Travel is among the fastest growing industries today, growing faster than the global economy. Within it, the online travel market is rapidly reaching the incredible size of one Trillion USD, chipping away at the offline and travel agent market shares along the way. High smartphone penetration rate introduced a new era in online travel, in which apps are gradually taking the lead in online booking. For online travel services, this new era introduces a number of opportunities, and quite a few serious challenges.
The Rise of OTAs and Travel Apps
The most significant increase in online travel belongs to the Online Travel Agent (OTA) category. Led by Priceline, Expedia, Booking.com, Ctrip, TripAdvisor, and a few others, OTAs is enjoying a great year over year growth, with the first two each generating over $10B in annual sales.
OTA is leading the way in mobile apps, with almost half of all OTA bookings done via mobile devices today. Social media, mostly consumed via mobile devices, plays a big part in travel-related decision making and live travel exploration, so there’s no wonder Mobile is the fastest growing revenue channel in Online Travel. When it comes to last minute bookings, mobile is already the most dominant player in the arena, responsible for over 70% of all transactions in some verticals.
Travel apps, however, are not only used for making reservations. 80% of travelers search for trips using their apps, even when the actual booking is made elsewhere. In addition, mobile apps provide a variety of other services – check-in, price drop alerts, boarding passes, booking vouchers, reservation updates, and many more.
Travel App Marketing and User Acquisition
Acquiring app users in the travel industry is certainly not cheap. More than $5 are spent, on average, to get a single user to install a travel app. The potential, however, is pretty clear – in western countries, 8 out of every 10 mobile users make a reservation using a travel app. This stands out as the best conversion rate in the app industry.
Trends in Travel Apps
The travel industry is not stagnant. New technology enables all travel verticals to provide users with much better services:
Retention and Engagement Challenges
As opposed to social media and news apps, most travelers tend to engage with travel services at certain peaks—not every day or week. This unique behavior is one of the reasons for Online Travel’s extremely high abandoned cart rates:
The clear result is that the biggest challenge travel apps are facing is low retention. Setting up a new OTA or hotel booking service is relatively easy today. With User Acquisition (UA) costs driving growing marketing budgets, retention becomes an even more critical factor. As it turns out, gaining travel app users’ trust and retaining them is incredibly challenging nowadays:
In the current over-crowded OTA vertical and certainly outside of it, there are still plenty of opportunities for travel apps to grow. However, even great products and services that do rarely communicate with their users, communicate too much, or send irrelevant content or offering, will ultimately fail.
The road to success in the travel category is paved with user context. In such a competitive environment, apps need to simplify the travel experience and establish relationships with end users – before, during, and after the trip. Achieving customer loyalty in the travel vertical relies on truly adapting to user habits and behavior, throughout their entire user journey.