According to Phocuswright, an independent travel and tourism research firm, the global travel market was worth US$1.3 trillion in 2015. The cut in Asia Pacific (APAC) was US$367 billion; of that, the online travel segment was 32 percent of the pie, which totals around US$117 billion.
With a population twice that of the U.S. and almost half of China, Southeast Asia had more than 100 million tourist arrivals in 2014. Income growth in Southeast Asia has remained strong since 2000, with average annual real gains of more than 5 percent. Extreme poverty is rapidly declining, thus, there’s an upcoming consumer market (it translates to a more consuming class who can make significant discretionary purchases, such as leisure activities).
Moreover, online travel booking is a relatively painless e-commerce model without needing to move a single atom in the undeveloped and scattered logistics landscape. Sixty percent of ASEAN’s (Association of Southeast Asian Nations) population is below the age of 35. With the growing penetration of the Internet and social media, these millennials and Gen Xers are going to crave to see the world out there and shift their families’ travel purchase behavior from offline channels to online.
However, the travel industry, which includes search engines, travel service providers (airlines, hotels, etc.) and offline and online reservation agencies, has always been marked as highly competitive with unexpected changes. Adverse surprises can be attributed to natural disasters, macroeconomic issues and infectious diseases, such as the bird flu, SARS and the recent Zika virus.
It is a cut-throat industry in which a majority of the companies are selling third-party brands and competing with online sites of these brands, such as airlines and hotel chains. It is not hard to deduce that scale and cost are the two main factors that result in the winner-takes-most scenario. Thus, online travel has produced few global enterprises; the top two contenders are Priceline and Expedia.
Not surprisingly, the subsidiaries of prominent online travel reservation services Expedia and Priceline (Agoda, Booking.com) have dominated SimilarWeb’s top travel website ranking in major Southeast Asian economies (except for Indonesia). In the most populous Southeast Asia country, East Ventures/Rocket Internet-backed online travel agency startup Traveloka emerges as the local winner. Its status is further reinforced as Ferry Unardi, Traveloka’s Harvard-dropout co-founder, was part of the Indonesia Information Minister’s delegation to visit Silicon Valley leaders last year.
There has never been a better time to kickstart Southeast Asia travel.
Priceline spent US$2.6 billion on advertising in 2014. What if there aren’t deep pockets and negotiation power to compete for user acquisition? The only way out is to have an unfair advantage through differentiated products and services. In the analysis, there are three distinct subdomains with such transformation and investment: pre-trip, midway and post-trip.
Trip preparation and information discovery is crowded with a high number of online reservation agencies because it is lucrative (owing to the average purchasing size and scalability through global airline and hotel partnerships). Moreover, offline and online incumbents are not adapting to the shift of consumer behaviors from standardized to personalized offerings. Startups such as Klook and Rakuten-acquired Voyagin are separating tour packages into individual thrilling activities as consumers opt for happiness in selected moment-to-moment experiences.
With less affluence than Westerner counterparts, and many first-time travelers in the region, startups have turned to budget consumers. Jungle Ventures-backed RedDoorz enables budget accommodation owners to reach out. Another worthy site to highlight is meta-search HelloWings, which provides stock-like visual analysis for budget flight ticket prices up to a year ago. Meta-search is similar to Google for aggregation of results across providers like airlines and hotels. Other APAC-focused meta-search sites are Sequoia-backed Skyscanner, which recently raised US$192 million, and Singapore-based Wego.
Smartphone penetration has led to an increased use by travelers of apps to navigate foreign cities after landing. Ithaka doubles down on this by giving users the experience of a personal travel assistant through a message app to do bookings, but also to resolve unexpected problems that the traveler might face.
In the accommodation sector, there is a new business model through proprietary last-minute discounts on leftover rooms. Though the accommodations might be available elsewhere, HotelQuickly gives spontaneity and exclusive access to a better price across 15 APAC countries; this probably reminds you of HotelTonight.
Online travel has produced few global enterprises.
Southeast Asia is still very much cash-only in offline retail. Travelers are already accustomed to instant information at their fingertips. By crowdsourcing the exchange rates of financial institutions and laying it out nicely in a user-friendly manner, Malaysia CurrenSeek helps travelers locate the most convenient outlet to get the best bang for their buck. Building on the same user philosophy, local transportation provider Go-Jek can pick up travelers and deliveries on demand to Waze through the crazy Jakarta traffic jam. Think of it as Uber Bike for X.
If you truly enjoyed yourself overseas and want to ensure others share the same great experiences, there are platforms more than willing to get user-generated content. Vietnam-based Triip.me helps locals create tours to share their lifestyle and knowledge. Passionate individuals can be tour guides on demand. This marketplace opens up greater social touring options and a true local experience, while saving travelers money. And, it doesn’t actually own a single tour guide to thrive on commission fee.
There is some overlap here with the previous category. TripHobo, which has around 50 million desktop visitors, allows users to easily create digital travel plans (which falls into the pre-trip category). Nevertheless, think of TripHobo as GitHub for completed itineraries and bragging rights. Plus, points to TripHobo for amassing huge content to display in a structured way, and a dynamic planning engine to input attractions, accommodations (partnered with Skyscanner), restaurants and transportation.
Yes, it is challenging that U.S. giants have set their sights on this region. Priceline acquired Agoda in 2007, and Expedia set up a joint venture with regional air carrier AirAsia for APAC strategy. It is not hard to imagine more consolidation of reservation agencies, either by local or international players, as has happened in the U.S. Moreover, local winners could possibly follow in Priceline’s footsteps to acquire or expand into new verticals, such as meta-search and restaurants, to cover the entire travel experience.
It was on purpose that I did not cover enterprise travel or B2B SaaS management tools that target travel service providers. Startups can possibly find strategic value to simplifying the travel business regionally, or so that their partners can focus on running their core business and keep relevant in the mobile era. Because user acquisition cost is high, thoughts can also be put to helping their partners build rapport and loyalty with users after reservation through O2O solutions.
With advancement in connectivity technologies and the increase of travelers through globalization, there has never been a better time to kickstart Southeast Asia travel.
This article does not represent the thoughts, intentions, plans or strategies of my employer. It is solely my opinion.