eMarketer reports that by 2010 roughly 46 percent of total travel sales will be booked online, second only to computer hardware/software in the B2C category.

The online travel market is divided into two segments: leisure/unmanaged business travel and managed business travel (also known as corporate travel). The online booking behavior of unmanaged business travelers is indistinguishable from leisure travelers. Employees of the millions of small- and medium-sized corporations in the U.S. use the same websites as leisure travelers to book their business travel. Thus these two groups of buyers are treated as one customer segment.
 
eMarketer estimates that U.S. online sales of leisure and unmanaged business travel reached a total of $65 billion last year that the total will grow to $122 billion by 2009, a near doubling of the market in just four years. eMarketer's forecast takes into account macroeconomic indicators, historical trends in online travel sales and historical and projected trends in overall retail ecommerce.

Estimates of online travel spending in the U.S. are bound to vary from source to source, given the differences in how the market is defined. The estimates from comScore and PhoCusWright are for both leisure and unmanaged business travel sales, the same definition used by eMarketer. The 2005 estimates from these three firms are close, falling within $4.5 billion. Forrester's estimate for 2005 would be higher if it included unmanaged business travel sales. Conversely, Jupiter's estimate, which appears to include managed business travel sales, would obviously be lower if these sales were excluded. Where all the research firms agree is in their estimates that annual sales growth was around 20 percent in 2004 and 2005, and that it will drop off into the teens during 2006 and 2007. 

 

A comparison of online travel sales with total retail ecommerce sales highlights some important trends. In 2005, US online leisure/unmanaged business travel sales were the equivalent of 75 percent of total retail ecommerce sales. In the two years prior to 2005, growth of online travel sales outpaced retail ecommerce sales, but last year was a tipping point. Going forward, eMarketer expects sales growth in online travel to lag behind retail ecommerce. This reversal of fortunes signifies that ecommerce growth markets, such as apparel, health & beauty and home furnishings, are replacing early ecommerce success stories like travel, computer hardware, books and videos as the leading sales drivers.

Travel is one of the most mature B2C ecommerce categories, as measured by the percent of total industry sales generated online. By 2010, Forrester predicts that about 46 percent of total travel sales will be booked online, second only to computer hardware/software (55 percent).

Breaking out online travel sales by distribution channel also illuminates some of the dynamics shaping the online travel market. Last year, according to PhoCusWright estimates, travel supplier websites (e.g., Continental for airlines and Marriott for hotels) accounted for $35 billion of the $65 billion spent on travel online, amounting to a 54 percent share. Online travel agencies (OTAs) such as Expedia, Travelocity and Orbitz accounted for the remaining $30 billion in sales. By 2007, PhoCusWright forecasts that online travel suppliers will widen the gap by controlling $54 billion of the $94 billion to be spent for online travel, giving them a 57 percent share. The data also show that between 2005 and 2007, online travel supplier sales will grow at a 24.2 percent annual rate compared to online travel agency growth of 15.5 percent.

Jeffrey Grau is a senior analyst at eMarketer. This article is drawn from eMarketer's recent report, Online Travel in the US: Pursuing Customer Loyalty. Reach them directly.