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In the past few years, mobile has emerged as a key channel within the travel industry and it is gradually heading towards holding a dominant position in terms of both travel bookings and customer service.
The mobile channel is also changing travel consumers’ behavior, with travelers on the move expecting to be able to find what they need when they need it through their mobile devices.
This has meant a shift in focus in terms of online travel marketing, from the time of booking to the travel experience, and therefore from the time before the trip to the time during the trip. As a result, all travel companies are being forced to review and revise their business models, to include mobile travel assistance as a core part of their offer, following customers throughout their trips to offer them support and the possibility to make additional bookings. Travel companies which are quick to successfully adopt this new model will strengthen their competitive positions, while those companies which do not embrace it are expected to lose market share.
Sharp Growth in Global Mobile Travel Bookings
The rise of the mobile channel has resulted in the first place in a growing share of online travel bookings being made through mobile devices.
The latest global travel research by Euromonitor International has revealed that mobile travel bookings totaled $96 billion in 2014, accounting for 12.5% of total online travel bookings made globally. They are forecast to record a strong 22% CAGR over 2014-2019 to reach $260 billion.
Mobile bookings are expected to account for 25% of total global online travel sales by 2019, and to continue their rise in the longer period to eventually account for the majority of global online travel sales.
Online travel agencies (OTAs) was the leading travel category for mobile bookings in 2014 in terms of both actual sales, at $34 billion, and of the percentage of their total online sales, at 17%. The two global leading OTAs, Expedia Inc and The Priceline Group, were estimated to account for about two thirds of OTA global mobile travel sales in 2014.
OTAs are expected to remain the largest category for mobile travel bookings throughout 2014-2019 thanks to its leadership in terms of technological innovation, with mobile sales reaching $90 billion by 2019. Considering the forecast strong rise in mobile travel bookings in the next few years, OTAs’ leading position in this channel means that they will hold an advantage in their competition for travel bookings over direct suppliers such as hotels and airlines.
Among travel direct suppliers, airlines are expected to record the best performance in terms of actual sales by 2019, with mobile travel sales totaling $70 billion, followed by lodging companies, with sales reaching $50 billion in the same year.
Western Europe was the leading region in terms of mobile travel sales in 2014, at $33 billion, closely followed by North America, at US$31 billion. Asia Pacific lagged considerably behind in terms of actual mobile travel sales in the same year, at US$19 billion.
Western Europe is forecast to remain the leading region in terms of mobile travel sales throughout 2014-2019, with sales reaching $85 billion by 2019, followed by North America ($82 billion) and Asia Pacific ($56 billion).
Changing Business Models in Travel
The sharp rise in mobile travel bookings is, however, not the only and probably not the most significant impact the advent of the mobile channel is having on the travel industry. In fact, the mobile channel has changed the same mission and business model travel companies need to adopt today, which includes constant mobile travel assistance for their customers.
The impact the mobile channel is having is especially significant in travel due to the peculiarity of travel products. Traveling is an experience which concerns people on the move; the introduction of mobile, internet-connected devices has therefore given travel companies the possibility to extend their services throughout every stage of the travel experience, offering customers new solutions to make it more convenient, comfortable and interesting.
Today travel companies need to be able to follow their customers across all their digital devices, including PCs, smartphones, tablets and wearable technologies; to help them enjoy a seamless travel experience through mobile services and assistance; to respond in real time to requests and complaints; to offer customers the information and tools to better discover and enjoy their destinations; and finally, to be able to increasingly offer a personalized mobile service, suggesting the most interesting activities and attractions to travelers based on their personal tastes.
This need to change business models concerns all travel companies, including lodging and transportation companies, as well as travel intermediaries and providers of in-destination tourist services.
Disrupting the Competitive Environment for Travel, Once More
The travel industry has already been disrupted once in the past 20 years, by the rise of the online channel, which forced companies to change business models, and had a significant impact on market share, with companies such as Expedia and Priceline reaching, in just a few years’ time, the top ranking positions amongst global travel intermediaries.
The advent of the mobile channel represents another disruptive event for the travel industry, once more forcing companies to change their business models. This is also expected to have a significant impact on the competitive environment, favoring the players who can respond more effectively to the challenges coming from the new technological developments and consumer behavior.
While OTAs currently lead in terms of mobile travel technology, they have an advantage and opportunity to grow further in the next few years by providing their customers with services that other players, i.e. independent hotels, will find harder to provide. Other travel companies such as hotel chains and airlines need to fill this competitive gap with OTAs and swiftly embrace the mobile travel assistant model to defend their positions. New entrants in the travel booking competitive environment, such as TripAdvisor and Google, are expected to benefit from the rise of the mobile channel thanks to their strength in terms of technological innovation and customer knowledge.
Euromonitor International is a leading provider of global strategic intelligence on consumer markets, with offices in London, Chicago, Singapore, Shanghai, Vilnius, Santiago, Dubai, Cape Town, Sao Paulo, Tokyo, Sydney and Bangalore and a network of 800 in-country analysts worldwide. Euromonitor International’s analysis of the global travel industry covers a wide range of categories, including tourist flows and expenditure, lodging, transportation, car rental, cruise, tourist activities, travel intermediaries, online and mobile travel.