There is no ambiguity that mobile platforms will continue to drive growth in the online space as service providers focus on improving the mobile experience, both, through apps and mobile websites, with an eye on tapping millennials, says Simon Lehmann, President, Phocuswright. He shares some key trends in the segment, noting that India’s bid to push for digital transactions, backed by the recently announced demonetisation, could further expedite its foray in the online space.
The idea of digitisation is gathering momentum, especially in India, with the government actively promoting digital payment channels and mobile wallets. ‘Digital India’ is Prime Minister’s pet project. How do you view this development and what could be its ramification on the online industry?
When government prioritizes digital engagement and commerce, that is generally a boon to the online – and especially the mobile — travel space. And in India, the government has a huge access point to travel – its state-run rail system is already one of the biggest e-commerce companies in the world. The relative security and ease of digital payments will be a big factor in how fast India’s digital travel market grows, and that is an area where the government could spur improvements. Especially with India’s recent currency demonetization in November 2016, there’s been a huge upswing in digital payments, especially via mobile. To the extent that this gets more people accessing information and transacting on mobile devices, it will help fuel online travel. For millions of people in India, the mobile is their only connection to the Internet. However, a large segment of the population relies on basic feature phones, which limits functionality in terms of mobile travel planning and booking.
A lot of parent organisations, through their subsidiaries, are acquiring stakes in various companies. This is particularly true for some of the recent acquisitions, raising concern over the growing cartelisation of business in the online space. What is your take on this? Do you see this as a threat to businesses and industry?
In mature markets like the US and Europe, there’s been massive consolidation – Expedia and Priceline being the most obvious examples. This is less the case in developing markets. But in general, big established brands have the marketing power and brand loyalty that make it really difficult for newcomers carve out a meaningful niche for themselves.
Share with us some key trends that you envisage in the online space? What is going to be the core areas of focus for service providers?
In many markets, growth in the online category is coming largely through mobile. So, providers are focusing on improving the mobile experience for their customers – both through dedicated apps and mobile websites.
Also, millennials continue to be a key focus for providers, and these younger travellers’ online behaviour and expectations are driving providers’ efforts to some extent – incorporating more on-demand features, enabling smartphone-based services, alternative accommodations, etc.
Messaging-based booking – all the big players are experimenting with it, and travellers say they are receptive to booking via message platforms (see attached slide). But uptake has been slow – perhaps a matter of getting the user experience right, or improving personalization.
Supplier/OTA competition – OTAs have enjoyed strong years. They are executing better on mobile than suppliers, and they have broadened their offerings to include the alternative accommodations that are increasingly considered alongside hotels. And with younger travellers showing an affinity for one-stop-shopping on mobile platforms, the outlook is pretty rosy for OTAs. But hotels are putting up a fight with preferred rates for loyalty members.
In-destination activities are getting more attention from intermediaries and technology startups. Suppliers now have access to an array of affordable Saas solutions that make it much easier to move products online. At the same time, OTAs are paying more attention to this huge, fragmented, segment of travel.
In the air space, we are a few years removed from the big unbundling efforts that really changed how flights are conceived of as products. Airlines still have ambitions to break out their products and sell in a more robust way. Personalized offers, more timely/relevant upselling, and seamless chat-based customer service, are all on the near horizon and could represent another big shift in the online airline space.
Mobile platform is fast emerging as the most important platform for driving business. What is the trend like in Asia Pacific? How do you expect this trend to unfold in the region?
As a region, APAC is taking to mobile channels faster than anywhere else. It will be exciting to watch what this could mean as e region grows, and its online travel companies and travel consumers are more tech-savvy and perhaps more receptive to innovation and new distribution models.
Asia-Pacific is home to the world’s leading mobile travel market – China. In 2016, it became the first country to get a majority of its online bookings through mobile platforms. By 2020, 39% of China’s total travel market will go through mobile channels – this in a travel market that had just 16% online penetration in 2013. India’s shift to mobile has been slower. It is at less than half China’s mobile penetration, and the gap is widening behind China’s torrid growth. But China is already influencing India via Ctrip’s tie-up with MakeMyTrip, and that could speed up mobile growth. We also expect China’s, and Ctrip’s, influence drive mobile growth in Southeast Asia.
What is happening in the European market? It is quite a mature market in terms of penetration and usage. How do service providers bring about innovation? How different is the modus operandi, compared to some of the newer markets like India?
Despite its maturity, about half of European travel is booked offline, and there are several country markets where traditional travel agencies and tour operators are extremely important. So there’s still lots of opportunity for online providers to capture more market share. In some places, providers offer a hybrid approach that offers a mix of offline/online features, from travel inspiration, through planning and booking. In terms of the mature online space in Europe, the competition between suppliers and intermediaries is evident in all segments. Suppliers are focusing on establishing direct bookings and relationships with their customers, while carefully balancing their reliance on OTAs (particularly in the hotel segment). In India, the online travel market opportunity is massive and still largely untapped. Plus, there is a strong entrepreneurial spirit in the country, and the climate for innovation in the space is quite supportive.