All markets are not created equal, and these five have lessons that are helpful beyond their borders.
Given the wide popularity of making all types of travel bookings online, the travel industry continues to be one of the industries most impacted by the rise of the connected consumer.
Online travel sales are continuing to outpace the industry’s overall growth rates. Countries such as China and South Korea are appealing to the mobile-first mindset of today’s traveler. As a result of this need to design travel offerings with the digital consumer in mind, Euromonitor International set out to explore market nuances in order to pinpoint five of the most promising countries for digital growth in the travel industry:
China is an emerging market standout, according to Euromonitor International’s Digital Consumer Index, which examines a country’s digital readiness. This is partially due to the sheer size of its population as well as the rapid pace in which consumers have embraced mobile-first commerce. 2015 marked the first time Chinese consumers made more digital purchases through a mobile phone than a personal computer. This trend played out in travel, too. Across all of travel, 54% of all online travel sales in 2015 were executed via a mobile phone or tablet.
One of the biggest digital growth stories in China is the expected continued expansion of online travel agencies, which is projected to be the top category for greatest absolute value growth over the 2015-2020 timeframe. While online travel bookings are expected to post a double-digit compound annual growth rate (CAGR) in the forecast period, mobile bookings are anticipated to enjoy an even more robust value. The desire for greater convenience and a shift toward on-the-go consumption are major growth engines behind this mobile-first trend.
South Korea is the most digitally connected population today based on the digital connectivity component of Euromonitor’s proprietary digital index. The country’s tech-savvy culture is unparalleled, with 99% of the population using broadband connections. It is a leader in technological development and has implemented some of the world’s fastest and most extensive networks, meaning this country is ideal for future digital commerce spend.
The travel industry is no exception as the digital channel is rapidly becoming the biggest one for this country’s tourism industry. Although online travel agencies and other travel intermediaries are leading the trend towards digital travel, direct suppliers have also focused their attention on the online channel as they look to attract more consumers and generate more profits directly. For example, airline operators, especially low-cost carriers, are actively developing customised products and selling them through these digital channels. In fact, of the top three categories for greatest absolute value growth across all of commerce, two are rooted in travel (direct airline bookings and online travel agencies).
United Arab Emirates
In Euromonitor International’s Digital Consumer Index, both China and the UAE score more similarly to developed markets. Although outpacing emerging market counterparts, digital commerce in the UAE has been hindered by a strong cash culture with 41% of all consumer payments in 2016 being cash. As a result of this hurdle, future digital commerce opportunities have been propelled by the travel industry, which in general is more digitally driven than the purchases of goods, foodservice or entertainment.
In fact, it is this popularity of online travel bookings that drives much of the digital commerce growth story in the UAE. This market is projected to have the greatest absolute value in online bookings on a per capita basis in the forecast period. The country’s major airlines, such as Emirates, Etihad, Flydubai, and Qatar Airways, recently made investments in their online sales platforms, which made it easier and more convenient for residents to use these platforms to book directly with the airline. As a result, direct airline bookings account for nearly three quarters of all online sales made in the UAE’s travel industry.
The willingness of U.S. consumers to make digital purchases continues to grow, as they become more familiar with browsing and buying online. The rise of the mobile phone is particularly notable, with US consumers expected to purchase more through mobile phones than personal computers by 2020. An estimated 46% of digital commerce across all industries is expected to be executed through mobile phones in 2020, up from 20% in 2015.
Moving forward, a major driver of digital commerce opportunities in the US will be direct lodging bookings, specifically those made through a mobile phone. Lodging bookings made via a mobile phone will contribute $23.2 billion in absolute value over the 2015-2020 forecast period. This is because mobile bookings within lodging remain a relatively underutilised category and present an opportunity for suppliers to reach on-the-go suppliers. In contrast, airline direct online sales are projected to grow more slowly due to the maturity of this space and the early efforts to develop online booking platforms for flights.
Online travel bookings made by residents continue to grow at a healthy rate, with Swiss travelers becoming more familiar with online bookings. The increasing number of Swiss households with internet access, as well as the high penetration of devices, is positively impacting online travel bookings. The fact that online payment systems have become more sophisticated and safer only further contributes to its further development. Online travel agencies and tour operators are among the most promising future digital commerce opportunities in Switzerland, based on forecasted 2015-2020 absolute value growth.
Mobile, in particular, is reshaping the Swiss travel industry as companies leverage the portability and personal nature of these devices to reach and communicate with consumers. Mobile travel bookings, which refer to those bookings made via mobile phones or tablets, have increased significantly. Swiss consumers are comfortable with such devices and, as a result, shifting digital purchases there. Mobile sales accounted for 38% of online travel agencies sales to residents in 2016, 28% of tour operators, 34% of direct airline online bookings and 17% of direct lodging online bookings, according to the latest data from Euromonitor International. In fact, the Swiss spend more on travel services on mobile devices than any other market.
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.
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