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A Sleeping Giant Awakens: Eastern Europe’s Online Travel Market
September 25, 2012 ATO, Moscow, Russia
Krasimir SimonskiMarket Analyst, Eastern Europe
© 2013 PhoCusWright Inc. All Rights Reserved. 2
© 2013 PhoCusWright Inc. All Rights Reserved. 3
Project Sponsors
Agent.ruAmadeus IT Group SAAmargoAnywayanyday.comAvis Budget GroupCalifornia Travel and Tourism CommissionHotel Reservation Service (HRS)Marriott International, Inc.Nabortu.ruOktogo.ruOpenJaw TechnologiesOstrovokOzon.TravelPoezdka.ruPososhok.ruTravelport Inc.TravolverV.I.P. Service
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Methodology
• 100+ Executive Interviews•Travel suppliers• Intermediaries•Technology providers•Media websites
• 300+ Public Sources
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Conclusions
Russia
Intermediaries
Size of the Market
Key Findings: Travel Technology
Russia and Eastern Europe: A Snapshot
AgendaMethodology
Russia and Eastern Europe Travel Market: A Snapshot and Key Findings
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GDP: Western Europe has GDP almost 5x higher than Eastern Europe
Land Size: Eastern Europe is 6x size of Western Europe
Population: 40% of European citizens reside in Eastern Europe
Source: PhoCusWright’s Eastern European Online Travel Overview
A Region of Contrasts
Rural vs. urban areas: on opposite ends of technology scale
Tourism plays different roles in terms of overall economy
Variation in travel market size and stages of development
Monopoly vs. market economy: intensive redistribution in progress
Economic crisis vs. strong economic growth
Source: PhoCusWright’s Eastern European Online Travel Overview
© 2013 PhoCusWright Inc. All Rights Reserved. 9
PEST Analysis
Source: PhoCusWright’s Eastern European Online Travel Overview
• Political isolation has created intrinsic desire for travel and tourism• Political instability
makes long-term strategies for growth for travel industry hard to implement
Political
• Privatization of state industries continues to extend to tourism•Most markets now
in recovery following 2009 downturn•Growing middle
class
Economic
• Emigration of young, upwardly mobile, who lead technology adoption• Rural migration
leads to social divide – most travelers live in urban areas
Social
• Internet penetration growing rapidly, though still behind Western Europe •High-speed
Internet offered in big cities but abandoned in rural zones
Technology
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Crossing the Chasm
Support for pragmatic mainstream market is under development
References to early majority market are not appealing yet
Online booking becoming popular
Source: PhoCusWright’s Eastern European Online Travel Overview
© 2013 PhoCusWright Inc. All Rights Reserved. 11
Inno
vato
rs
Early
Ado
pter
s
EarlyMajority
LateMajority
Lagg
ards
Tipp
ing
Poin
t
Crossing the Chasm: Online Travel Market Trends
Source: PhoCusWright’s Eastern European Online Travel Overview
East Europe
West Europe
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Online travel is still in very early stages of development, but is growing at a substantially higher rate than both
the total travel industry and the economy!
Key Findings: Travel Technology
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SoLoMo: Social, Local, Mobile!Technology is changing the travel paradigm and
landscape in Eastern Europe
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Search and Metasearch: Challenges for Google
Note: *Liverinternet.ru (http://www.liveinternet.ru/stat/ru/searches.html?slice=ru) March 21, 2012Source: PhoCusWright’s Eastern European Online Travel Overview
Google is incorporating hotel content from the region
Skyscanner and Momondo are among most popular metasearch solutions
Yandex is most popular search engine in Russia, with 60% market share*
Google lacks good local content, as Eastern Europe is not a priority
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Fragmentation Sparks Metasearch in Russia
Source: PhoCusWright Inc.
• Favorable conditions to thrive:• Low trust in e-commerce• Uncertainty in making decisions online• Price-sensitive market• Strong presence of OTAs
• Driver of growth in online bookings• Competition is high; plenty of room for redistribution• Metasearch converting users to online booking by offering trusted
solutions and helping with decision making following OTAs enabling early and mainstream technology adopters to build trust in online commerce
• Increasing use of mobile for travel related activities further metasearch’s potential
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Quarterly Gross Revenue (US$M) of Leading Metasearch Sites in Russia
Source: Alexa Internet and PhoCusWright Inc.
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42011 2012
0
10
20
30
40
50
60
aviasales.ruskyscanner.rumomondo.ruburuki.rujizo.ru
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Social Media: Difficult to Monetize
Lack of practice to assess return of investment
Almost no working direct revenue models
VKontakte, Moi Mir, Odnoklassniki: popular social media brands
Focus on PR and brand image
Good communications tool to maintain relations with customers
Source: TNS-Aug. 2011; PhoCusWright’s Eastern European Online Travel Overview
© 2013 PhoCusWright Inc. All Rights Reserved. 19
Mobile Solutions
Source: PhoCusWright’s Eastern European Online Travel Overview
Mobile is used mostly pre-trip for research/planning
Smartphones generate most of mobile Internet traffic
Almost every OTA offers mobile interface or plans one soon
Last-minute travel deals are not that popular in the region
Not as typical to search for local content as in Europe or U.S.
Technology: Flash Sales/Daily Deals
Source: PhoCusWright’s Eastern European Online Travel Overview
Well accepted by customers of this highly price-sensitive market
Average of 30+ players in each market
Impulse buying syndrome for travel is same as Western Europe
Not well accepted by suppliers: cheapens product in consumers’ eyes
Size of the Eastern Europe Market
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- 50 100 150 200 250 300
Total Travel Market Gross Bookings (US$B) by Region, 2009 & 2012
Source: PhoCusWright Inc.
Europe 2012Europe 2009
U.S. 2012U.S. 2009
East Eur 2012East Eur 2009
LATAM 2012LATAM 2009
APAC 2012APAC 2009
© 2013 PhoCusWright Inc. All Rights Reserved. 23
Eastern European Online Leisure/Unmanaged Business Travel (US$B), Online Penetration and Total Market Growth, 2011-2013
Note: 2011-2013 projectedSource: PhoCusWright’s Eastern European Online Travel Overview
2013
2012
2011
20,941.4
16,653.1
13,079.2
92.5
86.2
81.5
Online Total Market
16%
19%
23%
Onl
ine
Pen
etra
tion
(%)+11%
+6%
+7%
+33%
+27%
+26%
© 2013 PhoCusWright Inc. All Rights Reserved. 24
Online Leisure/Unmanaged Business Travel by Region, Penetration of Total Travel Markets, 2010-2014
Note: 2012-2014 projectedSource: PhoCusWright’s Middle East Online Travel Overview
© 2013 PhoCusWright Inc. All Rights Reserved. 25
Eastern European Online Leisure/Unmanaged Business Travel Market (US$M), 2009-2013
Note: 2011-2013 projectedSource: PhoCusWright’s Eastern European Online Travel Overview
2009 2010 2011 2012 20130
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
OTA
Airline Website
Hotel Website
Rail Website
Car Rental Website
Tour Operator Website
© 2013 PhoCusWright Inc. All Rights Reserved. 26
Eastern European Leisure/Unmanaged Business Travel Share Per Market – Online vs. Total Market, 2011
Note: 2011 projected. Totals may not add to 100% due to rounding.Source: PhoCusWright’s Eastern European Online Travel Overview
Russia38%
Other East-ern Eu-ro-
pean Countries62%
Online Market
Russia60%
Other Eastern European Coun-
tries40%
Total Market
Eastern European Intermediaries
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Eastern European Online Travel Agencies Gross Bookings (US$B) and Growth, 2009-2013
Note: 2011-2013 projectedSource: PhoCusWright’s Eastern European Online Travel Overview
2013
2012
2011
2010
2009
0.0 2,000.0 4,000.0 6,000.0 8,000.0 10,000.0
+40%
+33%
+27%
+26%
© 2013 PhoCusWright Inc. All Rights Reserved. 29
Top 15 Eastern European Online Travel Agencies, 2011
Note: “Others” include estimates for remaining online travel agencies.Source: PhoCusWright’s Eastern European Online Travel Overview
Booking.com (Total)
Expedia (Total)
AnyWayAnyDay.com (Russia)
Ozon.Travel (Russia)eSky (Total)
Student Agency (Czech Republic)
Airticket (Greece)Agent.ru (Russia)
V.I.P. Service/Biletix.ru (Russia)Lidot (Baltics)Pilot (Ukraine)
Altisaero (Ukraine)Oktogo (Russia)Pososhok (Russia)Amargo (Russia)
Others (Total)
© 2013 PhoCusWright Inc. All Rights Reserved. 30
Online Travel Agencies by Segment
Source: PhoCusWright’s Eastern European Online Travel Overview
• Local OTAs sell predominantly air – 90% • OTAs overshadow supplier websites in Ukraine and Bulgaria• Supplier websites gain momentum, surpassing OTAs in Russia and Greece
• OTAs have small online share• Rail companies do not offer deals
• OTAs have small share of this fragmented business
• OTAs seek redistribution, but this late majority market is slow to automate • Dynamic packaging is not popular so far
• Outbound hotel is dominated by Booking.com and Expedia • OTAs are often intermediaries between TAs and travelers
Russia: The Travel Revolution
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From Peripheral to Powerful
Who is Traveling?
Source: PhoCusWright’s Eastern European Online Travel Overview
Growing middle class to reach 27% of the population in the next 2-3 years
19% or 25M people in Russia are defined as middle class
15M families have an annual income of US$20,000 and higher
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Volume of Credit Card Transactions in Russia, US$M
Source: National Bank
2009: $6,052
2013: $15,799
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Note: 2011-2013 projectedSource: PhoCusWright’s Eastern European Online Travel Overview
2013
2012
2011
57.9
53.0
48.6
#REF! Online Gross Bookings
10%
14%
18%
+69%
+51%
+39%
Russian Travel Market (US$B) and Online Growth Rates, 2011-2013
Onl
ine
Pen
etra
tion
(%)
© 2013 PhoCusWright Inc. All Rights Reserved. 36
Note: 2011-2013 projectedSource: PhoCusWright’s Eastern European Online Travel Overview
2009 2010 2011 2012 20130
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500OTAAirline WebsiteHotel WebsiteCar Rental WebsiteRail WebsiteTour Operator Website
Russian Online Travel Market (US$M), 2009-2013
© 2013 PhoCusWright Inc. All Rights Reserved. 37
Nearly 2/3 of Online Bookings are Through Suppliers
Source: PhoCusWright’s Eastern European Online Travel Overview
Suppliers
OTAs
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Challenges for Growth
Source: PhoCusWright’s Eastern European Online Travel Overview
Tour operators just beginning to see advantages of going online
Travelers prefer the comfort of packages in comparison with risk of doing it themselves
Legacy players in tour operators, airlines, rail market entrenched for now
Online package booking tools in advanced stages of development
© 2013 PhoCusWright Inc. All Rights Reserved. 39
Russia: Social Media
Believed to be impossible to monetize
Viewed as source of information without same convincing power
Not trusted as others do
Used mostly for PR and customer relationships
Source: PhoCusWright’s Eastern European Online Travel Overview
Facebook is #4 social media site
© 2013 PhoCusWright Inc. All Rights Reserved. 40
Russia: Search and Metasearch – to be revised as per the article
Note: *Liverinternet.ru (http://www.liveinternet.ru/stat/ru/searches.html?slice=ru) March 21, 2012Source: PhoCusWright’s Eastern European Online Travel Overview
Momondo• Russia is the third-largest market for Momondo after
Scandinavia and the U.S.
Skyscanner• 25% of Skyscanner traffic from Russia comes from
mobile devices
Yandex• Dominant in Russia and Ukraine• Works closely with OTAs but yet to launch own travel
service• Yandex.travel is registered• 60% of Russian search occurs on Yandex (Google
carries 26%
Investors* assume risks associated with Russian online travel market and support innovators
Note: *such as Accel (which invested in Facebook, Groupon, Kayak, and Hotel Tonight), General Catalyst Partners (backer of ITA Software and Kayak) and Mangrove (Skype) Source: PhoCusWright’s Eastern European Online Travel Overview
Conclusions
© 2013 PhoCusWright Inc. All Rights Reserved. 43
The New Savvy Shoppers
Source: PhoCusWright’s Eastern European Online Travel Overview
Are not the most loyal consumer; more driven by price or reputation
Prefer not to risk their credit card information to an unknown agent
Arrange their own travel, and research widely using the web
Are vertically oriented
Like to see more competition
© 2013 PhoCusWright Inc. All Rights Reserved. 44
The Barriers to Overcome
Source: PhoCusWright’s Eastern European Online Travel Overview
Credit card penetration – bank deals
Trust in online transactions – e-Commerce
Travel content – structured and easy to find
Thank You!
Krasimir SimonskiMarket Analyst, Eastern EuropePhoCusWright Inc.ksimonski@phocuswright.com
Dr. Krassi Simonski is PhoCusWright's market analyst, Eastern Europe and managing director of eCommerceAcademy.net. Krassi is the lead analyst for PhoCusWright's Russia and Eastern Europe: Navigating the Emerging Online Travel Marketplace research initiative. The Special Project measures travel size and trends and forecasts online travel penetration for Russia, Ukraine, Poland and other Eastern European travel markets.
Prior to establishing the eCommerceAcademy.net, Krassi was head of business development for TravelStoreMaker.com, managing the spin-off of innovative business lines into different companies. He is also executive officer of Skal International's Sofia club, assisting in expanding the international relations in the region.
Krassi's background also includes chair of the Bulgarian Research and Education Network. Prior to that, he served a political mandate as deputy chair of the State Agency for ICT of Bulgaria in charge of the national IT development. He was the Bulgarian representative to several EC high level groups including Internet and information society. Krassi implemented multiple ICT projects of EU and national funding in the area of digital inclusion, broadband penetration, research networking and e-learning. He was the first chair of the Telecentres.Europe organization to support the network of telecenters across Europe
His university background as adjunct professor in computer sciences and 12 years as director of communications and computing at the first American University in Central and Eastern Europe (AUBG) as well as being one of the first Internet missioners in the region, brought to him thousands of contacts at the national, European and international levels.