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U.S. online travel agencies look abroad for growth

Posted by iTech - 2005-10-14

U.S. online travel agencies like Expedia and Orbitz are increasingly setting their sights overseas, especially in Europe where vacations are longer, as U.S. demand rises more slowly.
Foreign markets, where low-cost airlines are adding more routes, are ripe for one-stop online shops where users can book flights, hotels and rental cars all at once, experts say.

"Definitely the growth has slowed in the U.S.," even though it is far from saturated, said Lorraine Sileo of PhoCusWright, a travel research company. "The growth overseas is particularly in Europe, the UK, Germany, France."

International growth far outpaces that in the United States, where online travel agencies have a huge footprint.

PhoCusWright data show that gross U.S. bookings for U.S. online travel agencies grew 19 percent in 2005, down from 21 percent a year earlier and 33 percent in 2003.

By contrast, international gross bookings increased by 115 percent so far this year, up from 97 percent in full-year 2004 and 109 percent in 2003, PhoCusWright said.

European vacation habits are key to expanding regional online travel, said Ronen Stauber, chief executive of Consumer Travel International Markets at Cendant Corp., which owns Orbitz, the No. 3 U.S.-based online travel agency.

"Europeans, unlike Americans, actually take vacations," he said. "When you do that across more people with more vacation days, it just opens up more opportunities."

Orbitz, together with market leaders Expedia, the lead brand of Expedia Inc., and Travelocity, a unit of Saber Holdings Corp., control about 77 percent of online travel bookings.

"We clearly do believe that we'll continue to see growth in Europe on par with the States," Stauber said.

Europe lags the United States in the adoption of Internet commerce, with online travel booking trends mirroring American ones a few years ago.

Asian countries, with large populations, also are a solid growth area for online travel companies, but Internet penetration lags Europe by a few years, PhoCusWright said.

Cendant, which purchased Orbitz in 2004, has been expanding its online travel business in Europe, most notably with the acquisitions of Britain's Ebookers Plc, owner of Europe's No. 2 travel site, and British distributor Gullivers Travel Associates.

Expedia's former parent, IAC/InteractiveCorp., last year bought a 52 percent stake in eLong Inc., the second largest online travel agency in China.

But Expedia generally prefers creating new operations abroad rather than acquiring existing businesses, Dennis said. Last year, Expedia launched branded sites in Italy and France.

"We started investing overseas quite a while ago -- for at least the last five or six years," said David Dennis, Expedia spokesman. "We continue to branch that out."

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