In an effort to increase market penetration some online travel agencies in Italy are partnering with traditional agencies, according to PhoCusWright’s latest Italian Online Travel Overview, a subset of the fifth edition of PhoCusWright’s Europe Online Travel Overview.

The online travel market is one of the most active segments of the Italian travel industry and is forecast to grow in 2010 at a rate of 9%, outperforming the overall market. However, online penetration is only expected to reach a full 20% by 2011, meaning that Italy continues to lag behind more mature markets.

Italians have been slow to embrace online travel purchases for several reasons, the report states. Broadband penetration is low and still relatively expensive for most Italians. Half of Italian households do not own a computer and 58% of the population does not have Internet access at home.

Additionally, the country’s population is aging rapidly, resulting in slower adoption of the Internet than in other countries. Compared to other nationalities, Italians also are by nature hesitant to release personal information over the Internet.

Additionally, traditional offline players have powerful ties in the country and still sell the “vast majority” of travel related products. In 2009, 83% of travel sold in Italy was booked offline – either through a traditional travel agency or on the phone with a supplier. Though PhoCusWright does not break down the numbers between the agencies and suppliers, Douglas Quinby, senior director, research, said that PhoCusWright “would expect travel agents to represent a significant majority of those sales.”

Also, credit card usage is still relatively low and most credit cards have limited spending margins per month, meaning Italy is still very much a cash-dominant country.

The strongest online sales in Italy continue to be air and rail, while tour operators and hotels lag behind.

According to the report, tour operators were hit hard by the economic crisis and H1N1 in 2009 and are still hesitant to make the move online. The operators are very cautious about challenging conventional distribution channels.

The hotel industry, which remains highly fragmented in Italy, as well as geographically dispersed and largely independently managed, has also shied away from full scale online distribution.

One way in which the online travel agencies are increasing their penetration into the Italian market is through collaborations with traditional offline agencies.
“In some markets where Internet penetration is relatively weak, participation in multiple channels is more important,” said Quinby.

One method the online agencies are adopting is by offering an agency booking portal (similar to what Orbitz recently announced in the U.S.). Offline agents can use the agent portal to register, book products and earn commission.

In other instances, where online travel agents have acquired hotel content (both properties and rates) that are not available through the conventional agent desktop systems (i.e. GDS), the online agencies are making their hotel content available to offline travel sellers. One example is Venere, an online hotel consolidator acquired by Expedia in 2008. According to Venere, some 5,600 travel agents worldwide use them to book hotel content.