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No 2000/6 - Paris, October 30, 2000

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  France to the Europeans, Europe to the Americans?  

Internet plays a part bigger and bigger every day in the restructuring of our economies

There are many actors involved in the French tourism sector, most of which rather small, and such factors increase the vulnerability of all these companies. That's the reason why, in the last past months, we have seen a lot of sites being bought off by European actors.

eBookers first started with buying the Compagnie des Voyages, Lastminute made an even stronger impression when it bought Degriftour. And now, here is Preussag buying part of Nouvelles Frontieres' share capital..

Nouvelles Frontieres', with net losses worth of 36 millions of francs, with an online market place decreasing a bit more every day because of its rival sites who are showing aggressiveness and efficiency, had no other alternative than accepting that Preussag, the German leading company in the Tourism sector, bought some of its share capital.

Such a quantity of buyouts and share investments should have a positive effect on the Tourism sector, as it should bring it the industrialization it lacked.

For the web industry, industrialization means homogeneity of the IT systems, with the adjunction of new web standards.

But in most cases, to get this homogeneity, you need to reorganize your firm from top to bottom and many actors in the French tourism sector can not afford the expenses they will have to make in the next months if they want to survive and they might have to accept new shareholders if they do not want to…just disappear.

There is no doubt that the eTourism industry, as it makes it so easy for the consumer to compare prices, will generate a real war in terms of prices and commissions. As a result, it is now obvious that the efficiency of the transactional process will become the main element of the final margin.

You just need to have a look at the price war that just started in the United-States between U.S.Airways, Northwest, AirTran, United Continental, TWA, Delta, ATA and American to believe in such a statement.

Not only are price tickets decreasing but a new standard is appearing: if you book your ticket online, you will end up paying it 5% cheaper than if you had booked it through the phone.

As Internet has no country, it goes without saying that battles will now take place on a continental and not on a national level.

That's how eBookers keeps on expanding in Europe, and its politics is mainly based on buying off traditional firms.


There are a few factors, among which fulfillment and a wish for an already existing customer-base, that can explain this desire for growth through traditional set-ups when national sites are launched, and yet this goes against the way internet companies usually expand.

That's why, who aims at being eBookers direct European rival, has decided on a totally virtual expansion.

Whatever their politics, both of them will have to invest huge sums of money in order to grow as quickly as possible on a European level, and the question of money might well be the one thing that will make the difference between them, if one of them ended up being short of cash.

Let's not forget that eBookers plans on reaching its break-even point by the end of 2001 or beginning of 2002. Travelprice points out that its own break-even point as far as its French site is concerned has already been reached if investments are not taken into account. Nevertheless, due to its European expansion, it'll have to wait until the end of 2002 to reach its break-even point.

Even though eBookers turn-over keeps on increasing (32.6 million dollars for the third quarter 2000), the results of its politics of expansion have not been not very impressive up till now.

Its turnover, made outside the United-Kingdom, is no more than 63%, which does not seem much when you take into account all the European countries (Denmark, Finland, France, Germany, Ireland, Netherlands, Norway, Spain, Sweden, and Switzerland) in which the British company is represented.

It's even more so that the British territory is already very well occupied online, which does not make its expansions any easier.


That's how arrives just behind eBookers as far as its turnover and its number of visitors is involved.

This last aspect is a very interesting one, since it means that both companies have the same abilities as far as customer loyalty is concerned, and as a result, their lookers-to-bookers conversion rate.

And let's not forget that even though American online companies have only invested in the United-Kingdom up till now (for obvious reasons which are mainly cultural and linguistic), things are changing very quickly.

Europe has now become a major stake for those companies. The growth of the American internet population has substantially slowed down in the last past months and it will become more and more difficult to get market shares in the United-States in the BtoC sector, apart from the niche markets.

The European eTourism sector, which is still a virtual wasteland, remains a very accessible target for these huge eTourism actors such as and

Expedia was the first to set the movement as it began its European expansion a few months back and started to settle its teams outside the United-Kingdom.

Travelocity should be the next one and the announcement of the arrival of Priceline in the United-Kingdom (before it starts investing the other European countries) makes it clear that many local actors will no longer be able to rest peacefully.


And while some actors were concentrating on their own countries, some others, like, were trying to conquer the European countries that were a bit behind on the eTourism sector. That's how eDreams managed to establish itself in Spain and Italy in the package industry.

The fact that eDreams was able to establish itself so easily in the European eTourism sector (with no misjudgment of the quality of its abilities whatsoever) proves that Europe is still very vulnerable when confronted to those external investors.

Travelprice, which also has a site in both Spain and Italy, claims having the leading position in the flight industry.

It is very interesting to study the difference between eBookers and Travelprice in their evolution.

eBookers already acquired a Spanish brick and mortar company but hasn't yet been able to launch its Spanish site because of a few integration problems with its online structure. At the same time, Travelprice, which does not have any physical restraint, has already managed to be number one on the flight industry in the same country.

All this proves that the European battle in the eTourism sector has really started and such battle was even boosted by the closing down of the site and there is no doubt that the forthcoming months will be very rich in developments and investments.


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