airlines are flown (passenger) revenue, also net of cancellations. Travel that is researched online but booked offline using a toll-free telephone number provided on the Web site is also included in online gross bookings figures. Total travel figures (online and offline) are used to determine Internet penetration for each market segment. Total travel figures are either derived from third party sources or are PhoCusWright estimates.

Note that figures listed in tables do not always add precisely to column totals due to rounding.