Picture shows from left: Wilfred Fan, Director North Asia, Agoda; Johan Svanstrom, Managing Director, Asia Pacific, Hotels.com; Dan Lynn, CEO, AAE Travel (AirAsiaExpedia), Masabumi Mori, IKYU.com; Suguru Tomizuka, Recruit (Jalan); Toshiyuki Imai, JTB (i.JTB) and Masashi Okatake, Rakuten Travel. Co-moderating the panel with Yeoh Siew Hoon, editor and founder of WIT, is Kei Shibata, CEO, Venture Republic.

First the good news. Online travel is the standout not only in Japan but across Asia. Which probably explained the general upbeat mood of the OTA panel at WIT Japan which featured three foreign brands – Agoda, Hotels.com, AirAsia Expedia – and four of the top local names – Rakuten Travel, Jalan, Ikyu.com and iJTB.

In Japan, amid a declining travel market which has seen traditional travel agencies’ total gross bookings drop from Y6,281 billion in 1996 to Y5,930 billion in 2010, online travel continues to grow and all four Japanese OTAs reported a pick-up in customer demand and a shift from offline to online.

Rakuten Travel, Jalan and Ikyu are taking market share from the traditional travel agencies – five of whom account for 60% of the market – which explains why Japan Travel Bureau has set up an online arm, iJTB, to defend its estimated 30% market share.

From the panel discussion, it was clear that iJTB is finding it a struggle competing against the more established trio. Toshiyuku Imai of iJTB said they had an advantage due to their earlier start while his company was just getting into the space.

At Jalan, which is part of the Recruit company, CEO Suguru Tomizuka is being given wider responsibilities following a restructure – he will now lead up to six verticals including restaurants and fashion.

Tomizuka said with domestic travel accounting for 85% of the market, Jalan would continue to focus on offering domestic content for local travellers.

Following its failed expansion into China last year, Ikyu’s Masabumi Mori said he would remain focused on the luxury hotel segment. It also launched an English language website which has since been taken down, citing “site renewal” reasons. The company has expanded into restaurants. According to a news report, Ikyu saw a 40% jump in revenue from restaurant reservations in the year ended March and 30- and 40-somethings now make up more than 60% of registered users.

Mori said “restaurant reservations have led to more young women using the site” and Ikyu was also using social media to help bring back dormant members.

Rakuten Travel remains focused on expanding overseas and its biggest play is in South Korea – following its largest Japanese customer base – but CEO Masashi Okatake says it continues to face challenges of scale and finding the right model for the right market.

Wilfred Fan, director, North Asia, of Agoda said it was interesting that while everyone’s business was different, the challenge was common to all brands wanting to expand – “finding one way of operating that is scalable”.

His advice to his Japanese counterparts – “do it one market at a time. Get one market right first and then move to the next”.

When Japanese OTAs were asked what advice they’d give to their overseas friends wishing to expand to their shores, Ikyu’s Mori seated next to AirAsia Expedia’s Lynn said, “Buy me.”

Jalan’s Tomizuka said brand was important. It took him five years to build up the Jalan brand by successfully leveraging on the Recruit platform. “We have first mover advantage,” he said.

Imai said local content is a challenge and foreign OTAs struggle with getting content such as ryokans into the inventory. iJTB has 1,500 ryokans listed.

Rakuten’s Okatake agreed that the international OTA model worked with the business hotel market but not with more Japanese offerings such as ryokans.

Culture, language and offering a Japanese customer experience were also cited as obstacles facing foreign brands.

Johan Svanstrom, managing director, Asia Pacific of Hotels.com, said all these could be addressed with time but that is the challenge facing global brands – having the time to go into local markets and spending time in-market. “That’s the best way of growing any business but that’s not scalable.”

Dan Lynn, managing director of AirAsia Expedia, wanted to know how different Japanese consumers were and therefore how different the user interface has to be. “My belief is that yes, there is a secret sauce that big data can unearth but there are more commonalities than differences.”

One thing was clearer – smartphones and tablets are emerging as the next important play – and WAP is on the way out. Jalan’s Tomizuka said that he was seeing up to 55% of transactions taking place on the smartphone and the move to mobile had helped him cut customer acquisition costs by half.

In a later presentation, Google’s Katzuki Oshiden, director of travel industry sales for Japan, shared April 2012 data that showed that smartphones accounted for 34% of travel query volume compared with 12% for WAP and 54% for PCs. And during the recent Golden Week, mobile search queries surpassed that of PCs for the first time.

Overall, the mood was upbeat among panelists. Other than the dark clouds gathering over Europe, the outlook remains positive for online travel in Asia.

According to PhoCusWright, of the projected APAC online travel market of US$70.6 billion in 2012, Japan accounts for 45%, followed by Australia/New Zealand 17%, China 11%, India 10%, South Korea 7% and the rest of APAC, 10%.

As Svanstrom observed, growth is assured as “we sit in a region of growth”. “More Asians are saying, I want to travel and most will book an airline, hotel or ship online.”

OTAs are also looking forward to the entry of low cost airlines into Japan which will spur demand and further migrate customers from offline to online. They said that low cost customers would take savings on air and spend it on high end accommodation.

Imai of iJTB cited “dynamic packaging” as one area his company would be aggressive on – it’s seen quadruple growth in this area of business. Packaged tours remain popular in Japan – according to PhoCusWright, domestic packages account for 24% of total domestic market in 2011 while overseas packages form 32% of total overseas market.

Jalan and Rakuten see mobile as a big area of growth and an opportunity to drive down customer acquisition costs.

Lynn sees an opportunity in “big data to tease out those customer insights”. And he believes the area of social recommendation has yet to be addressed well by anyone. “This is something to watch – no one has the answer yet.”