The Evolution of Online Travel. Angelo Rossini Euromonitor International

The Evolution of Online Travel Angelo Rossini Euromonitor International

THE ONLINE TRAVEL REVOLUTION THE INTERNET BECOMES MOBILE GEOSOCIAL NETWORKS AND SOLOMO TOWARDS A NEW BUSINESS MODEL EMERGING TRENDS

THE ONLINE TRAVEL REVOLUTION Three steps of online travel evolution Stage Technological innovation Market impact Online travel Internet - New distribution channels - Rise of independent travel - Empowerment of consumers Social media Web 2.0 - Online reviews - Sharing videos and photos - Web reputation - Customer engagement SoLoMo Smartphones and tablets - Localised sales and offers - Personalized information - Real time social sharing - Online concierge services

THE ONLINE TRAVEL REVOLUTION Internet penetration rises in advanced and emerging economies 2.4 billion internet users in 2011 from 1.4 billion in 2007 Asia Pacific the region with the highest number of internet users at 1.1 billion Europe leads in terms of internet penetration at 74% of population Internet Access >80% of population 60-80% of population 40-60-% of population 20-40% of population < 20% of population Source: Internet World Stats Note: July 2011 data

THE ONLINE TRAVEL REVOLUTION Online travel sales play a key role in travel % Online Value of Total Sales in 2011 Car rental Transportation Travel accommodation Travel retail World 32.5 27.9 18.1 28.4 Asia Pacific 4.3 11.1 5.3 14.3 Australasia 51.3 60.1 20.5 15.5 Eastern Europe 28.8 15.3 9.2 4.3 Latin America 3.3 8.6 3.9 8.7 Middle East and Africa 6.0 8.4 9.3 8.4 North America 44.7 52.2 36.5 56.3 Western Europe 36.0 36.2 15.4 24.0 Source: Euromonitor International

THE ONLINE TRAVEL REVOLUTION Online travel results in a new distribution model Supplier's website Affiliate websites Search engines Social media Supplier Consumer Online travel agents High street travel agents Strong increase in direct sales through travel suppliers' websites Key role played by online travel agents Gradual move by traditional travel retailers towards online sales Rise of independent travel

Million subscriptions THE INTERNET BECOMES MOBILE Mobile web access is booming worldwide 1,200 1,000 800 600 400 200 0 Broadband subscriptions worldwide by type million Mobile broadband Fixed broadband 2007 2008 2009 2010 2011 Source: International Telecommunication Union Note: 2011 data are estimates. Mobile broadband subscribers refer to subscribers to mobile cellular networks with access to data communications (e.g. the Internet) at broadband speeds eg. 3G and 3.5G. Global mobile broadband subscriptions are outpacing fixed broadband subscriptions They grew by 342% from 268 millions to 1,186 millions in the 2007-2011 period While fixed broadband subscriptions grew by 68% from 351 million to 591million

Million units THE INTERNET BECOMES MOBILE Smartphones to become internet primary access device 1,600 1,400 1,200 1,000 800 600 400 200 0 Forecast sales of internet access devices by type million units Smartphones Tablets Laptops Desktops Netbooks 2011 2012 2013 2014 2015 2016 Source: Euromonitor International Sales of smartphones forecast to outperform PCs in the next five years Installed smartphones expected to reach 2.5 billion by 2016 In developing countries smartphones are expected to play a particularly important role

Polling Question

Which percentage of your sales are generated by smartphones and tablets? 1) 0%-1% 2) 1%-5% 3) Over 5% 4) I don t know 11% 16% 33% 40%

US$ billion THE INTERNET BECOMES MOBILE US to lead m-commerce sales by 2014 Mobile commerce sales in US, Europe, Japan and China US$ billion 30 25 20 15 10 5 0 2011 2012 2013 2014 2015 2016 US Europe Japan China Source: Forrester Research, Japan's Ministry of Internal Affairs and Communications, iresearch Global, Euromonitor International estimates Note: Digital content is excluded M-commerce over total e-commerce sales from 4% in 2011 to 12.5% in 2016 Japan first m-commerce world market in 2011 with sales accounting for US$ 13 billion US forecast to be first m-commerce market by 2014 with forecast US$ 19 billion sales

THE INTERNET BECOMES MOBILE Auction sites lead m-commerce sales, good potential for travel Top US m-commerce players in 2011 US$ million Top Chinese m-commerce players in 2011 US$ million ebay Amazon Apple Marriott Wal-Mart Intercontinental 0 2,000 4,000 US$ million Alibaba sites 360buy Tencent Vancl Maibaobao Amazon China 0 1,000 US$ million Source: Internet Retailer estimates Note: Global sales. Digital content is included Source: iresearch Global, Euromonitor estimates Note: Sales in China. Digital content is included Auction sites such as ebay and Chinese Taobao led m-commerce sales in 2011 Companies offering digital content were the second most important in 2011 Some hotel companies in top positions in 2011 Sharp growth for OTAs including Orbitz, Expedia and Priceline in 2012

THE INTERNET BECOMES MOBILE Beyond m-commerce: mobile and social influence on online sales E-commerce sales by type - 2015 E-commerce sales by type - 2015 M-commerce Other e-commerce Mobile and social driven Other e-commerce Source: Euromonitor International Source: Gartner The importance of mobile internet and social media goes beyond m-commerce M-commerce sales to account for just over 10% of total e-commerce sales in 2015 But 50% of online sales influenced by mobile and social media strategies in 2015

GEOSOCIAL NETWORKS AND SOLOMO Companies engage customers through social media Tourism boards Hotels Airlines Travel retailers Social Media Brand awareness Realtime sales Promotion Loyalty Customer service Crisis management Lastminute sales Social media focused on brand awareness and user engagement, not shortterm sales Effective to build customer loyalty in the long term Essential to receive customer feedback and act upon it to improve service

Million users Million users GEOSOCIAL NETWORKS AND SOLOMO Social media go mobile 2000 1500 1000 500 Social media mobile users - million 0 Source: Abi Research 2011 2016 50 40 30 20 10 0 Mobile users social network access by type - % users US EU5 via app via mobile browser Source: comscore Note: 3 month average ending Oct 2011. EU5 includes Germany, UK, France, Italy and Spain Mobile users of social networks reached 550 million in 2011 They are forecast to reach 1,700 million by 2016 Apps slightly prevailing in the US and mobile browser slightly prefered in Europe

Million users Million users GEOSOCIAL NETWORKS AND SOLOMO Facebook leads also among mobile users Mobile users of key social networks in 2011 - million Top countries for Facebook mobile users in 2011 - million 450 400 350 300 250 200 150 100 50 0 Facebook Twitter Instagram FourSquare 120 100 80 60 40 20 0 US Indonesia India UK Mexico Source: TomiAhonen Consulting Source: Facebook, Socialbakers In 2011 Facebook leads the number of social networks mobile users with 425 million users Fast growth in 2012 with 550 million mobile users in June and 600 million in September Twitter second international social network for mobile users in 2011 with 55 million users

GEOSOCIAL NETWORKS AND SOLOMO Geolocalization opens new location based opportunities Geolocalisation is the identification of the geographic location of the traveller It is available through GPS technology The focus is on where the traveller is, and what services are available locally Development of location-based mobile social media such as Foursquare and Yelp New functionalities for traditional social networks such as Facebook and Google+ Local

GEOSOCIAL NETWORKS AND SOLOMO Geosocial marketing to better target consumers Stored consumer profile Past consumer behaviour Current location Targeted offer Friends recommendations Geo-social networks provide companies with useful information to target consumers Companies can offer services and promotional sales based on current location Consumer profile information can be used in order to customize offers and service Reviews and recommendations by friends can also help address consumers

GEOSOCIAL NETWORKS AND SOLOMO The key of SoLoMo for travel companies: «here and now» Travellers Time: anytime Space: anywhere Travel companies Location-based services are key for local businesses such as eg. bars and restaurants For travel companies, the significance of the location aspect goes beyond them SoLoMo travellers key expectation is to be able to receive real time service

GEOSOCIAL NETWORLS AND SOLOMO Hotels: success for reservations on the go Mobile hotel bookings are the most successful SoLoMo service in travel According to Internet Retailer, Marriott is leading mobile travel bookings in 2012 It is followed by Orbitz, Hilton, easyjet, Intercontinental and Expedia These companies rank in the top ten for mobile commerce in Americas and Europe

GEOSOCIAL NETWORKS AND SOLOMO Airlines: real time services via mobile The real time, «here and now», aspect of SoLoMo key in the air market Mobile devices both a customer service tool and a source of additional revenues Services include check in, flight alerts, seat choice and booking of onboard services Location-based services include geo social networks «check ins», eg KLM

Polling Question

Do you offer to your customers real time services and options to buy additional products via smartphones and tablets? 1) Yes 2) No 50% 50%

TOWARDS A NEW BUSINESS MODEL A central role for consumers in travel Flash sales Travel reviews Social networks Travel aggregators Consumer Dynamic packaging Offline sales Free products Online bookings Mobile bookings Low Travel cost reviews products A shift of power to consumers is the result of the online travel revolution Travellers have much more information about products and destinations Much wider choice of offers

TOWARDS A NEW BUSINESS MODEL A new business model for travel companies Old Business Model New Business Model Travel company Travel product Travel product Travel Company Consumer knowledge Consumer Consumer Relationship To stay competitive travel companies need to re-think their business model Old business model was aimed at a more passive role for consumers Greater knowledge of customers and interaction are required

TOWARDS A NEW BUSINESS MODEL Making the most of SoLoMo Mobile website Travel company Mobile bookings Apps Mobile alerts and services Geo social media Reputation management Websites optimised for mobile usage are today a must for travel companies Proprietary apps and partnerships with geo-social media also increasingly important Reputation management departments to act swiftly on customers social media feedback Rising customers expectations of real time services when on the go, including bookings Real time answers needed not to lose on business

Polling Question

Do you have a? 1) Website optimized for mobile usage 2) App 12% 3) Mobile website and app 4) None of the two 22% 31% 35%

EMERGING TRENDS New types of social media rise Instagram and Pinterest, focus on the visual aspect Branch aiming at meaningful internet discussions

% sales of TVs EMERGING TRENDS Take off of Smart TVs Sales of digital TVs by Network Connectivity 2012-2016 100% 80% 60% 40% 20% Non internetenabled TVs Internet-enabled TVs 0% 2012 2013 2014 2015 2016 Smart Tvs about to take off as internet access device Travel companies to benefit from emotional connection of viewers of travel programmes

EMERGING TRENDS The growing importance of maps Recent Apple-Google map war showing their importance Mobile users increasingly using them to find local businesses Soon a huge advertising platform and market

EMERGING TRENDS Blurring of virtual and real life Brazilian retailer Hangers launch «Fashion Like» campaign Growing role for QR codes Augmented reality functions tourism boards apps

EMERGING TRENDS The development of peer-to-peer online travel services Airbnb and other peer to peer holiday rentals gaining ground New social network Touristlink offering local guides for authentic experiences

EMERGING TRENDS Commodity risk: differentiation of online travel products Products offered by OTAs and LCCs becoming increasingly similar Need to differentiate to avoid becoming a commodity by offering additional value: Being ahead of technological innovation Offering exclusive products and services Developing customers attachment to brands

EMERGING TRENDS Developing emotional attachment to the brand Online dialogue with customers to strengthen relation Share company values with them Inspire them