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U.S. Online Travel Market Slows to Single Digit Growth in 2008

December 3, 2008 By: George Dooley


The annual growth of the U.S. online leisure and unmanaged business travel market will slip to single digits in 2008. This marks the first time online travel growth has fallen below double digits since travel industry research authority PhoCusWright began tracking online travel in 1998, the company reports.

While online travel is experiencing the inevitable deceleration of a maturing market, its annual growth will continue to outpace the total travel market through 2010. According to PhoCusWright's U.S. Online Travel Overview Eighth Edition, online leisure/unmanaged business travel will grow 9 percent in 2008 and 7 percent annually through 2010.

"As the economic outlook becomes increasingly bleak, the real question on the minds of many in the travel industry is, 'Just how bad will it get for travel?'" said Lorraine Sileo, PhoCusWright's vice president of research. "Despite softening consumer spending and declining travel demand, online sales will continue to outpace total market growth as travelers increasingly shop and book online, seeking out better bargains."

PhoCusWright's U.S. Online Travel Overview presents comprehensive analysis and forecasts of the U.S. total and online leisure/unmanaged business travel market. The report covers all major travel product segments and detailed channel segmentation by supplier websites, online travel agencies and offline channels.

Key findings from PhoCusWright's study include:
*    U.S. leisure/unmanaged business travel bookings will reach nearly $100 billion in 2008, more than one-third of the total travel market, and a 9 percent increase over 2007.
*    Despite broad economic turmoil, softening consumer spending and declining travel demand, the U.S. online travel market is projected to grow far faster than the total travel market through 2010.
*    Suppler websites and online travel agencies are expected to hold a share equilibrium through 2010 at 61 percent and 39 percent, respectively, but this equilibrium remains uneasy: intense competition and powerful economic trends are driving turbulent dynamics in online air and hotel sales.
*    Market maturity is sparking significant innovation in consumer marketing, media revenue models, travel search and trip planning tools. The blurring of business models continues as the almighty transaction gives ground to eyeballs and ads.
*    The impact of airline capacity cuts across the industry remains far from clear, as a rapidly deteriorating economic climate may further reduce demand and restrain airlines' ability to raise fares.
*    Online travel agencies— in particular opaque sites —are getting a mild counter-cyclical lift from weaker demand in the current tough economic climate; travelers are increasingly shopping online for better bargains.
*    Dynamic packaging is experiencing a moderate resurgence as bargain-hungry consumers respond to the "book together and save" proposition.
*    Spurred largely by rising fuel costs, soaring airfares and growing concern for "green" travel, Amtrak is experiencing record growth in overall ridership and online bookings.

PhoCusWright's study is available for purchase at www.phocuswright.com.



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