Online Travel Slowdown?

JUNE 6, 2006
A vanguard industry approaches maturity.
Fuel prices are rising. Inflation fears are mounting. Consumers are nervous. It is not surprising, then, that sales in the maturing US online travel market will now grow more slowly than they have in recent years.
Nevertheless, according to the new eMarketer report,Online Travel in the US: Pursuing Customer Loyalty, US online leisure/unmanaged business travel sales will total $78 billion in 2006, up 20% over last year, while online corporate sales will be in the neighborhood of $37 billion.

"With most US travelers already using the Internet, online travel distributors will compete more aggressively for their business," says Jeffrey Grau, eMarketer Senior Analyst and author of the report. "To earn customer loyalty, online travel agencies are beefing up customer service and online travel suppliers, such as hotels, are adding more information about accommodations and nearby activities."
In 2005, the US travel industry generated estimated sales of $224 billion, the second consecutive year of growth exceeding 7%, according toPhoCusWright.

A strong economy and renewed enthusiasm for flying fueled the surge in spending. However, high-energy costs and a softening economy are likely to depress travel spending over the next couple years. As a result, as Mr. Grau noted, the industry will now have to compete harder for the business of individual customers.
So exactly who is the online traveler?
Travelers who use the Internet are more affluent, more highly educated and slightly older than the general population of Internet users in the US.
Whereas 38% of online travelers responding to aTravel Association Industry (TAI) survey indicated they have annual household income of at least $75,000, only 27% of Internet users among the general US population said they fall into the same bracket.

Similarly, 42% of online travelers reported they had graduated from college, compared to 34% of general Internet users according to aAnnenberg Public Policy Center survey.

Regarding age, a higher percentage of online travelers than Internet users in general are middle aged, or between 35 and 54 (47% vs. 40%). Females outnumber males by six percentage points among online travelers.
"Online travelers are an affluent and highly educated segment of Internet users who visit multiple travel sites to learn about destinations, find the best airline and hotel rates and book reservations," says Mr. Grau. "They are technology savvy and less price sensitive than general leisure travelers. Online travelers will increasingly rely on social technologies such as RSS, blogs, customer reviews and wikis to plan trips."
In the future, online travel service providers are going to have to go further to find new online travel customers.
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