Investment in the travel industry at large is on the rise, and not without good reason. The travel sector is growing 50% faster than the global economy, with one fifth of all jobs created in the last decade being within the industry. Furthermore, investment is forecast to rise by 4.3% per annum in the coming decade, to reach $1,408bn by 2028.
Focusing specifically on the online travel agency space, onefourzero has identified some key indicators demonstrating an increase in consumer behaviour, which highlights some of the reasons why online travel agencies have piqued the interest of private equity investors.
Compared with Q1 2018, Q1 2019 saw an increase in traffic to a representative sample of online travel agency sites of 3.9%, whilst aggregator sites (e.g. booking.com) have seen a 5.6% drop in traffic. Furthermore, in Q1 2019 visitors to online travel agency sites spent 27% longer on site, which we suggest reflects that these sites operate more like inspirational marketplaces, offering more opportunities to provide different options within the same provider.
Amidst these figures, the recent news of Thomas Cook’s potential acquisition by Fosun, Chinese owners of both Wolverhampton Wanderers football club and Club Med. The long-established travel agency has run into serious problems, with losses in excess of £1.5bn over the second half of 2018 alone and a total debt of £1.3bn at last count. Fosun’s prospective rescue proposes to comprise Thomas Cook’s entire tour operating arm, which basically includes everything except for the company’s airline – the most valuable asset it holds. The only reason Fosun’s not bidding on this is because it is banned from doing so under European ownership rules.
Considering the dire state of Thomas Cook, we have to ask why Fosun would be so keen to scoop it up. After all, the stakes are high. As The Telegraph notes, “wipeout in a debt-for-equity swap would be an embarrassment”.
The value of trust
The one thing that Thomas Cook really has going for it is its long-standing name in the travel industry. Our research shows that, in Q1 this year, an average of 67% of search traffic to online travel agents came from branded terms (i.e. people looking for a particular brand specifically), highlighting the value of a known and trusted travel brand.
This is particularly pertinent when we look at the demographics visiting online travel agency websites. 58.9% of all visitors to these sites are from the 45+ age group. Perhaps this is due to greater levels of disposable income amongst this age group, plus a reasonable assumption that they take more trips overall, as identified by Experian in their recent Spending Power Index whitepaper. We can also postulate that the older generation is more drawn towards brands that they know and trust, as a rule.
Research from TrustPilot reports that 43% of Brits are fearful of online travel scams, which have also been on the rise in recent years. And considering that 74% cite holidays as their biggest annual personal expense, it’s no wonder really that falling back on tried-and-tested brands is important to consumers. In times of uncertainty, such as now – with Brexit an ever-present dark cloud and airlines falling like dominos into debt and liquidation – trust is all the more crucial.
