Growth in the U.S. online travel market has witnessed a slowdown, which resulted in online travel agencies (OTAs) such as Expedia Inc (NASDAQ:EXPE) exploring other profitable markets. The Asia-Pacific region is a rapidly growing market, especially for the online travel industry. At present, Expedia possesses a 4% market share in the Asian-Pacific online travel market.
It must be noted Expedia’s revenue generated from international markets increased from 35% during 2008 to 45% in 2012. Going forward, one would expect it to draw more than 50% of its revenue through international markets.
In order to successfully expand its international footprint, it must have a long-term vision and a superior growth strategy for unexplored markets. I believe the underlying growth potential in the Asia-Pacific region can certainly drive Expedia Inc (NASDAQ:EXPE)’s revenue in the future. Hence, I have a bullish view on this stock.
Asia Pacific offers plenty
According to a research offered by eMarketer, online travel sales from the Asia-Pacific region are expected to increase 15% to $91 billion during 2013. Furthermore, the market is estimated to grow at a CAGR of 18% until 2016. This underpins my belief that Asia-Pacific is one of the fastest-growing online travel markets in the world.
In addition, the entire region reported robust economic growth despite the global meltdown of 2008 and 2009. It is noteworthy that from 2007 to 2012, the average per-capita disposable income in the Asia- Pacific region grew 19%.
Moreover, per-capita consumer spending from this region is expected to grow by around 37% during the next seven years. The travel industry in this region has flourished primarily due to relatively higher consumer spending. It is well comprehended that discretionary spending has a direct relationship with disposable income.
A recent research published by Internet World Stats revealed that broadband penetration in Asia is relatively lower than in Europe and the U.S. At present, Asia stands at 27.5%, while Europe and the U.S. are at around 63.2% and 78.6%, respectively. However, the constantly growing demand for broadband from the the Asia Pacific region will enable Expedia to penetrate newer markets and expand its global footprint.
Initiatives to bolster market share through local partnerships
Expedia Inc (NASDAQ:EXPE)’s presence in the Asia-Pacific region so far has been fairly limited. However, forming strategic partnerships with local players will enable the company to enter newer markets with a better understanding of local preferences.
Recently, Sabre and Expedia took their global technology partnership to another level by expanding into Asia in order to provide Expedia’s users a wide range of travel options at extremely competitive prices.
Further, during July 2012, Expedia partnered with Thomas Cook Group plc (LON:TCG) India in an effort to provide end-to-end visa services to its customers. India is a fast-growing outbound market with an estimated growth rate of 16%. Thomas Cook’s strong presence in India will help Expedia to gradually capitalize on the rapidly growing Indian market.