Expedia needs to look to Asia for growth

TravelMole guest comment by Parita Chitakasem, Asia Pacific travel and tourism manager, Euromonitor International

Expedia’s recent financial results reporting 10% revenue growth, with 6% net profit decline, reveal a reasonable, but poorer than average performance, especially at a time when so many markets are witnessing dynamic growth in online travel.

According to Euromonitor International, Expedia needs to do more to leverage the lucrative online industry beyond its domestic market, if it is to improve on its “moderate” financial performance.

US focus continues to impede potential

Expedia’s main weakness still remains that it is too heavily reliant on the US which, despite being the world’s number one market for online travel retail, is experiencing growing maturity and strong signs of market saturation.

It is also arguably underperforming in some other markets, including Europe, where rival, Travelocity, owned by Sabre, continues to fight for the upper hand and has narrowed market share gap significantly through the acquisition of www.lastminute.com.

Another market where Expedia continues to struggle is Australia, where strong consumer loyalty to local online players such as, www.webjet.com, www.flightcentre.com  and www.wotif.com means that it is far from capturing more than a 3% share of the market. It also loses out in potential market share to the high rate of direct supplier bookings, most notably from Quantas, Jetstar and Virgin Blue.

Look to the Far East?

Euromontior International forecasts that the best move for Expedia would be to target Asia-Pacific more aggressively. The company has already taken aim at rising market, China through the purchase of eLong in January 2005. Furthermore, its entrance into Japan with the launch of www.expedia.co.jp in late 2006 also puts it in a good position to start capitalising from the ongoing rise in internet usage in Japan, particularly amongst the rising consumer base of “silver surfers”.

It is early days yet, but Expedia’s ability to offer competitive pricing and maximum variety of package tours – by far the most popular product in the Japanese travel retail market – will be the key to its success in gaining market share.

However, the company has been slow to respond to growth in other Asian markets. Singapore and Hong Kong have become significant BTMICE hubs and are certainly ahead in their internet technology compared to most Asian counterparts, but Expedia appears to have missed the boat there.

It would now have to contend with main rival, www.zuji.com, acquired by Sabre in 2006, which comfortably holds a dominant position across both markets for online travel.

India is another opportunity which Expedia could miss out on, if it allows Sabre, with its www.zuji.com platform, to establish its position in the market before it makes its entry. Expedia has yet to announce any detailed plans on its launch in India.

First-mover advantage essential for success

For long-term growth, Expedia needs not only to target markets with strong opportunities, but also to grab market share before its major competitors, by entering these markets first.

Whilst it has missed out on first mover advantage in Singapore and Hong Kong, Euromonitor International predicts that there is strong potential for growth in lesser-developed markets such as Malaysia and Thailand, where there is a growing base of internet-savvy consumers.

If it is able to penetrate these markets and establish a name for itself, Expedia will be in a stronger position to maintain its global lead and continue to capitalise on potential phenomenal growth in the online Asian market.

*Hear Parita Chitakasem speak about the future of internet travel retailing in Asia Pacific at Euromonitor International’s exclusive free afternoon seminars at Travel Distribution Summit Asia (March 13-14). Register your free place by e-mailing Florence Mazzone: [email protected]

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