Recent increases in the level of Internet access throughout the Asia-Pacific region are spearheading efforts to corner the huge potential market in online air travel and booking services
After two years of delays and failed promises, online travel booking services are finally hitting Asia, and the coming months will witness a slew of launches by suppliers eager to tap the increasing desire of consumers to find the best deals over the web.
Within the next few months, US travel auction site Priceline will be expanding further in the Asia-Pacific region following an April launch in Hong Kong. Another long-promised full travel booking site being launched by 10 Asian carriers - Zuji - will also finally be rolling out its services.
In the Japanese market, Travelocity has just established itself with a booking service in partnership with Japan's major carriers and other international airlines. And there are more in the works in other parts of Asia, including smaller ventures by travel agents.
But why has it taken so long for on-line travel booking services to hit the Asian market following their widespread success in Europe and the USA?
Some observers have identified the "dot-com bust" and September terrorist attacks in the USA as factors behind the delays - along with the technical challenges of preparing for such services in different markets with so many different languages.
But Asia's slower Internet penetration rates have also caused some business plans to be made more conservative. The rates are, in fact, only now catching up in the region.
According to figures supplied by Priceline, as of February this year, the USA and Canada had 181 million Internet users, while Europe had 171 million. Asia-Pacific, which accounts for around half the world's population, had 157 million.
Asian growth is now outpacing the more mature US and European markets, however. Internet usage grew 5.6% in Asia-Pacific from the third to the fourth quarter of last year, versus 4.9% in the Europe/Middle East/Africa region, and 3.3% in North America, according to Nielsen/NetRatings figures released in March.
Visits to e-commerce sites are also growing fast in parts of Asia. In Hong Kong alone, there were 1.9 million Internet users as of December 2001. The Nielsen//NetRatings figures show 800,000 people in Hong Kong visited e-commerce sites, up 46% on a year earlier.
"E-commerce has been slower to develop in this part of the world - but we'll probably see the acceleration factor be much higher," says Mark Siladi, Priceline's vice-president for travel in Hong Kong. "There certainly is every reason to suspect e-commerce will take off here." And Zuji commercial director Martin Symes, says: "I think the market is more ready now than it has ever been."
Priceline, the "name-your-own-price" on-line travel auction firm that has expanded rapidly in the US market, made its foray into Asia in April with the launch of a Hong Kong site. The company, which offers discounted air travel and hotel booking services, plans to be in six Asian markets by the end of next year. Following its Hong Kong launch on 16 April, a Singapore site is now being launched, with a site in Taiwan to follow in the third quarter. Siladi says Australia and South Korea are two other markets high on Priceline's list.
Priceline has moved into the Asian market through a joint venture with Hong Kong-based conglomerate Hutchison Whampoa. Hutchison and sister company Cheung Kong Holdings own around 29% of US-based Priceline.
The Asian venture is formally called Hutchison-Priceline. Siladi says it has around 60 employees in Hong Kong, where servers are housed, and each additional market will require around 10 employees.
Priceline's move into Asia came as Zuji was preparing for a "soft launch" to a limited number of users in Australia and Singapore in May, and for a wider rollout of services to the general public in June. By the end of the year, it aims to have expanded into Brunei, Hong Kong, New Zealand, Malaysia and Taiwan.
Zuji, a Mandarin Chinese derivation of the word "footprint", is a joint venture between 10 major Asian airlines and Travelocity. It aims to have both business-to-consumer and business-to-business elements, and will cover a full range of travel services such as air ticket purchases, hotel bookings, car rentals and land tours.
Airline investors include Air New Zealand, Cathay Pacific, China Airlines, EVA, Garuda Indonesia, Malaysia Airlines, Qantas, Royal Brunei, SilkAir and Singapore Airlines. US travel site Travelocity is not only a shareholder, but also the provider of the site's booking technology.
Zuji has been working towards a launch since mid-2000, when details were first announced with the airline owners stating it would start operating by the end of that year. The launch was later delayed several times, but since late last year its backers have been consistent in saying it would be ready for a partial rollout in the second quarter of this year.
In the Japanese market, meanwhile, on-line travel booking site Tabini was formally launched at the end of March.
Tabini is a joint venture between Travelocity and Japan's three major carriers, All Nippon Airways, Japan Airlines and Japan Air System, as well as 14 other airlines from Asia and the USA. It offers a full range of on-line travel services including bookings on airlines serving Japan, as well as for both hotels and car rental companies.
But Asia's consumers have yet to embrace on-line spending in droves, and many are still insecure about completing transactions over the web. The key players are conscious of this, and are working to convince consumers that it is safe. "One of our tasks is educating consumers," says Priceline's Siladi. "We know that we have to be one of the pioneers."
Zuji's Symes characterises the education aspect to on-line buying as a challenge, because "whenever you are asking people to do something different, there has to be an education process."
But he expects it will catch on rapidly, particularly as consumers in Asia become more price-conscious with their travel plans. He says the topic of air and hotel fares, for example, will become more of a "dinner table conversation subject" in Asia, as it already is in North America. "We are now seeing people more interested in this as a subject," he says. "There is greater awareness of air and hotel pricing."
The Australian market is already relatively open to on-line transactions, and low-fare carrier Virgin Blue makes a large percentage of ticket sales over the web, on which it says the best deals can be had. The airline adds that it is second only to UK low-fare carrier easyJet when it comes to the percentage of bookings taken over the Internet, with more than two-thirds of its direct sales and over half of travel agent sales generated through the web.
But elsewhere in Asia-Pacific, on-line goods and services buying has been much slower to catch on, and discount ticket sellers like Flights.com have come and gone. Some hotel booking services are already operating in Asia, however, and are increasing in popularity.
Airlines themselves appear confused about the clear strategy to follow, observers say. Hong Kong's Cathay Pacific, for example, says its intention in selling tickets over its own website is not to put traditional travel agents out of business. Indeed, it says it is not undercutting agents. It is a politic statement to make in Hong Kong where, in November, Northwest Airlines faced the wrath of travel agents when it sold tickets over its website at prices lower than those charged by agents. The Travel Industry Council Hong Kong, which represents more than 1,200 travel agencies, was so upset that it called for members temporarily to refuse bookings for the airline.
But situations differ depending on country. In Singapore, for example, Singapore Airlines regularly undercuts agents, selling tickets more cheaply over its own website than at the best prices the traditional distributors can offer.
Most airlines will not comment on how much business they do over their own websites, citing commercial confidentiality, but say they generally see on-line booking as simply another form of distribution.
Siladi, a former Virgin Atlantic executive, says the more distribution avenues available, the better it will be for everyone. He says Priceline, although it has a different model from other providers because it sells non-refundable tickets and does not allow interlining, welcomes the entry of other on-line ventures as they will "help the cause" for all.
"Our competition really is anyone who competes in a consumer's mind for disposable income," he says. "We fully expect the people who go to our site to go to their site," he adds, referring to Zuji and other future on-line sellers.
Are the sites intended to put the traditional travel agent out of business? Symes says not, although he believes agents should look more to getting on to the Internet for sales and marketing following the launch of the new suppliers.
Symes describes Zuji as primarily a "marketing company", but also as a travel agency with a different operating model than that to which consumers in the region are accustomed. Zuji is in fact a licensed travel agency in its markets, he says. "But the Internet is not all things to all people," Symes adds. "It doesn't have the flexibility of the human brain."
He also says there will continue to be a place in the market for the traditional ticket seller - in part as the market for travel continues to grow. "We expect to be only a small percentage of the travel market," he adds. "It's certainly another avenue for airlines and other travel providers to distribute through - not just for the shareholder airlines"
Source: Airline Business