France: Online Competition Fierce as Traditional Agencies Move to Web

France’s online travel market has remained stable despite global economic challengers, according to the fifth edition of PhoCusWright’s French Online Travel Overview.

Although the overall French travel market contracted by an estimated 8.7% over the past year, online leisure and unmanaged business bookings (including supplier direct sales and online travel agencies [OTAs]) remained relatively flat. However, the market share of online leisure and unmanaged business bookings grew to an estimated 33% of gross bookings in 2009, up from 30% in 2008 and 26% in 2007.

Looking deeper at the market share of the three main travel segments studied by PhoCusWright – direct supplier online sales, OTAs, and all offline “other,” which includes both direct supplier and retail travel agencies – the report revealed that the online supplier direct channel accounted for 7.9 billion euros in 2008, while OTAs accounted for 5.1 billion. The “all other” category continued to dominate the market with 30 billion euros in business.

However, “all other” offline channels is predicted to steadily lose market share. In fact, by 2011, online direct supplier sales are forecast to account for 8.3 billion euros, and OTAs 6.5 billion euros, with all dropping to 25.4 billion euros.

The growth of the online channels is driven, in part, by the continued growth of e-commerce in general, increasing 26% year-over-year through the first quarter of 2009. Much of this can be attributed to the ever-growing number of Web sites with online sales transaction ability.

According to the PhoCusWright study, an estimated 22 million people in France have purchased a product or service online.

Online Agencies & Agencies Online

Competition within the online travel agency sphere is fierce, with the French OTA market composed of global, regional and local players each maintaining a significant share of business.

Furthermore, competition is ramped up by traditionally offline agencies building a presence online. For instance, French agency Jancarthier operates its network of individual agency sites through a white-label agreement with lastminute and other competitors. Two other agencies, AFAT Voyages and Selectour, use technology provided by Amadeus to create their online channels.

In fact, said Carroll Rheem, director, research at PhoCusWright, it’s gotten to the point where “the line between ‘traditional’ and online travel agencies is murky.”

Tough Economy Favors Online Shopping

The market share growth of online travel sales is also linked to the relative strength of online channels during tough economic times, thereby increasing online travel penetration.

“In uncertain economic times, consumers need to feel confident that they are getting the best value for their money,” said PhoCusWright’s Rheem. “Online travel agencies are certainly benefiting from this trend.”

In fact, total OTA gross bookings grew by 9.5% in 2008, and though growth was forecast to slow in 2009 and 2010, overall the segment is predicted to continue to increase 6.7% year-over-year.

The report states that in the second half of 2008 alone, 42% of French Internet users are projected to have purchased or reserved travel online. Furthermore, one in three Internet users is estimated to have visited one of the top five OTA Web sites, resulting in a 20% increase in visitor numbers in all of 2008.

Of the online travel market, supplier direct sales dominated with a 61% market share, while OTAs came in at 39%. However, OTAs will slowly gain ground, at least in the immediate future.

“In the short term intermediary bookings [mostly OTAs] are expected to increase at a faster rate than online direct, partially driven by the need for travel suppliers to use every distribution channel at their disposal,” the report stated.

Direct online sales are predicted to recover as the effects of the recession wear off. What growth there is now among direct online supplier sales, and the growth to come, is led by the traditional airline sector, as consumers become more comfortable purchasing air online. The strength of the Air France-KLM brand is also a contributing factor.

Online Agencies & Agencies Online

Competition within the online travel agency sphere is fierce, with the French OTA market composed of global, regional and local players each maintaining a significant share of business.

Furthermore, competition is ramped up by traditionally offline agencies building a presence online. For instance, French agency Jancarthier operates its network of individual agency sites through a white-label agreement with lastminute and other competitors. Two other agencies, AFAT Voyages and Selectour, use technology provided by Amadeus to create their online channels.

In fact, PhoCusWright’s Rheem said, it’s gotten to the point where “the line between ‘traditional’ and online travel agencies is murky.”