Online Travel Market Analysis

Online Travel Market Deep Dive – PESTLE, Porter, SWOT

In recent years, the travel industry has been undergoing major changes, largely due to the technological advances, changes in the behavior of consumers and the increasing reliance on digital platforms for travel planning and booking. Travelers are increasingly looking for convenient and personalized travel experiences, and travel agencies, metasearch engines and direct-booking platforms are able to meet this need. Furthermore, the rise of mobile applications and social media has changed the way consumers research and share their travel experiences, resulting in a dynamic environment in which customer-generated content and reviews play an important role in the decision-making process. Artificial intelligence and big data have also been integrated into the travel industry, helping to improve the service experience and reduce costs. And the trend is continuing. Under these circumstances, the future of the travel industry is a complex one, and understanding the current trends, challenges and opportunities is vital for all industry players to survive in this increasingly competitive environment and take advantage of the changing preferences of consumers.

PESTLE Analysis

• Political:
  In 2023, the online travel market is heavily influenced by government policies affecting international travel. For example, the European Union has established a new travel regulation that, from 2024, will impose a 7-euro fee on travelers from non-EU countries, for the European Travel Information and Authorization System (ETIAS). This is designed to facilitate border control and improve security, but it will also have an impact on travel patterns and the way people book travel. Geopolitical tensions, such as the ongoing conflict in Eastern Europe, have also led to travel advisories for over 30 countries. Travel advisories may deter some travelers from making a booking, and also affect the way people book travel.
• Economic:
  In 2023 the world economy is still recovering from the pandemic, and the average inflation rate in the major economies is 5.4%. The fall in real wages has had a negative effect on consumers’ spending power and on the travel industry. For example, in the United States, the amount spent on travel is expected to reach $1,200 billion in 2024, largely thanks to the increase in spending on travel via the Internet. However, rising fuel prices, which have risen by about 20 percent since the previous year, will have an effect on travel costs and the choice of travel options, which could result in a shift towards more budget-friendly travel.
• Social:
  Social trends in 2023 indicate a growing interest among consumers in sustainable travel. In early 2024, a survey showed that 68% of travelers were willing to pay more for sustainable travel. This shows a growing concern for the environment. The trend towards working from home has also given rise to the workation. 45% of remote workers plan to combine work and travel, which has increased the demand for workation travel and increased the need for specialized online travel services. This change is reflected in the travel packages and services offered by the travel agencies.
• Technological:
  In 2023 the travel market is still being transformed by the latest developments in technology. Artificial intelligence (AI) has become an established feature of customer service, with 75% of travel companies now using AI chatbots to enhance customer relations and make the booking process more efficient. The use of mobile applications has also increased. Over 60% of travellers now use mobile devices to book their trips. This trend has meant that the online travel agencies have had to invest in mobile-friendly platforms to meet customer expectations and improve the customer experience.
• Legal:
  In 2023 the market for on-line travel will be subject to a number of legal regulations that will affect its functioning. The General Data Protection Regulation will continue to impose strict rules on the protection of personal data, with fines of up to twenty million or four percent of turnover, whichever is higher. In several countries, the new consumer protection law will impose stricter rules on the return of services, requiring travel agencies to refund the full amount within fourteen days of the termination of the service. These legal frameworks are essential for preserving trust in consumers and ensuring fair competition in the on-line travel industry.
• Environmental:
  The travel industry is dominated by the environment in 2023. The industry is responsible for a full eight per cent of global greenhouse gas emissions, which has led to a demand for more sustainable practices. In response, many of the big OTAs are now offering consumers the chance to offset their carbon emissions, with around 55 per cent of the platforms providing this service. The United Nations has also set a target for a 50 per cent reduction in emissions by 2030, and this is putting further pressure on travel companies to adopt greener practices and to promote eco-friendly travel in order to meet both regulatory requirements and customer expectations.

Porters Five Forces

• Threat of New Entrants:
  The travel industry is a medium-sized industry, with medium barriers to entry, such as the need for technical equipment and brand recognition. The industry is characterized by high customer loyalty and a large market share, which means that, while new players can enter the market with new solutions, the established companies have a great advantage in customer loyalty and market share.
• Bargaining Power of Suppliers:
  The Suppliers on the Travel Platforms are Generally Low-Cost Suppliers. Because of the wide range of choices that travel platforms offer, suppliers such as hotels and airlines have limited bargaining power. The travel platform can use its strong bargaining power to offer better terms, and the supplier's influence is weaker.
• Bargaining Power of Buyers:
  In the online travel market, the bargaining power of consumers is high, as they can easily compare prices and services on different platforms. Information and reviews enable the buyer to make informed decisions and increase the competition among the suppliers.
• Threat of Substitutes:
  There are alternative ways to travel, such as booking directly with the airlines or the hotels, but the convenience and comprehensiveness of the services offered by travel agents reduce the threat of substitutes. However, the rise of alternative ways of travelling, such as the sharing economy, may also pose a threat.
• Competitive Rivalry:
  The e-travel market is highly competitive and features many players, both established brands and newcomers. Price wars, marketing strategies and technological innovations all lead to a continuous drive to innovate, which makes the industry highly competitive.

SWOT Analysis

• Strengths:
  • Increased consumer reliance on digital platforms for travel planning and booking.
  • Diverse range of offerings including flights, accommodations, and experiences.
  • Ability to leverage data analytics for personalized marketing and customer engagement.
• Weaknesses:
  • High competition leading to price wars and reduced profit margins.
  • Dependence on third-party suppliers for inventory and pricing.
  • Vulnerability to cybersecurity threats and data breaches.
• Opportunities:
  • Growing trend of experiential travel and unique local experiences.
  • Expansion into emerging markets with rising disposable incomes.
  • Integration of advanced technologies like AI and VR to enhance user experience.
• Threats:
  • Economic downturns affecting consumer spending on travel.
  • Regulatory changes impacting travel restrictions and safety protocols.
  • Environmental concerns leading to increased scrutiny on travel practices.

In 2023, the Online Travel Market will be characterized by strong digital engagement and a diverse range of services. It will be challenged by intense competition and reliance on external suppliers. Opportunities will arise from emerging markets and the use of technology to enhance the customer experience. Regulatory changes and macroeconomic volatility will force strategic agility. The companies will need to focus on innovation and sustainability to remain competitive.