U.K.,
France and Germany are Market Leaders

With about one-third of the European population
connected to the Internet, the popularity of
low-cost carriers and the emergence of dynamic
packaging, the European online travel market
is finally taking hold. Led by the U.K., France
and Germany, travel e-commerce reached 7.6
billion euros in Europe in 2002. Gross bookings
are expected to more than triple in three years
to reach 27.9 billion euros by 2005, according
to PhoCusWright's European Online Travel Marketplace:
Focus on France. The report series covers the
leisure and unmanaged business travel market
in five markets - France (now available), Spain,
the U.K., Scandinavia and Germany.

Although half of European online travel sales
are generated in the U.K., that trend is expected
to change considerably in three years, as Germany
and Scandinavia gain ground. France will retain
its market share over the next three years,
and represent one-quarter of the European online
travel market in 2005.

Consolidation has not yet taken hold in Europe,
though the barriers to entry are getting higher
and start-ups, such as Opodo, are having their
challenges usurping the market leaders. In
France, for example, there are currently nine
competitive online travel agencies, and the
top three have a 51% market share (that compares
to the U.S. market, where the top three online
travel agencies have more than a 75% share).

Leading online travel agencies in Europe include
Lastminute.com, Expedia, ebookers and Opodo.
But in France, for example, three of the four
largest online travel agencies are tour operators
or owned by tour operators: Nouvelles Frontières,
Anyway and Karavel.

Expedia has a good presence in France, where
it benefits from a partnership with the French
state-owned rail company, SNCF. Still, even
with high brand recognition, Voyages-sncf,
the joint venture with Expedia and SNCF, garners
a small 6% share of the fragmented French online
travel agency marketplace. Used to having a
leadership position in the markets it serves,
Expedia will have to surpass six more sites
before it can overtake the current leader.
Watching the evolution of the French and other
European online travel businesses should prove
interesting over the next several years as
the various markets mature.