PhoCusWright report on mobile bookings shows rapid growth

By Danny King

In the U.S. travel industry, where 2% to 3% growth is considered solid and 5% is exceptional, mobile booking continues to surge at exponential rates, according to a recent study by PhoCusWright.

In 2015, Americans will book $39.5 billion worth of reservations on their mobile devices, accounting for 12% of all travel sales, PhoCusWright reported in its annual Online Travel Overview last month.

Those numbers represent more than a fivefold jump from the $6.15 billion in sales and 2% market share that mobile represented in 2012, and they illustrate the growing ubiquity of the smartphone- and tablet-toting traveler.

“The channel is getting a lot of attention from both OTAs [online travel agencies]and suppliers,” PhoCusWright wrote in its 90-page report. “Every serious player in the online travel space is prioritizing mobile technology development and pushing hard for travelers’ attention in the form of traffic, transactions and app downloads.”

PhoCusWright is owned by Northstar Travel Media, the publisher of Travel Weekly.

Within the travel industry, the hotel sector is leading the way with regard to mobile booking, and that trend is shortening the booking window considerably.

At the annual PhoCusWright Conference in Florida last month, RBC Capital Markets’ managing director, Mark Mahaney, said that as more travelers book with smartphones, the idea of booking either a same-day or day-prior reservation is becoming more of a rule than an exception.

And while surging airfares and the ever-shrinking seat capacity will make many travelers gun-shy about rolling the dice with a last-minute airline booking, a number of hoteliers have demonstrated a propensity to offer last-minute discounts in order to unload unused inventory for the night.

As a result, about 12% of the online bookings directly with hoteliers will be via a mobile device this year, compared with about 8% of car rental bookings and about 6% of airline ticket reservations, PhoCusWright said. And by 2015, about a third of the bookings U.S. hoteliers process online will be made using mobile devices.

“Mobile is creating a new growth engine,” Mahaney said.

Still, airlines are investing big in mobile-distribution technology to capitalize on more computer-tablet use by travelers. As a result, airlines are expected to overtake car rental companies when it comes to the percentage of supplier-direct online bookings transacted on mobile devices.

Additionally, mobile growth has further pitted suppliers, especially hoteliers, airlines and car rental companies, against OTAs. While suppliers have started investing in expanding their mobile presence as a way to limit bookings through the OTA distribution channel, which remains far more expensive for the them, onine giants Expedia, Priceline and Orbitz have managed to stay a step ahead of the suppliers.

Indeed, while OTAs’ mobile U.S. bookings growth between 2012 and 2015 will be slightly slower than total mobile bookings growth, mobile bookings will account for 29% of the OTA market by 2015, compared with 27% for the total online market.

And those numbers may actually be conservative. At Orbitz Worldwide, which accounts for about a fifth of OTA bookings by Americans, 27% of hotel bookings were via mobile devices, CEO Barney Harford said at the PhoCusWright Conference.

What’s more, the mobile booking numbers for hotels don’t include smartphone owners who use “click-to-call” features that provide direct phone access to a hotelier’s call center. So for every hotel booking via smartphone, there were three or four cases where the user clicked through to a call center or booked via another distribution channel, according to PhoCusWright.

Still, PhoCusWright suggested that carriers and hoteliers have left money on the table by not creating online content quickly enough to meet the growing number of both searches and bookings from smartphone and tablet users.

As a result, newer companies like Hotel Tonight have capitalized by creating smartphone apps geared to streamline last-minute hotel reservations. The 3-year-old company had a $45 million funding round in September.

“Mobile is beginning to take off, but there is still much to be done to drive transactions,” PhoCusWright asserted in its report. “For the most part, entrenched players from airlines to hotels to OTAs have not been on the cutting edge of the devices’ capabilities.”

What effect such a surge will have on supplier pricing remains unclear, as the mobile market appears bifurcated. For example, people who book via smartphones appear to be far more likely to make a spur-of-the-moment travel decision. As a result, Harford said that the percentage of Orbitz’s hotel bookings that were same-night reservations had risen to 20% in the third quarter, with 60% of those being last-minute bookings made on mobile devices.

Meanwhile, the behavior of a prospective traveler using an iPad, Nexus or other tablet is more similar to a desktop or laptop user, as the larger screen allows for better pricing comparisons as well as more facility to coordinate a multi-supplier trip. As a result, airline and cruise line suppliers are emphasizing interface redesigns for their websites to better serve tablet users.

Either way, the buzz at the PhoCusWright Conference among both attendees and suppliers was the sense that the proliferation of mobile searches and bookings will eventually enable suppliers and distributors to get past the booking stage.

Sabre Labs’ director, Sarah Kennedy Ellis, told conference members that hoteliers will be able to use GPS-based location features on customers’ smartphones to better locate incoming guests in order to greet them and prepare their rooms accordingly.

Suppliers have another chance to improve the smartphone users’ travel experience via voice-command features, Hudson Crossing analyst Henry Harteveldt said.

“Travel companies’ abilities to make better use of travelers’ locations, to send ‘right time, right place, right price’ offers, will help, as well, especially for ancillary purchases at hotels and resorts and for in-destination services like shopping, dining and entertainment,” he said.

Additionally, more mobile booking may force suppliers and OTAs to better cooperate and share traveler information.

“One possible opportunity is to offer itinerary management that serves the entire trip experience,” PhoCusWright suggested in the report. “Some of the most convenient and fastest-growing mobile travel tools, such as mobile boarding passes and car rental unlocking, will require suppliers’ cooperation in order for OTAs to provide them.”