US $695.00

PhoCusWright's Australia/New Zealand Online Travel Overview (PDF ONLY)

July 2007
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Despite its geographical proximity to, and inclusion in, the Asia Pacific (APAC) region, the social and cultural ethos of the citizens of Australia and New Zealand (ANZ) are more akin to the United Kingdom and United States than to neighboring countries like Indonesia, Korea or Malaysia. This affinity stems from the historical, cultural and economic context of both countries, which are more closely tied to the U.K. and U.S.

The context is crucial because it impacts the demand and supply side travel structures that have evolved for both leisure/ unmanaged and corporate travel. At a structural level, key online drivers such as electronic fulfillment, the English language, global management practices, comfort with online credit card purchases, 100% e-ticketing, supplier direct strategies and an active online travel agency mar- ket, mirror the drivers present in the U.S. and U.K.

But key differences also exist, particularly on the supply side of domestic air where just two airlines dominate the Australian market and one airline controls New Zealand. In addition, Australians and New Zealanders (also referred to as Kiwis) are known for their active lifestyles, whereby sport is an aspirational career, lifestyle choice and travel driver.

Although ANZ’s 25 million population caps the opportunity relative to other high growth markets like China and India, the total travel market is still a sizable US$22.2 billion. Online growth potential is also enhanced by the fact that the entire travel opportunity is addressable for technology-enabled disintermediation. In contrast, despite having 93 million domestic air passengers, Japan, for example, has a high barrier to entry due to supply side issues, and online growth prospects are consequently hobbled.

Report Overview Table of Contents Methodology

REPORT OVERVIEW ^top

Despite its geographical proximity to, and inclusion in, the Asia Pacific (APAC) region, the social and cultural ethos of the citizens of Australia and New Zealand (ANZ) are more akin to the United Kingdom and United States than to neighboring countries like Indonesia, Korea or Malaysia. This affinity stems from the historical, cultural and economic context of both countries, which are more closely tied to the U.K. and U.S.

The context is crucial because it impacts the demand and supply side travel structures that have evolved for both leisure/unmanaged and corporate travel. At a structural level, key online drivers such as electronic fulfillment, the English language, global management practices, comfort with online credit card purchases, 100% e-ticketing, supplier direct strategies and an active Online Travel Agency market, mirror the drivers present in the U.S. and U.K.

But key differences also exist, particularly on the supply side of domestic air where just two airlines dominate the Australian market and one airline controls New Zealand. In addition, Australians and New Zealanders (also referred to as Kiwis) are known for their active lifestyles, whereby sport is an aspirational career, lifestyle choice and travel driver.

Although ANZ’s 25 million population caps the opportunity relative to other high growth markets like China and India, the total travel market is still a sizable US$22.2 billion (note: all dollar references are in U.S. dollars unless otherwise noted). Online growth potential is also enhanced by the fact that the entire travel opportunity is addressable for technology-enabled disintermediation. In contrast, despite having 93 million domestic air passengers, Japan, for example, has a high barrier to entry due to supply side issues, and online growth prospects are consequently hobbled.

GROWTH DRIVERS

The following factors will contribute to travel demand growth in ANZ:

sustained economic growth in the region;
high gross domestic product per capita among developed countries;
a mature and sophisticated traveler willing to make independent travel choices; and
a cultural orientation towards travel.

Similarly, several key factors have also driven the growth of the online travel sector in ANZ. These include:

the early success of Virgin Blue’s online distribution strategy, resulting in explosive growth for the past five years;
fare simplification initiatives by the leading domestic carriers;
market development investments by online travel agencies such as Webjet Travel, Zuji.com, Travel.com.au and Wotif.com; and
corporate management practices embracing online booking tool adoption.

These supply-side developments stand in sharp contrast to other APAC markets such as South Korea, Japan and China, where demand is the major force in the evolution of online distribution.

An early catalyst for e-commerce in Australia was the emergence of low-cost carrier (LCC) Virgin Blue after the collapse of airline Ansett Australia in 2001. VB rapidly ramped up in Australia, bypassed the global distribution systems (GDSs) and built an easy-to-use Web site to boost electronic transactions. In year one, 80% of VB’s bookings were online. Now, both Virgin Blue and the dominant national flag carrier Qantas Airways (with its LCC subsidiary Jetstar) are driving consumers and agents to book domestic tickets online. After about four years of this duopoly, the market is being shaken by entry of a new carrier, Singapore-based Tiger Airways, which is now competing for the domestic Australian air market. LCCs currently account for nearly 45% of all domestic air bookings in Australia.

The ANZ travel market historically has been well served by traditional travel agents such as Harvey World Travel and Flight Centre. Qantas Holidays, a division of Qantas, is one of the largest travel wholesalers in Australia. Full-service online travel agencies have had to overcome the powerful brands and retail networks of traditional travel agents. The lack of airline choices in the domestic market has also limited the potential of online intermediaries. In China and Japan, where a similar lack of choice in air products prevails, successful online travel agencies have emerged in the lodging market (e.g., Ctrip and Mytrip.net, now Rakuten Travel). Led by Wotif, ANZ has at least seven well-funded online travel agencies operating in the market with strong management teams.

KEY TRENDS

The following factors are impacting the development of the online travel market in ANZ:

Market Readiness

Developed and growing economy: ANZ has experienced continuous economic growth for over 10 years. Market liberalization policies have enabled healthy growth in the ANZ economies, and income per capita in the region has increased from AUD$26,000 in 1995 to almost AUD$36,000 in 2005.
Rapid uptake of broadband: The e-commerce infrastructure consists of two building blocks: high-speed Internet access and online fulfillment. Australia’s Internet infrastructure reflects a sophisticated and mature market. According to the Australian Bureau of Statistics (ABS), about half (2.3 million) of all households with Internet access had broadband connections in 2006. Overall, 34% of all households in metropolitan areas were connected via broadband, compared with 19% of all households in non-metropolitan areas. Through its brand BigPond, Telstra Corp. Ltd. is Australia’s largest broadband provider with 2.9 million customers, which breaks down into 1.43 million retail customers and a market share of 45% in 2006.
E-commerce and online shopping firmly entrenched in the region: The maturity of the Australian online consumer is best exemplified by the fact that one in five Australians had used eBay. All major consumer-facing industry verticals, such as financial services, retailing and government services, have developed compelling applications to drive online usage.

Travel Market Structure

Infrastructure and focused marketing support the industry: Fundamentally, both countries offer safe, enriching travel experiences for domestic and inbound travelers alike, thanks to world-class tourism infrastructures. Each country is also an attractive travel destination, with governments that recognize the economic importance of tourism, building leading-edge destination management organizations (DMOs) to drive the ANZ tourism industry. The DMOs are in the midst of a four-year, $175 million effort to develop global campaigns, market intelligence and travel trade strategies in source markets to drive domestic and inbound tourism.
Travel and tourism are important drivers of the ANZ economy: Australia and New Zealand have harnessed their natural heritages, ecological diversity,marine life, beaches, mountains and adventure sports to offer visitors compelling travel experiences. As a result, tourism has become a key economic driver for both the Australian and New Zealand economy. In Australia, tourism directly employs 5.6% of the workforce, contributes nearly $56 billion in expenditure per annum and is worth around 11% of exports, according to the ABS. In New Zealand, tourism directly or indirectly employs 9.8% of the workforce, and contributes 9% of the GDP and 18.7% of New Zealand exports, according to the New Zealand Statistics Bureau.

TABLE OF CONTENTS ^top

Overview: Size of the Market
Growth Drivers
Key Trends
Size of the Online Travel Market

Suppliers
Airlines
Car Rental
Other Supplier Content

Online Intermediaries
Traditional Travel Agencies
Suppliers Sell Packages
Online Travel Agencies

Conclusion

LIST OF TABLES

ANZ Online Travel Market (Leisure/Unmanaged Business) Gross Bookings (US$M), Growth, and as Percentage of Total Travel Market, 2005-2009
ANZ Travel Market (Leisure/Unmanaged Business) Share by Channel, 2006 and 2009
ANZ Travel Market (Leisure/Unmanaged Business) Gross Bookings by Channel, 2005-2009 (US$M)
ANZ Travel Market (Leisure/Unmanaged Business) Gross Bookings by Segment, 2005-2009 (US$M)
ANZ Online Travel Market (Leisure/Unmanaged Business) Share by Segment, 2006 and 2009
ANZ Airlines (Leisure/Unmanaged Business) Total and Online Gross Bookings (US$M) and Online Penetration, 2005-2009
Domestic Airline Passengers, Australia, 2004-2006
Domestic Airline Passengers, New Zealand, 2004-2006
Outbound International Airline Passengers, Australia, 2003-2006
Domestic Airlines Market Share, Australia, 2006
Australian Lodging Establishments by Star Grading, Market Share by Properties, Rooms and Revenue, 2006
ANZ Hotels (Leisure/Unmanaged Business) Total and Online Gross Bookings and Online Penetration, 2005-2009
ANZ Online Car Penetration: Leisure/Unmanaged Business Gross Bookings (US$M) as a percentage of the Total Car Market, 2006-2009
ANZ Online Travel Agency Gross Bookings (Leisure/Unmanaged Business), 2005-2009 (US$M)

METHODOLOGY ^top

PhoCusWright's Australia/New Zealand Online Travel Overview presents the findings from PhoCusWright research on the Australia/New Zealand (ANZ) travel market in 2006-2007. In this report, figures for ANZ are based on 2005-2006 actual data, and all cited data for 2007-2008 are projected.

To evaluate the market, PhoCusWright interviewed executives from more than 25 ANZ-based airlines, hotels, tour operators, rail companies, online and traditional travel agencies and travel technology companies. Estimates and projections are for leisure and unmanaged business travel.

Internet sales are based on gross bookings – that is, the total transaction value of the products sold online inclusive of taxes and fees – for leisure and unmanaged business travel sites. PhoCusWright includes in these figures bookings that are researched online but may have been completed offline as a direct and immediate result.

Financial information is based on data obtained from interviews with company executives or public financial reports. Estimates and projections are based on these interviews, third party information, Web traffic results, economic indicators, market trends and PhoCusWright analysis.

PhoCusWright online market size estimates and projections for ANZ are based on the results of local online travel agencies, tour operators, airlines, car rental companies, hotel properties and railways headquartered in India.

All currencies are in U.S. dollars (US$). All data in this report are provided by PhoCusWright Inc. unless otherwise noted.