To outsiders and even local industry insiders, the intricacies of Latin America’s evolving online travel market can present a daunting puzzle.
Or "rompecabeza" in Spanish, which literally translates to head breaker.
NB: This article is written by Luke Bujarski, director of research at Phocuswright.
Twenty markets, numerous currencies, cultures, languages and business operating environments make harvesting the full point-of-sale opportunity of the region a real challenge.
But as a whole, the region also offers big gains for those digital intermediaries and technology providers that are up for it.
By 2016, total travel spend will approach $100 billion. Online travel is taking off, growing at 15% on average with certain markets growing even faster.
Low online penetration means big gains for tech-savvy intermediaries but also technology providers that can offer value to supplier networks growing weary of established and outdated distribution channels.
Complexity also brings opportunity to online and travel tech companies, as local suppliers expand throughout the region and look for new partners.
To give our travel colleagues a bit of a head start, here are five high-level findings explored in much greater detail in Phocuswright’s latest report, the Latin America Online Travel Overview Second Edition.
1. Point of sale versus international
Some countries are hot inbound destinations, while others are hot point-of-sale markets.
Mexico’s travel suppliers have traditionally leaned on inbound/international demand mostly from the United States, but the domestic market is now rapidly expanding.
This creates different operating environments requiring unique planning when it comes to marketing, sales, customer support and other strategic considerations.
Online penetration rates differ across markets (see figure) but also across supplier segments, depending on the various purchasing channels available to the consumer.
2. Unique payment ecosystems lead to unique customer engagement models
Each market has unique dynamics when it comes to consumer preference when purchasing travel.
In certain countries consumers prefer to pay in cash and in person, in installments, via unique payment methods and payment partners such as utilities companies and local banks.
For online travel agencies – particularly those that command bigger portions of the market – it is import to adapt and cater to these unique consumer channels.
At the same time, certain new and niche OTA players are successfully adopting the types of online-first strategies that are now commonplace in more mature markets.
3. Competitors can make great partners
Many of the homegrown OTAs have realized that it pays to work with your competitors.
Traditional travel agents still carry mainstream sway with the travel consumer and will so for the foreseeable future.
This creates opportunities for OTAs to leverage their in-house technologies and platforms as a way to capture share of this market on the B2B side (e.g., creating strong affiliate programs with traditional travel agency networks).
Partnerships between OTAs are also forming as local players take advantage of global player inventories – and vice versa.
4. Mixed business operating environments hamper scalability
Capturing the full market potential of the region requires investment and understanding of each local operating environment, which can often be complex.
Selling in certain markets requires local incorporation while collecting on revenues between markets (e.g, a Brazilian OTA targeting the Argentinian consumer) can be a costly and complex exercise.
The business environment is also deteriorating in certain countries while improving in others, turning strategic planning into an even greater challenge.
5. Fragmented supplier landscape
In particular, Latin America’s hotel segment presents opportunities and challenges for OTAs and technology providers.
Independent hotel brands still dominate the landscape particularly in key destinations such as Rio de Janeiro. Connecting with the hotels requires more effort and oftentimes coaching on digital distribution best practices.
In every country, each supplier segment has a unique customer footprint – whether leisure or business travelers, or both.
NB: This article is written by Luke Bujarski, director of research at Phocuswright. It appears here as part of Tnooz's sponsored content initiative.
NB2: The above findings are among the topics explored in rich detail in Phocuswright’s latest research on Latin America . The study uncovers trends in Latin America’s six biggest markets – Argentina, Brazil, Chile, Colombia, Mexico and Peru. Market sizing, online distribution and growth forecasts are also available on five suppliers segments – air, hotel, car rental, tour operators and OTAs.
NB3: Latin America image via Shutterstock.