Improved performance for airlines – driven by a steady economy, increased traveller movement and the strengthening of local currencies – propelled the Australia-New Zealand (ANZ) travel market to grow a projected 5% in 2018, according to Phocuswright’s recently published Australia-New Zealand Online Travel Overview.
The study says that with online penetration of 44% in 2018, it is “one of the most mature online travel markets” in Asia Pacific, though offline travel agencies “remain a critical channel for complex leisure itineraries and packages in addition to business travellers”.
The 12-page report provides an overview of the Australia-New Zealand travel market, including background, key characteristics, market structure and major players in each segment. It identifies that the online travel landscape across Australia and New Zealand is dominated by global brands Booking Holdings and Expedia, travel powerhouses identified by Phocuswright has having “deep pockets, offer superior booking experiences and have been investing heavily in advertising”.
This has helped them successfully capture a considerable share of the online market both organically and through acquisition. But, competition does still remain, but the report identifies Webjet as “the only independent domestic OTA still in the game”. It has been “experimenting by diversifying its product lines to maintain its growth momentum in the highly competitive landscape”.
Despite the power of the OTAs, the region still has a very strong presence of traditional travel agencies, which still represent serious competition to OTAs with their multichannel approach via retail stores, call centres and online. Like in other parts of the world, travel agencies have been ramping up their online presence and booking capabilities in recent years to meet market demand and changing consumer habits and remain relevant.
In the airline sector, domestic air passenger volumes have been relatively flat over the past five years, but with modest climbs over the most recent three years. “Capacity correction coupled with the end of fare wars in the domestic market” have proved to be a boon for all carriers, says Phocuswright.
“Qantas is now trying to grow its overall market share by focusing on the small to medium enterprise (SME) market. Virgin Australia posted a strong 2017 and is the only serious competitor to Qantas in the leisure segment. Traditional airline revenue accounts for the vast majority of gross bookings, but the incursion of Asian LCCs, especially on international routes, is slowly changing the equation,” it says in the report.
A consolidated air market restricts the growth – and relevance – of metasearch, but still, metasearch websites have not shied away and Phocuswright highlights that “they can bring value to travellers by aggregating relatively complex and fragmented hotel and international air products”. They also help online businesses that lack the budget to compete with big OTAs. “Traditional agencies in particular stand to benefit from metasearch websites as they get enhanced visibility and customer attention through these sites,” says the report.
Accounting for 35% of the region’s total travel market in 2018, Phoscuwright predicts lodging to be the fastest-growing segment. “Rising domestic business travel, a major source of business for hotel chains, is further buoying the sector,” it says and with demand growing faster than supply, it projects high occupancy levels and increasing average daily rates (ADRs).
The car rental market across Australia and New Zealand remains different to that seen in Asian countries. “Travellers prefer self-drives to cover some of Australia’s vast distances,” says the report. This is in contrast to other countries across South and Southeast Asia where travellers opt for chauffeur-driven vehicles due to insurance, language, license and infrastructure limitations.
The report shows, as you would expect, global car rental brands like Hertz, Avis/Budget and Europcar dominate the Australia-New Zealand market. Although increased tourism has largely benefited car rental companies, Phocuswright says the growing popularity of ride-hailing companies (e.g., Uber, GoCatch and Ingogo) and car-sharing services (e.g., GoGet, GreenShareCar and Flexicar) is “acting as a headwind for the industry”.