While the global online travel market is still in its infancy - worldwide online travel sales will near US$200 billion in 2006.

By the end of next year, another $50 billion in online travel will be sold. Meanwhile, the global Internet population is expected to surpass 1.2 billion (source: Computer Industry Almanac), with China driving much of the growth in international e-commerce.

Travel providers have responded in kind with a host of leisure travel offerings in the U.S., Europe and Asia Pacific. In India, venture capital money flows freely for start-ups such as MakeMyTrip and Cleartrip. Giant European tour operators such as TUI and Thomas Cook have accelerated their Internet strategies. And U.S. online travel providers continue to see much of their shareholder wealth coming from outside the U.S.

This focus on the newly empowered leisure customer begs the question: what about corporate travel? Certainly, online corporate travel has ramped up more slowly than leisure travel in the U.S., which should mean it is just a fledgling market in other parts of the world.

The truth is that online corporate travel is still small (representing less than 5% of total corporate travel) in both Europe and Asia Pacific, according to PhoCusWright's Corporate Travel Distribution: Key Markets. But these markets are waking up -- quickly. Travel providers need to have a global strategy in place now to exploit this opportunity later.

Globalization will be a key force in determining competitive advantage in business in general and online corporate travel specifically. In corporate travel, it means a centralized strategy for managing a travel program, negotiating supplier agreements, corporate branding, customer services support, data consolidation, information technology development and travel policy and traveler support. Globalization is essential for U.S. channel players to improve margins.

Corporate Travel Management Companies (TMCs) already have responded to these market demands for centralized ownership and global branding. The break-up of BCD Holdings and Hogg Robinson earlier this year (and the subsequent formation of two new global companies after a series of brand realignments and acquisitions) is just one example. Other examples are Carlson Wagonlit Travel's (CWT) pending acquisition of TQ3Navigant and HRG's European realignment and recent acquisition of U.S.-based Partnership Travel Consulting. The result is the formation of four mega-TMCs: American Express, CWT, BCD Travel and HRG. They are now bigger and more focused to compete on the international stage with relative newcomers Expedia Corporate Travel, Travelocity Business and OfB/Travelport.

All of these companies as well as airlines, hotels, rail and other suppliers are responding to a single and universal corporate need: cost reduction. This is true for U.S. multinationals, as well as European and APAC-based firms. As a result, there are a number of market dynamics that will stimulate the globalization of online corporate travel, including the following:

• U.S. Online Corporate Booking Tool Experience. U.S. online corporate booking tool providers such as GetThere, CWT and Concur are parlaying the online experience and success of their U.S.-based clients in Europe. U.S. and multinational corporations (rather than local/regional) present the ripest opportunity for online booking adoption today.
• Content Fragmentation. Because Europe is highly fragmented in terms of access to content (75% of hotel properties are independent and not part of a chain), online booking and other Web-based tools will serve as the "aggregators" for the market.
• No-Frills Carriers. With 95% of their tickets sold direct and online, their dominance in the leisure and short haul travel markets and current efforts to tap the business traveler with targeted routes, schedules and services, low-cost carriers (LCCs) are an important component to driving the online corporate travel market.
• Internet Advertising Spend. The sheer cost effectiveness of the online advertising model will drive corporations to shift spend away from print and other traditional advertising channels like outdoor (billboards, posters and transit cards). In the U.K., for example, the Internet is replacing national newspapers, cinema and radio as the primary channel for travel advertising expenditures.

Globalization is just one of several forces shaping the worldwide corporate travel marketplace. Other trends include content acquisition, portals and the battle for wallet share. And, by 2008, this sleeping giant (the online corporate travel market) will represent 22% of the total corporate travel market in Europe and just under 10% in APAC.

These and other corporate travel trends, as well as market sizing, forecasting, and an analysis of the impact on the travel distribution landscape are presented in the upcoming PhoCusWright report, Corporate Travel Distribution: Key Markets.

Copyright 2006 PhoCusWright Inc., Sherman, CT USA +1 860 350-4084. All rights reserved.
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