part of a wsj article:
Suitcases Stuffed with Dollars
The French company is expanding into a lucrative market. New York market-research firm Jupiter Communications predicts that online travel spending in Europe will grow to 385 million euros (or about $395 million) this year, more than doubling from 155 million euros last year. Spending is expected to be nearly 10 times larger by 2002 and jump to 6.5 billion euros by 2003.
Germany is by far the largest European travel market, with estimated online sales of 144 million euros this year, compared with 62 million euros in the U.K. and 52 million euros in France, according to Jupiter.
So far, however, U.S. Internet sales dwarf the European travel market. According to market researcher PhoCusWright Inc., a U.S. firm that focuses on Internet travel, the U.S. market will grow to $20.2 billion in 2001, up from $7 billion today.
As the Internet market matures in Europe, however, leisure-travel sales show particular promise, given that Europeans usually have more vacation than Americans. Five weeks of vacation plus national holidays is average in much of Europe, while Americans generally start a job with just ten days of vacation on top of holidays.
Already, the market shows signs of heating up. The high-profile lastminute.com, launched a little more than a year ago by Last Minute Network Ltd., offers U.K. residents deep discounts on travel. The company competes with a host of other U.K. players, including A2bTravel.com, which has a section for last-minute holidays, and ebookers.com PLC, which has recently expanded through acquisition.
As players expand, so do travel requests. Last month, ebookers.com said the number of airline tickets booked through its site rose to a weekly record of 1,000, nearly a fourfold increase in five months. And last week, the company said its third-quarter sales were $8.1 million, up 217% from the same quarter in 1998.
The market growth hasn't been lost on U.S. firms. Sabre Holdings Corp.'s Travelocity unit has opened a U.K. site, while Microsoft Corp.'s Expedia has opened sites for both the U.K. and German markets. In October, Atlanta-based LastMinuteTravel.com teamed with the U.K.'s FSS, a travel-technology specialist, as part of plans for its global expansion.
At home, Degriftour has had plenty of opportunities to prepare for its upcoming competition, as a host of online players can already be found in the French market: Anyway Voyages, Nouvelles Frontieres (which itself has sites for consumers in Italy, Spain, Belgium and Greece), Travelprice, and Havas Voyages all sell travel on the Internet. The U.K.'s ebookers.com and lastminute.com both have French sites as well.
As it expands to the rest of Europe, Degriftour will run into many of these same players. Lastminute.com already has a site for the German market, and ebookers.com Thursday announced its purchase of two German agencies (adding to another German agency it bought in September) and a Finnish agency.
Around Europe, Degriftour can also expect competition from those airlines that offer unused inventory in last-minute offers. In January, for example, Germany's Lufthansa started a last-minute discounting program through German tour operator L'Tur. The airline tickets are offered as part of existing L'Tur travel packages and Lufthansa has said it expects to sell some 100,000 tickets this year through L'Tur via the Internet and the phone.
Lorraine Sileo, a PhoCusWright analyst, thinks Degriftour's experience with selling tour packages may help it in the crowded U.S. market. Tour packages have long been a popular item at European travel agencies, but in the U.S. they've proven complex to sell on the Net. The company that can bring a successful sales model for the growing U.S. taste for package tours could do well, she says.
Currently, nearly 60% Degriftour's sales are package deals.
-- Jane Costello in New York contributed to this report. |
