Growth of online travel through the years. Oh no, here comes a credit crunch!

December 18, 2007

There’s a really interesting story on Travel Mole today. It’s a guest comment from Euromonitor taking a look at the potential impact of the current global credit crunch on sales in the travel industry.

I’ve been wondering how this is going to affect us in our January peak month. Will we see the growth predicted, or will we see little to no growth year on year as consumers tighten their belts after an expensive Christmas and with the thought of credit problems to come.

Euromonitor warn that any recession in 2008 could be a real wake up call to an industry who have seen significant growth over the last few years. They’re right, a real recession would cut household spending significantly and obviously expensive purchases such as holidays are the first to be cut from the budget. Of course this could be further off than January, a recession takes time to bite and, if indeed we are heading for one, it would be middle of next year before it would really show it’s teeth (I believe).

Euromonitor see a recession as unlikely and rather predict a drop in consumer expenditure growth. However they still expect to see consumer expenditure grow by 2.25% in 2008, compared to 2.5% in 2007. That sounds like too small a drop in expected growth to me. Having worked in financial services I have many friends in senior positions in financial institutions, all of whom agree with me and think there will be significantly less growth than that next year. Time will tell…

One thing in our favour though says Euromonitor is that if we do see a drop in the desire to spend then the travel industry areas that will still succeed are low cost carriers and internet operators. This makes perfect sense as the hunt for cheap deals happens online these days and therefore travel companies offering online discounts and incentives to book will do better. Price comparison websites would be my other tip for a year of lower consumer spending, they’ll get more traffic (on a percentage of traffic available basis) as more users want to compare deals. Dynamic Packaging providers will also do alright as long as they have access to low cost carrier fares.

Anyway, the point of this post (I’ll get there eventually) was to post a graph showing growth of online travel by year. It’s using figures from Euromonitor taken from the article linked above and shows growth of online travel sales by industry segment.

So, the graph above shows that traditional package holidays are growing the quickest of any online industry segment! Great news for tour operators everywhere, I’ve always said there is still huge potential for packages if the user experience is right. At the end of the day, customers don’t know the difference between a dynamic package, a traditional package and even component packaging. All industry jargon, ignore it and focus on delivering the best booking experience you can!

Also interesting is the jump in Dynamic Packaging as it took off, and then the massive slowdown in growth the following year. Looks like everyone jumped on the bandwagon in one year, or more likely the ability to distinguish between the two became blurred for Euromonitor as it has for consumers.

The upshot of this post is that we may not see the massive growth we have all been expecting in January if this credit crunch gets any worse. So in that case I hope you have all got your developments in place before the Christmas lock down so you can get as much value out of the visitors who have money to spend as you can!


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