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Tuesday, July 31, 2007

Asian Tourists Love to Click and Go

When 29-year-old Sabrina Fu decided to spend a week exploring the ancient temple ruins of Angkor Wat in Cambodia, she turned to Chinese online travel site (CTRP). She long ago became sold on the convenience and ease of researching and booking her vacations online. "The first thing I do when I decide to go somewhere is to log onto the worldwide Web," says Fu, who works at a multinational company's Shanghai office.

With its emerging middle classes and rising disposable income, Asia has one of the fastest growing tourism sectors in the world. Still, the industry has endured some rough luck this decade, with the region's 2004 earthquake and resulting tsunami, sporadic terrorist incidents, and uncertainty about the direction of Avian flu.

Even so, plenty of destinations such as the Maldives, Bhutan, Thailand, and Cambodia saw their tourism businesses expand more than 10% last year, according to figures compiled by the Pacific Asia Travel Assn. Indeed, the tourism sector accounts for more than 10% of the economic output of Australia, New Zealand, Hong Kong, Singapore, Thailand, and Malaysia (see, 4/23/07, "Guiding Tourists to Asia").

One-Third the Size of the U.S. Market

Not surprisingly, a number of regional online sites and established international ones hope to prosper from the Asia travel boom. To be sure, the size of the region's online travel market is still small compared to mature markets such as the U.S. Online travel sales in Asia Pacific are estimated to reach $25.6 billion this year. That's only about one-third of the U.S. market forecast, according to New York Internet research firm eMarketer.

Yet online travel in the region is likely to experience explosive growth the rest of the decade. From 2006 to 2010, India is expected to grow at 271.6% annually, while Vietnam's online travel sector is forecast to expand 202% and China's and Indonesia's in the 70% to 83% range. (The biggest markets in revenue terms outside of Japan are India at $300 million and China at $200 million.) The U.S. online travel biz, by contrast, will grow 17% on an annual basis during the same time.

Another crucial difference in the U.S online travel market, where sites such as, and are big players, is that the growth in new customers is quite slow, given most Americans already have Net access and are familiar with online travel planning.

Planting Seeds for Growth

In Asia, the race is on to capture the interest of the first-time user and build up some brand loyalty to sites. "In the U.S., companies are fighting to take over consumers. But in Asia Pacific, there is opportunity to acquire new users who are using the Internet for the first time," says Jeffrey Grau, senior analyst at eMarketer. "You want to plant the seeds now because that's going to be the future growth engine."

That's why the big international online travel sites are now ramping up their marketing and online service efforts in the region. Paris-based Carlson Wagonlit Travel, a worldwide business travel management company, has big aspirations for Asia. "The big four markets in Asia Pacific, Australia, Japan, China, and India will see their online (managed business) travel adoption rate go up to 40% in three or four years," says Nicolas Pierret, director of global accounts for Asia Pacific.

Site Traffic is a Leading Indicator

IAC/InterActiveCorp (IACI), which owns Expedia and, invested $166.7 million in 2004 for a 52% stake in eLong (LONG), China's second-largest online travel booking site by market share. Though eLong reported a $2.1 million operating loss in 2006, Expedia is seeing Asia Pacific markets represent a bigger share in its worldwide sales. In the first quarter, Expedia's bookings from Australia, China, Japan, Europe, and other countries grew from 25% of worldwide bookings to 29%. In revenue terms, that's about $1.47 billion worth of business.

The Australian site, acquired in 2004 by Orbitz Worldwide (OWW), witnessed the fastest growth in Asia Pacific. "Traffic grew 70% and revenue grew 45% year to date in Asia Pacific," says Chloe Lim, managing director of HotelClub. "Some people focus on sales revenue, but traffic is actually the first sign of sales growth," says Lim.

China is estimated to overtake Germany and become the third biggest personal and business travel market by 2011, valued at about $300 billion a year, according to eMarketer. (Last year, the Chinese market was worth $134 billion.)

China's biggest online travel company is Nasdaq-listed, with a 54.2% market share. Last year, it pulled in $80 million in gross profit on $100 million in revenues. Chief Executive Officer Min Fan thinks online bookings will blow away the growth of the overall Chinese tourism industry. "The growth of online travel will be at least double the speed of travel spending growth," says Fan. "There is the Beijing Olympics in 2008 and the World Expo in Shanghai following [in 2010], which creates a beneficial environment for both international and domestic travel."

In China, right now at least, local players dominate. Ctrip and eLong enjoy a combined market share of 72%, and other, newer sites such as and are trying to get a piece of the action. The reason for the optimism is that the market penetration for online bookings is still quite small. "Only a very small percentage of travel transactions are done online in China," says Fritz Demopoulos, CEO of Beijing-based "The prospects for future growth are encouraging."

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Khmer genocide suspect questioned

A notorious Khmer Rouge prison chief is facing questioning at the Cambodian genocide tribunal headquarters today.

Kaing Khek Iev, who headed the former Khmer Rouge prison S-21 in Phnom Penh, will face judges investigating crimes committed during the regime's rule in the late 1970s, an official said.

He becomes the first suspect to be questioned by judges of the UN-backed tribunal in Phnom Penh, said a tribunal spokesman.

The prison was a virtual slaughterhouse where suspected enemies of the ultra-communists were brutally tortured before being taken out to killing fields near the city.

Kaing Khek Iev, also known as Duch, was driven in a car escorted by Cambodian government security forces and arrived at the tribunal headquarters this morning. He was taken from a military prison, where he has been detained since 1999.

Kaing Khek Iev (62), is among five ex-Khmer Rouge leaders the tribunal's prosecutors have submitted to the co-investigating judges for further investigation, the spokesman said. "They (the judges) need to do an initial interview with him, but he has not been formally charged yet," he said.

Some 16,000 people were imprisoned at S-21, now the Tuol Sleng Genocide Museum. Only about a dozen of them are thought to have survived when the Khmer Rouge regime was overthrown by a Vietnamese invasion in 1979.

Since his arrest by the government on May 10th, 1999, Kaing Khek Iev was detained on war crime charges. It is unclear what charges he will face before the tribunal, set up jointly by Cambodia and the United Nations to try to seek justice for crimes committed during the Khmer Rouge's 1975-79 rule.

Some 1.7 million people died from hunger, disease, overwork and execution as a result of the radical policies of the communists.
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