4 things we learned at Phocuswright Europe

Last week OTA Insight joined over 600 attendees from 44 countries in Amsterdam for Phocuswright Europe. The event gathered leading executives and thought leaders from across the travel industry. The overarching topic this year was Empires on Edge, which sought to explore the rising dominance of travel brands. In a landscape where brands have established consumer trust, leveraged large marketing spend, and aggregated content, the event asked: what next? And who next?

The event also provided a showcase and awards for a number of new and innovative startups who are looking to reinvent the travel sector. This included luggage booking service Nannybag, who came runner up for Travel Innovator of the Year. Questo, the mobile app for city exploration games proved popular and landed the People’s Choice Award.

Here’s what we learned from the developments at the event:

Airbnb aims for end-to-end

Sitting down with Phocuswright editor in chief, Kevin May, Airbnb discussed their evolution from home-sharing to accommodation, and recent steps towards becoming a hospitality end-to-end provider. Making this move would see Airbnb providing services for every point of a customer’s trip; from the dreaming and planning, right through to logistics on the trip itself.

The travel industry took notice in early March when Airbnb confirmed their HotelTonight acquisition. But far from seeking to challenge global OTAs, their sights are set on becoming a curated distribution platform for independent hotels. Managing director of EMEA, Jeroen Merchiers, revealed that select inventory from HotelTonight will likely be available on the Airbnb platform. Merchiers described this as a “natural route”, commenting: “Chains already have a strong brand and direct traffic so there is little added value we can give. For small boutique hotels, they offer personalised hospitality. There’s that personal connection with recommendations of what to do and those are really the ones we want to tailor towards.”

Airbnb has continued to make strides in providing experiences via their platform. There are currently over 30,000 offered experiences on Airbnb, with Merchiers stating the key focus to be “where we can have an impact and differentiate” rather than getting the highest volume or popular tours. Addressing the move by Marriott into the “experiences marketplace”, Merchiers welcomed the chain to the party and commented that this shows “there is really a market, not just for the backpack traveller, but also for the business traveller and more upscale traveller who is looking for a different type of experience.”

Looking ahead at the potential next phase in Airbnb’s end-to-end expansion, the company’s new head of transportation seeks to address transportation as one of the biggest pain points for travellers, with Merchiers speaking about aiming to “reinvent” the process.

Experiences and activities move to the forefront

Phocuswright data revealed activities as the third-largest segment within the travel industry, with more than 90% of travellers participating in some sort of tour or activity during their last trip. Indeed, many tech start-ups at the event were activity-focused.

The discussion centred on how travel companies can build on this opportunity. Despite being in a low-transaction market, activities bookings contribute to a margin on top of a traditional transaction and offer something extra to capitalise on. There can also be gains in digital marketing around activity bookings.

Google, Booking and Expedia have made advances over the last few years to enter into this arena. Last year Expedia expressed ambitions to see a five-fold increase in its activity bookings. Booking.com and Airbnb have also brought activities to the forefront with customers now being able to purchase a range of activities via their platform without using them to book hotels.

During Phocuswright, Google announced that its mobile Google Trips app will now be getting a desktop version. Like its mobile counterpart, it gives access to flights, hotels, tour packages and other relevant suggestions. With this integration of Search, Maps, Flights and Trips, this illustrates Google’s overall ambition to become an end-to-end travel planning service. It remains to be seen whether they will take the plunge and become a player in the OTA space or stick with their lucrative advertising strategy.

Mobile use highlights differing market conditions in Asia vs Europe

OTAs may be booming in Europe, but mobile bookings have shown slower signs of growth, according to Phocuswright data. Senior director of research, Maggie Rauch, revealed that bookers were yet to gravitate towards mobile booking, with around a quarter using mobile to book in 2018. This still represents a lot of business, but the figure fell to 10% when asked specifically if they had booked a hotel or flight on mobile for their last trip.

In comparison, mobile continues to be a dominant force in Asia. The WiT (web in travel) panel discussed the rise of super apps such as Grab, initially a taxi booking app who then entered the travel industry with hotel bookings powered by Agoda and Booking. The app has been downloaded on 125 million mobile devices, with forecasts it will double revenue in 2019. WeChat is perhaps the most famous example of the super app with more than 1 billion monthly users. WeChat is the premier messaging app within Asia, which has since expanded to WeChat Pay, with 800 million users.

The transition of a social networking app into a transactional player is reflective of the closer B2C relationship in Asia. Trust is a high-value currency in the Asian market. With WeChat’s focus on policing the app, trust has been built between themselves and their customers, and allowed them to form a payment system that their customers and others feel comfortable and confident in. The European market, by contrast, has established banking and credit payment systems that are spread across different organisations. Asia as a developing market has taken the approach of consolidation and putting trust in one place. This illustrates that one of the best ways to enter that market is to align with a super app and capitalise on the customer trust that comes with it. To be a major player in China, a WeChat presence can really help.

Mobile use will continue to be a point of interest in the hotel industry, with more discussions on how it affects all stages of the customer journey from organisations like StayNTouch. Markets with mobile use as high as Asia will continue to benefit from this as hoteliers look to add to their revenue per room by selling auxiliary items.

The Tripadvisor panel also covered the Asian market, with trust a defining feature once more as they highlighted the importance of local presence and relationships. They identified three key pitfalls made by some businesses seeking to enter the market:

1. Treating Asia as a single market when each country needs a local team.

2. Lacking the right local relationships, making it essential to hire the right people and have different pricing models.

3. The misconception that the government will favour big business when sensitivity to local market requirements is key.

What next?

Phocuswright Europe looked to not only ask what’s in the big travel companies’ pipelines, but to see which companies will be next to rise up within this new landscape being built. Arise provide a blockchain-based solution for hotel reservations and distribution and are gaining traction as a more flexible and robust peer-to-peer connectivity solution that will eventually bypass intermediaries, thus increasing revenue margins. Goals for 2019 involved working with enough distribution partners that hotels themselves pressurise their PMS, CRS or channel manager to connect to their network.

This has interesting consequences for parity as the incentive for non-contracted OTAs is taken away, as they don’t have a connection with the channels that have been opened by hotels. This affects the distribution chain as it means that transactions can only go through verified channels, so non-contracted OTAs have no opportunity to sell the available hotel room.

Phocuswright also saw Awaze, Europe’s leading managed vacation rental and parks group, share their insights. They stated that customers do not shop by category, but are simply looking for accommodation. This sentiment is mirrored through Booking beginning to offer alternative accommodation. Booking stated during their panel that this move doesn’t compromise hotels, as the same guests use different things for different situations, confirming the need for everything to be on the same platform - a strategy shared by Airbnb allowing hotels on to their website.

Awaze also discussed the lengthened timeline of content as the trip begins at the research stage ahead of booking. This provides much more opportunity to attract customers and, as such, content must continue to be strong, with great imagery. The desired effect is to have customers start dreaming about the experience they can have through the content provided.

Those were some of the key takeaways from our time at Phocuswright Europe. Explore more crucial trends and topics from events earlier this year such as ITB Berlin and WTM Latin America. If you’d like to see how strategies are evolving, not just for travel companies, but within hotel revenue management, then join us for our webinar: Creating the ultimate power couple: How to bring together marketing and revenue management teams.