The Takeoff Episode 02: How Startups Can Adapt and Pivot Sponsored This content is created collaboratively with one of our sponsors.
Travelers on the go seem to be a natural fit for mobile, but making mobile adoption more difficult is the stubborn fact that it can be a lot harder to book a hotel and compare prices elsewhere than it is to buy a piece of furniture on eBay. That travel industry is making strides, but other industries are more advanced.
While companies from the Priceline Group to Expedia tout their proliferation of mobile traffic and bookings, mobile adoption in the travel industry has lagged other ecommerce and social media sectors.
That’s the view of financial services firm PiperJaffray, which argues in a company note about TripAdvisor that the travel industry’s mobile adoption has been relatively sluggish.
“While the proliferation of mobile devices has disrupted search, social and e-commerce, the influence on online travel has arguably been less than seismic,” PiperJaffray states. “Less than 15% of travel bookings are made with a mobile device today and less than 5% of travel ad spend is allocated to mobile screens.”
Although mobile travel sales are still relatively low, they are slated to reach $64.69 billion, or 37% of U.S. travel sales, by 2018, according to an eMarketer forecast.
“We believe that both of those disappointingly low mobile penetration rates are positioned to move higher as users become more comfortable booking on mobile and travel companies re-allocate their marketing dollars more proportionately with mobile’s share of the user’s time spent and closer to the point of sale.”
PiperJaffray points out that while TripAdvisor generated less than 10% of its revenue from mobile in the fourth quarter of 2013, mobile revenue at Facebook and eBay were dramatically higher.
In fact, Facebook’s mobile revenue was 53% of total revenue, and eBay’s mobile revenue stood at 26% of gross merchandise volume in the same period, PiperJaffray states.
Reflecting the relative lack of mobile conversions, TripAdvisor’s mobile cost-per-click rates are merely 15-20% of desktop CPCs, PiperJaffray states.
The financial services firm states there are numerous factors behind the travel industry’s mobile sluggishness, including the extended time and efforts it takes to research a trip, high prices and pricing disparities, as well as fragmented supply.
In other words, booking a family vacation and looking for a good deal on a small screen can be a lot more complex than purchasing sneakers or a camera on eBay.
Travel companies are making improvements, though. TripAdvisor has now rolled out its Instant Book feature, where users can book rooms from Getaroom, Choice Hotels or Tingo without leaving TripAdvisor apps, to 30% of its mobile traffic in the U.S., and it should be fully introduced in the U.S. by the end of June, PiperJaffray says.
That should improve the booking experience for users, and mobile conversions for TripAdvisor.
PiperJaffray warns that online travel agencies that refuse to participate in TripAdvisor Instant Book are likely to lose share on TripAdvisor. PiperJaffray expects some major online travel agencies will sign up.
Holdouts may be influenced by the fact that their branding and the fact that they actually handled the bookings on TripAdvisor are emphasized throughout the booking process, PiperJafferay states.