In Asia, we have a less developed online travel market than in Europe and the US. This means there are no dominant players like Expedia, Travelocity, Orbitz, and Priceline.

The nearest we get to that is Zuji, which is the Asian offshoot of Travelocity. However, this serves limited markets, and under different brands, which doesn’t give it the mindshare of the 4 dominant players in the US and Europe. Priceline has Agoda, but apparently, it contributes only 3% of Priceline’s turnover. (Interestingly, Priceline has Booking.com as well as Agoda, what’s the story with the branding there?) Ctrip is big in China, has a very innovative business model (users can book online but pay offline, which gets round low credit card penetration, and a historical reluctance about online payments), but it has very little reach outside China.

This means there is no natural go-to, no Amazon.com of the travel world, and so the market is fragmented. Price is the determining factor. As a lot of Asian hotels have yet to achieve rate-parity, there are still wide variations in price, so people jump around the different aggregators in order to find the best deal. Other factors, such as loyalty programs (that for example Agoda has put in place) are not yet important enough, as customers do not believe that it offers enough of a hook when there may be far cheaper rooms around.

Looking at the data, Expedia has clearly pulled ahead in terms of visitors, and customer loyalty, enabling it to top the revenue table ($2.9 billion, vs $2.3 billion for Priceline, $738 million for Orbitz in 2009; Travelocity is a unit of Sabre, which is privately held).

The weakness of these brands in Asia means that there is still a HUGE opportunity for someone in Asia, to use scale to offer consistently low pricing, and local knowledge (most importantly sites in local languages) to come in and take the market. There is probably an even BIGGER opportunity for someone to come up with a business model which is suitable for the Asian market. Any ideas what that could be?

Anthony Green – August 2010