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PhoCusWright report on mobile bookings shows rapid growth

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PhoCusWright report on mobile bookings shows rapid growth

By Danny King

Plane and phoneIn 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.”

A reset for Carnival on Europe

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A reset for Carnival on Europe

By Tom Stieghorst

*InsightThe Carnival Sunshine is hosting a media group on its current Mediterranean voyage, and the top concern of the European reporters onboard is Carnival Cruise Lines’ decision to go without a ship in Europe in 2014.

The Carnival Legend, which had been scheduled to sail in Europe next year, is being deployed to Australia, after a winter season in Tampa.  It seems to reverse a promising expansion of Carnival’s sales deployment into the U.K.

At a news conference, Carnival President Gerry Cahill said it ain’t necessarily so.

“We’re not stopping marketing to the U.K. and Europe,” Cahill noted, saying it would continue to sell cruises to the Caribbean, New York and Barbados to Europeans.*TomStieghorst

But Americans made up most of the passengers on a majority of the line’s European itineraries.

“Carnival caters best to middle America,” Cahill continued. “The cost of an air ticket to Europe became very, very high, and it was causing a lot of our guests not to be able to afford to come.

“At the end of the day, when the air fare costs more than the price of the cruise, that’s a problem,” he said.

The reset on Europe comes as Carnival is withdrawing from several regional ports on the U.S. East Coast, such as Baltimore and Norfolk, Va. Tighter pollution rules mean higher costs for clean fuels at those ports, and Carnival has an aversion to higher costs. When low prices are such an important part of your strategy, anything that raises them means trouble.
So Carnival is increasingly returning to tried and true markets where it has had traditional success: sailing to the Bahamas and the Caribbean, primarily from ports in Florida.

It recently bolstered its Caribbean capacity from Port Canaveral, where the Sunshine will sail for much of 2014, and from New Orleans, where it will have two ships year-round. Miami, Tampa and Jacksonville will also be home to Carnival ships next year.

For many passengers, flying to Florida isn’t as cheap as driving to the port, but it is a lot less expensive than flying to Europe. Travel agents can sell a fly-cruise to Florida because the airfare isn’t that scary. But it does mean getting people excited about an area that many cruise passengers have seen before.

The traditional itineraries may not be the most exciting. But with costs rising, they’re the ones that Carnival can sell at a price point that middle America can afford.  Europe on Carnival will have to wait for another year.

Europe’s woes could lure more Americans to cruise there

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Europe’s woes could lure more Americans to cruise there

By Tom Stieghorst
As the European financial crisis drags on and various countries’ austerity measures push unemployment skyward, cruise lines could once again find their Europe-based ships filled with North Americans this summer.

With many ships now departed on transatlantic repositioning trips, the cruise lines say that demand within Europe has been softer than anticipated, particularly in southern European countries.

Royal Caribbean Cruises Ltd. (RCCL) recently announced it will cut capacity in Europe again in 2014, reducing it to 25% of its total berths, compared with 31% as recently as 2011.

Adam GoldsteinTo a greater degree than in the past, passengers from the U.S. and Canada will be filling those ships, because their economies are performing relatively better than those in most of Europe.

“We will have more Americans cruising with us on itineraries away from North America in 2013 than we had expected,” Royal Caribbean International CEO Adam Goldstein said in a recent conference call.

On the other hand, an enticing whiff of demand in February from European travelers complicates the outlook. It might yet turn out that Europeans will cruise this year, despite unemployment rates that in some countries have risen to more than 25%.

But Europeans tend to wait until they’re close to sailing to book. So cruise executives are left to project, without a lot of certainty, how lines such as Costa, P&O and Pullmantur will do.

Micky Arison“Because of the closer-in booking pattern in Europe, that [makes] forecasting European yields much more difficult,” Carnival Corp. Chairman Micky Arison said in a mid-March conference call.

For travel agents selling European cruises to U.S. travelers, this year has been a modest improvement, at best, over 2012.

“My Europe sales are pretty consistent with last year,” said CruiseOne agent Becky Piper of Strongsville, Ohio, near Cleveland. “I can’t say they’re tremendous, but they’re OK.”

Kevin la Van, manager of Village Cruise & Travel on the southwest side of Chicago, said he’s selling one or two European cruises a month.

“The prices aren’t bad,” la Van said. “That certainly helps. But the airfares are higher. It’s kind of a wash.”

For many agents, summer is the key season, and most of those cruises have been booked.

“It’s difficult to move Europe last minute,” said Mark Fletcher, executive vice president of Mann Travels in Charlotte, N.C. He said escorted tours and river cruises are doing better than deep-water cruises.

Some agents said the European cruises they sell now tend to be for 2014.

Gayle Fortin, director of sales at Legendary Journeys in Sarasota, Fla., said a “No Air Europe” trip combining two transatlantic voyages on Oasis of the Seas next year, with a 15-day land tour sandwiched in between, is very popular.

Holland America Line Rotterdam in VeniceShe said her core business is seniors: “If their heart’s desire is to go to Italy, they’re going to go. They don’t have five years to wait.”

Meanwhile, the economies in some European countries continue to worsen. In Spain, which accounts for 9% of European cruise passengers, unemployment recently hit 27%.

Both RCCL and Carnival Corp. have written down their investments in Spanish cruise lines, based on a bleak forecast for future revenue growth. Those lines are looking outside Spain for passengers. In one example, Pullmantur will use the Monarch of the Seas, recently transferred from Royal Caribbean International, to offer southern Caribbean cruises to Latin Americans.

But the picture is far from uniform. Demand in Germany and much of northern Europe remains healthy.

Beyond Spain, Royal has indicated that the U.K., Europe’s top cruise market, is weaker than expected. Carnival officials said in March that economic uncertainty in Italy was hurting confidence in that country, Europe’s third-largest cruise market.

“With the situation with the [Italian] government basically in a stalemate, that’s not helping either,” Arison said.

However, in late February, Carnival reported a “significant uptick” in European brands’ bookings, and Royal officials said they saw “meaningful demand” from European source markets.

But Carnival also said that was partly in response to pricing actions taken in Germany and the U.K. to maintain full occupancy. Overall, prices and occupancies remain lower year over year for European cruises, Carnival said.

RCCL Vice Chairman Brian Rice said that Royal’s strategy is to divert capacity from Europe to other markets such as the Caribbean and Asia so that prices hold up even if demand is weak.

“We are happy that we took 10% of our capacity out of Europe this year,” Rice said. “We are dealing with an easy comparable [and] we think we are in a good place in terms of our capacity relative to what the market condition is right now.”

From that perspective, Royal’s forecast for European business is a little stronger than what the economy there would predict, he said.

“We view Europe as slightly better than we did three months ago,” Rice said. “But we’re not ready to declare victory there and say that that is the new treasure chest of the industry.”

Despite the current difficulties, there are good reasons for the cruise industry to stick with a European deployment strategy, according to Robin Farley, a leisure analyst for UBS Securities.

In a recent report, she wrote that although European passenger growth was only 1% last year, it has averaged 10% over the past decade, more than double the rate for North America.

European cruises tend to be more profitable than those in North America, and only 1% of Europeans cruised last year, compared with 3.7% of North Americans, a sign of higher potential growth.

Still, Farley noted that the big winner in Europe this year might be Norwegian Cruise Line, because just 15% of its passenger base comes from outside North America.

“We believe Europe, longer term, is an important market for the cruise industry, given low penetration rates,” Farley said. “But 2013 is a good year to have limited exposure to European passenger sourcing.”