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Despite recent headline news about the slowdown experienced in the BRICS economies, these countries continue to command strong appeal. The numbers speak for themselves. The BRICS account for 40% of the world’s population, 22% of its GDP and a staggering 58% of middle-class income and remain key target markets for destinations and travel players seeking new sources of significant revenue growth.
Unsurprisingly, BRICS consumers are also moving online in their droves and together make up 38% of the world’s netizens. There are already 600 million internet users in China, where local players dominate the competitive online marketplace. In China, 53% of the population use the internet, compared to only 12% in India, which remains underdeveloped due to a lack of connectivity in rural areas.
Access to the Internet via mobile phones exceeded access via PCs globally for the first time in 2013, thus illustrating the huge importance of mobile phones. And, with smartphones now accounting for the majority of mobile devices, a major shift is occurring as businesses seek to communicate and target consumers through them. In China, smartphone penetration is high and is expected to reach almost 100% of mobile users by 2017, with exponential growth forecast. With consumers connected around the clock, the travel distribution and payments landscape is rapidly changing.
Punching Below Their Weight in Online Travel
Demand for domestic and international travel is critical in building online travel sales. In the BRICS, the building blocks are in place and growth is on the right upward trajectory. Much attention has been focused on the potential for outbound travel from China, with the UNWTO forecasting 200 million outbound Chinese trips by 2030.
However, despite the rosy exogenous factors, the share of online travel is low in the BRICS, at only 7% compared to the group’s comparative share of smartphone users (35%), m-commerce (23%) and outbound tourism demand (14%).
Some areas of online travel are more advanced than others. Travel retail featuring online travel agents is well established, while transportation is very developed to date thanks to OTAs’ focus on transport and airlines’ direct web sales.
China is by far the most developed market in the BRICS and ranks as one of the world’s leading online travel markets, with the potential to go all the way, ranked seventh in transportation, sixth in accommodation and fifth in travel retail worldwide in 2013.
The race is on to secure a slice of the online travel market in the BRICS, forecast to be worth US$65 billion by 2017, up from US$38 billion in 2013. Euromonitor International expects growth in online travel in the BRICS to explode, achieving a 67% increase over 2013-2017 for car rental, accommodation, transportation and tourist attractions combined. There is much room for development across all categories and countries as China continues to move online and the other countries play catch up. Across the BRICS, travel accommodation is behind the curve for online development and should be a focus area for development.
Social Media Frenzy
In the BRICS, word of mouth is key, but is conducted predominantly offline in Brazil, China and India. This preference for sharing ideas and opinions helps explain why the BRICS have widely embraced the social media movement. Social media giants like Facebook and Twitter have high profiles in countries like Brazil, Russia and India, while home-grown players are also strong.
Brazil is hugely social media-friendly, with 97% of internet users accessing social sites, with Facebook having also become a new sales channel for travel bookings, as used by low-cost carrier GOL.
In China, the market is unique as domestic companies dominate as global online players like Facebook are banned, with e-commerce players often having launched travel offshoots to break into the developing online travel retail channel. The online space is very competitive, with a price war in 2012 between Ctrip and the new challenger, trip.taobao.com. Meanwhile, in India, the online travel agency market is consolidating. China’s direct suppliers including hotels and airlines, however, remain behind the curve in terms of online presence and development.
TripAdvisor is widely used across the BRICS, showing the importance of reviews with home grown players like Qunar.com dominating the Chinese travel meta-search scene. New travel players like Airbnb are also active, with the BRICS a core focus for expansion, with the company blazing a trail in alternative accommodation, targeting key events and picking up overflow demand.
Obstacles and Opportunities
Structural challenges include rolling out internet connectivity from urban to rural areas, the slow uptake of credit cards, consumer attitudes to e- and m-commerce and the associated risk of fraud. Censorship of social media sites and privacy issues with regard to big data will be hotly debated.
However, the march of travel social is on and companies which embrace new ways of interacting with consumers, be it in terms of relationship building, loyalty or sales, are likely to flourish.
New payment methods, new business models such as peer-to-peer and mobile only and other new technologies/companies which do not yet even exist are likely to disrupt the status quo and create opportunities. With the middle-classes growing in vast numbers, and segmenting further, engaging with consumers in a travel mobile-social space will be critical for future success.
Euromonitor International is the world’s leading provider for global business intelligence and strategic market analysis. We have over 40 years of experience publishing international market reports, business reference books and online databases on consumer markets.
We deliver market research solutions to support strategic planning for today’s increasingly international business environment. Our research offers in-depth market analysis on consumer goods and services industries worldwide, as well as economic, demographic and socio-economic data and insight on countries and consumers.