Time for an African Online Travel Agency?

It it time for an African Opodo? Opodo, a Pan European online travel agency, was founded by nine European airlines in 2000 to sell cheap flights, hotel accommodation and car hire.The travel portal was launched to provide cheapest offers for flights to, from and within Europe as well as complementary products for travelers.

Although Opodo hoped to completely dominate the market in Europe by heading off the Lastminute.com and Expedia duopoly, it found an established market already carved by these players that had traditionally dominated the European Online Travel Market since their establishment during the .COM boom years. In 2011, two European investments giants acquired and merged Opodo with eDreams and GoVoyages thus creating a giant online agency to oust Expedia from the top position in the online travel markets in Europe. The dominant online travel agencies in Europe are owned by European companies.

This trend is repeated in the emerging markets including India, Brazil, China and Russia where the rapidly emerging or dominant OTAs are companies from within those emerging markets. In India for example, the online travel agency MakeMyTrip controls almost 10% of the market offering bookings for air tickets, train tickets, bus tickets, hotel bookings and accommodations, car hire, international and domestic holiday packages, visa services, B2B services. In Russia, Ostrovok, an online travel agency launched last year with a $13 million start-up funding, is now the fastest growing online travel company in the country, with a focus on hotel booking. Before the launch of Ostrovok, Russia was probably one of the major global economies without an established online travel solution. Amongst the investors in the start-up include former ICANN Chair Esther Dyson, Expedia, Tripit amongst others. Brazil's Despegar is fast becoming a market leader in Brazil and Latin America. In China Qunar is a major local player in the online travel industry together with ctrip. So why not Africa? And why not now?

There are many reasons why African airlines and travel entrepreneurs should join forces and create a local product or products spread across the various African travel markets. While in the past African internet users relied on offline agencies' offices due to poor internet access and lack of awareness of online travel options, the recent deeper penetration of the internet and adoption of eCommerce solutions and online payment systems means that more Africans are already buying tickets online and this trend is expected to grow exponentially as African consumers become more sophisticated in the next few years with the exponential growth of the internet.

The numbers in Africa are now looking good for airlines on the continent, while African airlines account for only 20% of the intercontinental flights, they dominate their intra African traffic. Flights between African countries is completely dominated by the big African carriers Kenya Airways, Ethiopian Airlines, South African Airways, EgyptAir, Royal Air Maroc amongst others. In addition, more professionally run car rental and booking services are emerging that can be integrated into global distribution systems and sold via online travel agencies. Many Africans still line up in long queues to pay for bus services, train services and these are sectors that can be completely integrated into the online booking experience. No one would understand these more than an African player with deep knowledge of the services provided in each of the African countries.

In addition, local online travel industries are likely to integrate payment systems that are widely available to African travelers but are not necessarily accepted by the international players such as Expedia, Priceline and others. For example, mobile payments for flights are not accessible in these global platforms but local players can easily integrate these payment modes into their systems. Not many Africans have access to credit cards or debit cards but almost all will have access to mobile money; these are some of the advantages that local online travel agencies can wield over international players in order to build a Pan African online travel market.

The airlines rely on Online Travel Agencies to cut down on distribution of costs since (offline)agencies cut deeply into airline revenues and in the maze of the internet, an airline cannot rely on its website alone to distribute tickets so it must use countless channels on the web as distribution channels. Some of these distribution channels include Expedia, Lastminute.com, Orbitz, eDreams, Travelocity. It would make sense if African airlines could launch a "local" Pan African product through which they could offer tickets for sale at a slightly lower cost while also reining in middlemen  fees which account for 4% of their revenues thus increase their profitability in this way in the long term. I think a cooperative effort backed by Kenya Airways, Ethiopian Airlines, South African Airways amongst other players can have a good shot at success.

As the web infrastructure continues to grow on the continent, more Africans will be buying their tickets on the internet, and airlines must start thinking where those consumers will buy the tickets. The success of home grown online travel agencies in emerging markets like India, Brazil, China and Russia has shown that the global players in the industry have no idea/no interest on how to compete in the emerging markets. A Pan African Online travel portal might just break through and eventually come to dominate the market in Africa, giving Africans a more familiar feel and cutting the costs for African airlines.

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