Online ‘stimulates rather than cannibalises’

Online bookings stimulate the market rather than cannibalise it, Opodo has claimed on the back of new research.

While dynamic packaging has been slower to take off in Europe than the US, the UK is likely to follow the trend sent in America where sales reached more than £4.3 billion last year.

Research by the online travel company, which has just introduced dynamic packaging to four sites in Europe, shows that dynamic packaging has been slower to take off in Europe with only £1.3billion sales in 2005.

The UK can be seen to follow a similar trend to the US – 76% of all European dynamic package sales are from the UK. However, other European markets are evolving at a slower pace with Germany only accounting for 11% and France for only 3% of total European dynamic sales, according to the research conducted with Euromonitor International.

Europe continues to show strong sales of traditional package holidays although consumers are turning to the internet to purchase them with online sales of package offers reaching £3 billion in 2005, according to the study outlined at the Institute of Travel & Tourism conference in Oman.

Similar differences between the US and UK and the rest of Europe can also be seen in online market dominance. Both the US and the UK show a market divided 50-50 between online travel agents and direct suppliers. But in France, Germany and Denmark direct suppliers have the upper hand, meanwhile, Sweden and Italy are dominated by online travel agents, who control 60% of online spend, the research showed.

Industry consolidation has also been occurring at different rates throughout the US and Europe. From 1999 to 2005 traditional agents declined by 38% in the US, by 25% in Germany and by 13% in the UK as investment in the online travel sector in these markets intensified. In Finland and Norway the number of traditional agency outlets has remained static whilst other markets have experienced minor positive growth.

Italy is the only country in Europe to buck the trend with a 21% increase in the number of traditional agents between 2004 and 2005, yet at the same time the online sector is booming.

Opodo head of tours Chris Roe said: “The European online travel market is not necessarily following exactly the same trend as the US. With the exception of the UK, which follows the US model whole-heartedly, other European markets are at different stages of their online evolution.

“Consolidation is happening at different rates, balancing marginal offline growth with stronger online performance, which would suggest that online bookings tend to stimulate the market rather than to cannibalise it.”

Report by Phil Davies