The State of Mobile Booking 2016

by Colin Gibbs + Skift Team - Nov 2015

Skift Research Take

An in-depth look at the trends that are driving booking via smartphones and tablets, the challenges holding the market back, and strategies for businesses in the travel and hospitality industries.

Report Overview

Use of mobile apps and websites is soaring as the smartphone revolution enters maturity. Though the number of mobile bookings of hotel rooms, airline flights and other travel-related items remains small, mobile booking activity is beginning to pick up. This is because OTAs and travel brands are improving their mobile offerings to make it easier for travelers to make arrangements and conduct transactions on the go. Those consumers are likely to be relatively young, affluent and active, making them particularly appealing to travel and hospitality companies.

This Skift Trends Report examines the factors that are driving the market for mobile booking, the challenges that continue to limit its growth, and the kinds of travelers who are booking trips on their smartphones and tablets. It features an extensive Q&A with the SVP of global digital at Starwood Hotels and Resorts

Worldwide plus the latest data on current usage trends both worldwide and in the U.S., and insights and strategies for companies hoping to ramp up their mobile booking businesses.

Executive Summary

Use of mobile apps and websites is soaring as the smartphone revolution enters maturity. Though the number of mobile bookings of hotel rooms, airline flights and other travel-related items remains small, mobile booking activity is beginning to pick up. This is because OTAs and travel brands are improving their mobile offerings to make it easier for travelers to make arrangements and conduct transactions on the go. Those consumers are likely to be relatively young, affluent and active, making them particularly appealing to travel and hospitality companies.

This Skift Trends Report examines the factors that are driving the market for mobile booking, the challenges that continue to limit its growth, and the kinds of travelers who are booking trips on their smartphones and tablets. It features an extensive Q&A with the SVP of global digital at Starwood Hotels and Resorts

Worldwide plus the latest data on current usage trends both worldwide and in the U.S., and insights and strategies for companies hoping to ramp up their mobile booking businesses.

Introduction

Mobile devices continue to change the way we live. Adults in the U.S. now spend nearly three hours a day on smartphones and tablets on “non-voice” activities, according to the latest figures from eMarketer. That figure is up from 46 minutes per day in 2011, and it is expected to increase to three hours and 18 minutes per day by 2017.

Predictably, the time we spend on our desktop and laptop computers is slowly eroding as our dependence on mobile grows. Americans spent two and half hours per day consuming major media on computers in 2011, a figure that will gradually decline to two hours and 10 minutes a day by 2017.

But while mobile has already overtaken computers as a platform for major media, we continue to use the two platforms in different ways. Smartphone and tablet gaming is booming, for instance, as is mobile video. But m-commerce continues to lag far behind: Statistics from the software technology company Demandware, for instance, indicate that while smartphones accounted for 39 percent of worldwide traffic to online retail sites in the second quarter of 2015, they accounted for only 19 percent of orders.

It should be no surprise, then, that travel and hospitality bookings from desktop and laptop PCs continue to outpace smartphone bookings substantially – at least in more mature markets. A TripAdvisor survey conducted by Ipsos earlier this year found 42 percent of travelers around the world have used their smartphones to plan or book at least part of a trip – TripAdvisor refers to these users as “Connected Travelers” – but only 11 percent of those users reported actually booking an accommodation via a “mobile app channel.” A mere 8 percent of respondents said they had booked a room on their smartphones.

Some of the same challenges holding back m-commerce are surely shackling the mobile booking market as well. A 2014 survey by Mobiquity found that U.S. consumers said several factors were particularly frustrating when shopping on mobile devices, including a lack of accessible info (26 percent of respondents reported this), inconsistent user experiences across devices (37 percent), and slow load times (42 percent). Security concerns and difficulties with data input are also often cited as major hurdles for m-commerce. And all those challenges can be applied to mobile booking.

Mobile booking faces unique challenges as well. Travizon surveyed 204 travelers for its 2015 Business Travel Survey and found that 54 percent of respondents said their company had no policy guidelines for booking with suppliers via mobile, another 23 percent said they didn’t know whether company had such guidelines in place. That lack of support in the enterprise helps explain why Travizon found that only 2 percent of respondents said they always book business travel reservations from a mobile device, while 59 percent said they never do.

Texting

“Mobile now represents more than 25 percent of online business travel bookings in the U.S.,” Anita Salvatore, Travizon’s EVP of account services, said in a prepared statement outlining the survey results several months ago. “Yet corporate policy continues to lag when it comes to acknowledging mobile behaviors, defining acceptable mobile apps and usage, and communicating these provisions in order to drive compliance.”

The problem is exacerbated by the fact that frequent business travelers often like to combine their business travel with leisure time, according to Angelo Rossini, who is responsible for Online Travel Research at Euromonitor International. Those tech-savvy users typically have their favorite online channels through which they book pleasure trips and prefer to use them rather than their corporation’s chosen booking agent. If corporations become more flexible in their booking policies, mobile booking could see a notable boost.

“This is driving an issue of compliance with companies’ policies, with an increasing number of business travellers not using their company’s corporate travel program, instead preferring to turn to leisure intermediaries and direct suppliers for their trips,” Rossini wrote several weeks ago. “The need to have more freedom in choosing the booking channel for business trips was behind the introduction of open booking. Open booking allows business travelers to make their bookings through any channel thanks to specialized companies able to capture all travel spend by company employees and report them to travel managers or TMCs [travel management companies].”

While mobile booking is still a small market, though, it is clearly on the upswing. TripAdvisor’s survey found that the number of travelers using a mobile app to book accommodations has doubled over the last year. Some 45 percent of so-called “connected travelers” use their smartphones to book activities for their trip, second only to the 55 percent of that group who reported using a laptop for such activity. That booking is generating substantial sums of money: Euromonitor International estimates mobile travel bookings totaled $96 billion in 2014, accounting for 12.5 percent of worldwide online travel bookings. The travel market research firm predicts those revenues will grow by a 22 percent compound annual growth rate from 2014 to 2019 to reach $260 billion.

Smartphones, Tablets and How Mobile Is Different

Because the market for mobile booking is still very young, there’s little aggregated data on user behavior differences between smartphones and tablets. In the overall m-commerce market, tablet users are more likely than smartphone users to actually close a transaction on their devices. Recent data from eMarketer indicates that 80.9 percent of U.S. users who shop on a tablet actually make a purchase, far outpacing the 52.4 percent of smartphone users who are converted from shoppers to buyers. Which indicates users are far more comfortable closing a deal on larger devices with bigger screens.

Kayak Android app

That said, the iPhone appears to be a particularly suitable platform for m-commerce – or perhaps iPhone users are more interested in mobile shopping than consumers who use other phone models. The iPhone’s share of U.S. e-commerce transactions increased 12 percent from the fourth quarter of 2014 to the first quarter of 2015, according to data from Criteo. Nearly 10 percent of all e-commerce transactions in the U.S. were conducted on an iPhone during the first quarter of this year, Criteo estimates.

Much of the disparity between tablets and phones in m-commerce surely has to do with the difficulties of inputting data on smaller devices. Entering a name, address and credit card number can be done fairly quickly and painlessly on a tablet, but logging that same data on a phone is typically cumbersome and time-consuming. That is slowly changing, according to Josh Martin, director of analytics research services at Strategy Analytics, as users begin to warm to mobile payments platforms that are integrated with apps and services from a variety of vendors.

“Conversions are getting easier on mobile devices than they have been before,” Martin said in an interview with Skift. “People can use Touch ID on Apple or Android Pay rather than put credit card information into their phones.” So travel and hospitality companies looking to leverage mobile bookings should ensure their apps are seamlessly integrated with major mobile payments platforms to help users complete their transactions with ease.

The Rise of Last-Minute Hotel Booking

The emergence of smartphones and tablets as booking vehicles coincides with a marked increase in the number of travelers checking the mobile web for last-minute stays. Online travel agencies are taking advantage of that traffic far more effectively than individual hotel chains are. Phocuswright parsed data from the online advertising platform Adara and found that more than 70 percent of bookings on the mobile sites of online travel agencies such as Expedia and Orbitz between May 2013 and December 2013 took place within 24 hours of check-in. Hotel mobile websites, however, saw no major spike for same-day bookings but rather saw relatively even distribution of bookings over 30-plus days in advance.

Timeliness and convenience explains the disparity between last-minute bookings by online travel agencies and hotels. Travelers looking for last-minute deals want to compare prices and accommodations from a variety of providers, and they have a limited amount of time in which to do so. Online travel sites let them do that more quickly than bouncing from one hotel’s site to another.

Hotels can fight back, though, by making their mobile apps and websites as booking-friendly as possible, according to Mary Haley of O’Rourke Hospitality Marketing.

“As mobile users become more comfortable using their mobile devices to pay for items and hotel rooms, we can expect to see an increase in mobile bookings on OTA sites and hotel sites,” Haley wrote on O’Rourke’s blog recently. “One way hotels can help make users comfortable purchasing from the property is to simplify the mobile booking process. Instead of a booking engine designed for a desktop, [a] booking engine should be designed with mobile users in mind. This means bigger buttons that are easy to select, simple drop down menus, and an intuitive layout. Providing a better user experience will encourage users to adopt mobile booking faster.”

The race to capture last-minute travelers has led companies such as Booking.com, Priceline, Expedia, Hipmunk and others to offer same-day hotel booking features, placing them in direct competition with more specialized companies such as HotelTonight. Those moves are likely to result in the consolidation – or perhaps even the elimination – of HotelTonight, One Night Standard, or other more targeted last-minute booking providers.

Millennials and the Sharing Economy

As with many segments of the broader mobile app economy, millennials – particularly older millennials – are driving mobile booking activity. The fifth installment of Skift’s Travel Habits of Millennials 2015 series of surveys found that 29 percent of respondents from the ages of 25 to 34 had used a mobile browser or app to book an airline, hotel or car rental in the last year, outpacing any other age group. Nearly 25 percent of users from the ages of 18 to 24 said they had booked via mobile in the last year. In every other age group, less than 18 percent of respondents reported using mobile booking.

It’s no coincidence that millennials are also driving the sharing economy that is fueling much of the growth of mobile booking. In a recent Vision Critical survey of Internet users in North America, 71 percent of respondents from the ages of 18 to 34 said they’d consider using a sharing economy service for accommodations if it were cheaper than purchasing traditionally; only 59 percent of users 35 to 54 agreed. Similarly, millennials were substantially more likely to consider using a sharing economy service to rent a car than older consumers were.

Chart1

The sharing economy is largely based on trust. Millennials are much more likely to trust the new wave of disruptive, sharing-based services than other age groups. Sixty percent of travelers from 18 to 34 trust the sharing economy compared to just 37 percent of all age groups, according to recent data from Allianz Global Assistance. And 28 percent of travelers under the age of 35 said they planned to book travel through a shared economy service during the summer of 2015; only 17 percent of all respondents said they would do so.

It’s also worth noting that Millennial-age consumers are far more active users of smartphone apps and the mobile web than their older counterparts. Millward Brown Digital reported earlier this year that 77 percent of millennials use a smartphone daily, while only 60 percent of Generation X users and 42 percent of Baby Boomers do so. Travel and hospitality companies hoping to boost their mobile bookings should hone their focus on those younger users.

Chart2_MillennialsTrustSharingEconomy

What Kind of Consumer Books via Mobile?

According to recent research from Criteo and Phocuswright, U.S. travelers who booked flights from their smartphones are 47 percent more likely than all U.S. leisure travelers to have taken three or more trips in the last year. Meanwhile, a report from Expedia Media Solutions and comScore indicates 52 percent of luxury travelers are likely to book a trip on a smartphone within a year, nearly double the 29 percent of all travelers who plan to use mobile booking.

Since Millennials are particularly active mobile users, they’re more inclined to shop on their phones than older users. According to a Global Web Index quarterly report released earlier this year, roughly 40 percent of Internet users worldwide from the ages of 16 to 24 use a mobile device to shop online every month. Additionally, 30 percent of respondents from 25 to 34 reported using a mobile shopping application within the last month – the highest percentage of any age group.

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These mobile-toting travelers make for an especially attractive market, then, for airlines, hotels and other companies in the travel industry. And as a recent survey from MMGY revealed, 64 percent of active leisure travelers in the U.S. think they’ll find a better deal on a brand’s website than on an OTA’s site. So savvy businesses can entice these users by offering discounts and other incentives to users who make their arrangements through mobile apps or websites. And they can capture those high-value customers on their phones through loyalty programs, offers via push messaging and other perks.

Mobile accounts for only 20 percent of worldwide online travel sales, according to Euromonitor International, but competition is heating up in a very big way. TripAdvisor’s mobile-friendly booking app launched in the first quarter of 2014 with roughly 150,000 properties; that figure had grown to 235,000 by the summer of 2015. Meanwhile, Expedia, which spent an estimated $1 billion in 2014, launched a $6.45 million TV ad campaign in September to tout the tours and activities that can be booked through its mobile app (it spent $2.8 billion in marketing in 2014), and Google is expanding the hotel-booking functionality that is integrated with Google Search. Mobile booking still faces too many challenges to see a dramatic increase in usage overnight, but it could become a massive market over time.

The figures above prove that there is still plenty of room left for growth in the overall m-commerce market, and in mobile booking specifically. Consumers often cite security concerns as a primary reason they don’t use their phones to conduct transactions, so mobile booking companies must earn the trust of travelers to entice them to book trips and activities on their phones. Those businesses should also make it as easy as possible for users to enter and access credit card information and other account data by integrating with popular payments platforms and providing a seamless user experience across devices. Mobile apps and websites should load quickly and flawlessly, minimizing the number of potential customers lost “in the funnel.” Finally, they must maintain mobile apps and websites that require users to jump through a minimal number of hoops to accomplish their tasks.
The market is still relatively untapped, but it’s becoming increasingly competitive. The major OTAs are stepping their battle against last-minute booking sites such as Hotel Tonight, and Google recently announced a series of moves aimed at moving more aggressively into the hotel advertising and booking market.

Meanwhile, The Priceline Group only recently agreed to allow some of its brands to participate in TripAdvisor’s instant booking platform. The competition will become more intense as mobile bookings increase not only for hotels but also for airline seats and other segments of the travel market.

Where the Money is Flowing

Online travel agents claimed the leading category in mobile travel bookings in 2014, according to Euromonitor International. Such OTAs generated $34 billion in sales worldwide last year, and mobile accounted for 17 percent of the category’s total online sales. Expedia and The Priceline Group claimed roughly two-thirds of those worldwide revenues, Euromonitor International estimates. Airlines were the top-selling direct supplier worldwide, followed by direct lodging providers.
Euromonitor predicts OTAs will remain the largest category for worldwide mobile travel bookings for at least the next several years, reaching $90 billion in sales by 2019. Individual brands will continue to grow as well: Airlines will continue to lead direct vendors with sales totaling $70 billion by 2019, and lodging companies are expected to ring up $50 billion in that year.

Mobile booking is particularly popular in some emerging markets where mobile devices are often the primary means of connectivity because traditional, fixed-line Internet access isn’t necessarily ubiquitous. Data from TripAdvisor indicates 65 percent of consumers in both Thailand and China use their mobile phones to plan or book a trip, making those countries the top markets worldwide for “connected travelers.” Brazil, Indonesia and Malaysia round out the top five such markets respectively, while the U.S. is the eighth-most connected mobile travel market with 48 percent of users.

Those figures don’t necessarily correspond with mobile booking revenues, however. Euromonitor estimates Western Europe was the leading region for mobile travel sales in 2014 with $33 billion. North America followed closely at $31 billion in sales last year, while Asia Pacific lagged far behind at $19 billion. Euromonitor expects Western Europe to continue to be the leading region through 2019, followed respectively by North America and Asia Pacific. Mobile booking activity in emerging markets will only increase in the coming years, and many of those markets are simply too big to be ignored by major global players. But the most lucrative markets for mobile booking will continue to be in more mature regions like North America and Western Europe.

Apps vs. Web: Yes, You Probably Need Both

Mobile applications are generally considered to provide a superior user experience to mobile websites, but data from Google’s 2014 “Traveler’s Road to Decision” study indicates neither channel is dominant in mobile booking. Google found that 45 percent of leisure travelers who booked on a smartphone did so via their browser, while 40 percent used a mobile app. Meanwhile, 55 percent of business travelers used the browser to make a booking, and 63 percent used a mobile app to do so. (Some respondents reported using both mobile websites and mobile apps.) Forty-four percent of users in both categories actually placed a call to make their arrangements.

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Most travel and hospitality companies should continue to focus on both mobile channels. But airlines, hoteliers and other direct players in the travel space would much prefer their customers use their apps than their websites for several reasons. While consumers often use online search to find what they’re looking for on the web, using a branded app ensures they stay in direct contact with the company itself. An app also creates an opportunity to engage the customer more closely through features such as push notifications and loyalty programs, as well as the use of technologies that can be used to unlock a hotel room door or board a flight. Such perks might also provide a way to keep consumers from straying to OTAs, which can also access that kind of data but can’t leverage it in a face-to-face manner the way hotel chains and airlines can.

“I think the biggest challenge if you look at how users are using appslications is that they’re utility applications. Unless you’re a frequent traveler, the chances of downloading and using a travel app frequently are small.” — Josh Martin, director of analytics research services at Strategy Analytics

“We’re seeing an increased focus on branded apps, and it makes sense,” said Strategy Analytics’ Martin. “These guys are going to make more money through their own apps, and you’ll get a stickier user. But I think it’s unrealistic to expect anyone to book through a certain provider, through a particular app” as opposed to using an OTA where they can easily compare prices and other variables. The effort to get branded apps into the hands of consumers is why we’re seeing players in different sectors of the travel industry integrate their apps with each other’s. For instance, Uber has struck partnerships that enable users to order a car from apps published by United Airlines and Hyatt Hotels.

It’s still unclear whether the direct vendors can make their apps compelling enough to keep their customers away from major OTAs, however.

“I think the biggest challenge if you look at how users are using appslications is that they’re utility applications,” Martin said. “Unless you’re a frequent traveler, the chances of downloading and using a travel app frequently are small.”

Interview: How Starwood Hotels Views Mobile Booking

headshotInterview: Julie Atkinson, senior vice president of global digital at Starwood Hotels & Resorts Worldwide, Inc.

Starwood has moved aggressively to embrace mobile, offering several branded mobile apps including versions of its Starwood Preferred Guest (SPG) loyalty program for Android phones and Apple’s smartphones and tablets. Skift interviewed Atkinson via email about the growth in mobile booking, user behavior on mobile and the power of mobile applications.

Has Starwood seen a marked increase in the number of its guests that book rooms though the mobile web or apps? Are guests more likely to use Starwood’s apps or its mobile website to book their accommodations?

Overall mobile gross bookings increased more than 50 percent in 2014, and our growth is even more dramatic in 2015. More than half of our site visits now come through mobile devices, up from 13 percent just three years ago.

How does user behavior differ between smartphones and tablets? Are users trying to accomplish different tasks on each platform?

In order to appeal to specific customer needs on the right channel or device we develop unique content and functionality for particularly devices. For example, we developed our smartphone app with the mobile traveler in mind, easy to use with “one eye and one thumb” while walking through an airport, whereas our iPad app was designed for a more leisurely interaction, a “lean back” moment, encouraging travelers to explore and dream about different destinations.
Starwood has also extended its apps to wearables – for example with Apple Watch – which allows our developers to leverage new form factors to enhance guests’ interaction with Starwood. The SPG App has become Starwood’s third-largest booking channel.

Does Starwood have any insight into its mobile bookings through online travel agencies? What does Starwood do to entice guests to book through its own mobile apps rather than an OTA?

Guests are increasingly bypassing other channels to book directly on our sites which supports our “own the guest” strategy. Our digital innovation, combined with our brands, loyalty program and the experience we deliver in our hotels, gives our guests a true “end-to-end” experience before, during and after a stay. OTAs, startups and others are focused on parts of the equation, but we’re focused on the entire guest experience. Shares of bookings through our digital channels – our most profitable – are at their highest levels ever.
We have also built powerful functionality into the mobile apps which is exclusive to loyalty members through our channels. Some examples of these are SPG Keyless [the hotel’s mobile check-in system], compelling in-stay offers and content that changes based on where you are in your journey, and free high-speed Internet. As the first hotel company to launch mobile, keyless check-in, Starwood is rolling out SPG Keyless to 150 hotels and 30,000 door locks around the globe in the first half of 2015.

“As our fastest-growing channel, we believe it is only a matter of time until mobile bookings are one of our primary global sources of revenue.” — Julie Atkinson, senior vice president of global digital at Starwood Hotels

Mobile booking still seems to lag other uses of mobile data. What’s holding the market back, and how can that be addressed?

As our fastest-growing channel, we believe it is only a matter of time until mobile bookings are one of our primary global sources of revenue. We see a population in emerging markets in particular where the device of choice is mobile, and it may be the only choice. We’re thinking of our mobile channel through the SPG app in particular, as mission control. We get a lot of feedback about how guests want to experience our services and products. “Untethered” applies to all parts of the experience – pre, during and post – and that’s what we’re working towards.

Are there differences between the guests who book via mobile and those who don’t?

A full spectrum of guests book via mobile but it is most interesting to look at the correlation between frequency of stays and mobile app usage. Those who are heavy leisure travelers will more likely conduct research over the app for future stays, while guests who are very familiar with our hotels are more likely to book via mobile.

Insights and Strategies

  • Mobile booking is still a very small market worldwide, but it’s growing relatively quickly. Consumers who are most likely to book on their phones are inclined to be young, affluent, active travelers, so they’re valuable customers. Booking functionality is a must-have for app-based services such as Uber, of course, but it must also be a core feature of any major mobile website and application from travel and hospitality companies.
  • While mobile apps are a core component of some travel businesses, traffic on the mobile web continues to ramp up. App usage can vary substantially from mobile website usage, but most companies should address both channels by enabling users to book both through their apps and through their mobile websites.
  • As in the broader m-commerce market, simplicity and ease of use is crucial for mobile booking – particularly on smartphones. Smartphone booking sites and apps must offer a clean user interface with just a few basic options, enabling users to make their arrangements with as few clicks as possible. Additionally, the user experience between devices should be seamless, enabling regular users to log in and complete the booking process quickly.
  • Additionally, mobile payment mechanisms are finally becoming more user-friendly thanks to the emergence of major platforms such as Apple Pay, which should give the m-commerce market a substantial boost over the next several years. Expect mobile booking activity to grow as m-commerce activity increases.
    User-friendly features in mobile apps can build customer loyalty and bring additional value to the platform. So while booking through a mobile app must be simple, apps should have more sophisticated, compelling features that encourage users to keep coming back.
  • User-friendly features in mobile apps can build customer loyalty and bring additional value to the platform. So while booking through a mobile app must be simple, apps should have more sophisticated, compelling features that encourage users to keep coming back. Particularly effective strategies include push messages (such as fare alerts) and integrated loyalty programs.
  • Users who book through mobile devices are frequent travelers that oftentimes have high-end tastes. Airlines, hoteliers and other companies should consider dangling special offers to users who book through their mobile devices, then building relationships with those customers through mobile marketing tactics such as loyalty programs and pushed messages.
  • Emerging markets offer high rates of users who book via mobile and, often, plenty of room for smartphone penetration growth. But foreign companies looking to tap those markets must first understand differences in culture, user behavior and other factors, and develop their apps and services accordingly.
  • As with any mobile app, booking apps and websites should be thought of as a long-term commitment rather than a one-off download. Publishers must continue to monitor user behavior, study industry trends, and test and update their apps constantly to keep pace in the fast-moving world of mobile.

Endnotes and Further Reading