Mobile devices, tablets and computers are frequently used in the Middle East for every aspect of trip planning, from browsing to booking, to even post-travel reviews.
This is opening tremendous growth opportunities for key players in the industry as they utilize these devices to engage with current and prospective customers. Euromonitor International analyses the technologically-savvy, growing population’s impact on the travel landscape, which is already creating a more connected and personalized experience.
Digital-savvy and young population feeds travel and tourism online
With extensive internet use via the online and mobile platforms, throughout all stages of the travel experience, players in the travel and tourism industry are adapting marketing strategies in order to maximise their visibility and to maintain competitive advantage. Moreover, there is a clear shift in booking patterns toward mobile and tablet booking devices. According to Euromonitor International, Middle East online travel penetration will grow from 18% in 2013 to 22% in 2014.
It is believed that among the Middle Eastern travellers who plan their trips online, 48% have used a smartphone during the previous 12 months to carry out travel-related activities, and about 70% of them have used either tablets or smartphones to plan their trip. In addition, Euromonitor International estimates that 50% of travelers from UAE and 35% of travelers from Saudi Arabia access online services via their smartphones, providing travel companies great marketing opportunities to engage with potential customers.
Mobile internet potential is expected to intensify with the growth of the younger and more digital-savvy population in the region. Strong growth of the mobile platform is expected to play an important role in the business strategies of travel and tourism businesses throughout the region. In 2013, about 85% of business travellers used mobile apps, 62% used them on every business trip and about 90% claimed that mobile apps improved their travel experience.
Key travel and technology trends identified by Euromonitor International:
- In 2012, online travel penetration in the Middle East accounted for 18% and is expected to reach 22% in 2014. By 2030, the region is predicted to have nearly 81 million outbound travelers;
- The young make up 60% of the population in the Middle East, with over 50% under the age of 25. This age group is typically technologically-savvy and the strongest consumers of smart phones and iPads. This youth-demographic economy represent strong potential for the travel market in the forecast period;
- The region has strong market potential in value terms, as Middle Eastern spending in the Middle East is relatively high while traveling. Outbound travel tends to be amongst larger groups and for longer periods of time. Euromonitor International estimates that in 2014, one in six travellers booked their trip online;
- UAE tourism receipts are forecast to rise by 67% by 2018. The region is entering a new era of stability, increased connectivity and expansion of existing infrastructure. Euromonitor International expects UAE’s hospitality market to reach US$7.5 billion by 2016, up from US$4.5 billion in 2011, a 67% increase;
- Tourist arrivals in the UAE are expected to grow at a CAGR of 5% between 2012 and 2022, with hotel supply expected to increase from the current 96,992 hotel rooms in Dubai and Abu Dhabi, to a total of 125,383 hotel rooms in 2016. In November 2012, year-to-date occupancy reached 80%, up 2% from the same period in 2011;
- Dubai International Airport recorded total passenger traffic in 2012 at more than 52 million travelers, up 13% from previous year, with passenger numbers forecast to reach 98 million by 2020. Abu Dhabi alone welcomed 2.3 million hotel guests in 2012 in hotels and hotel apartments, an increase of 13% from the previous year;
- Hotel revenues also witnessed strong growth over 2012-2020, up 6% to US$1.2 billion. Ras Al Khaimah plans to position itself as a nature-focused tourism destination, aiming to add 10,000 rooms by 2016.
- “Visiting family” is cited as the number one reason for travel across United Arab Emirates and Saudi Arabia. Travel for this purpose account for 71% of trips for Saudi Arabia travellers, and 55% for UAE travelers.
United Arab Emirates tops technology-tourism
In Dubai alone, 60% of airline booking and ticketing came from online purchases in 2014. One indicator influencing online travel is that 44% of the population in the Middle East/North African region (MENA) is less than 20 years old and the region’s youth are confident internet users. Despite the fact that traditional travel agencies remain important for Middle East travellers, online travel agencies are experiencing a strong increase in popularity.
In the UAE, half the population uses the online platform while planning or purchasing travel products. Amongst leisure travellers, 39% use the internet to plan their trips, while 12% book their travel online. Moreover, 46% of airline tickets in the UAE are booked online, followed by Kuwait (34%), Saudi Arabia (23%), Lebanon (18%) and Egypt (12%). Hotel rooms are less commonly purchased online, with 12% of hotel bookings in Saudi Arabia conducted online, 9% in both UAE and Egypt, 6% in Lebanon, and 5% in Kuwait. If there is room for growth in terms of online booking, the low conversion purchase rate is mainly explained by the mistrust or inconvenience of online payment solutions offered.
Strong impact of online travel agencies on travel and tourism revenue
In 2014, online travel agency sales in the Middle East have reached USD$3 billion, representing about 17% of total sales. Online travel agencies are leading direct sales in the Middle East, with 34% of this total in 2013 coming from hotels. Online travel agencies have a compound average growth rate of 18%, with Expedia.com and Booking.com the key players in the market. The Booking.com model has a strategic advantage in the region as it allows the Arab traveller to book online and to pay offline on arrival at the hotel.
Smaller players, such as MakeMyTrip and Cleartrip.com, have experienced strong growth in current value terms since their entrance in 2011, mainly due to their focus on developing web pages with Arabic content. Strong potential still exist for online travel agencies in the region, the market being relatively untapped. Taking the example of Saudi Arabia, where 80% of Google searches are done in Arabic, traditional travel agencies remain core to the country. Despite the fact that travelers search on Expedia.com and Booking.com, when it comes to transactions, a large number of travelers still go to a travel agency to book hotels at the online travel agency rate.
Smartphone and social media influences Middle East travelers
The internet is playing a key role in the decision making process for both leisure and business travelers in the Middle East. Amongst travellers using an online platform to plan their trips, 50% used mobile for their travel decisions in the past year. Middle Eastern travel has a great opportunity to engage with customers using the mobile platform and to convert these mobile travelers into bookings. In fact, bookings made online through smartphones represents a strong opportunity for the travel industry, and last minute booking is high in Saudi Arabia for both leisure and business travelers.
Euromonitor International estimates that mobile data traffic in the MENA region will grow faster than in any other part of the world between 2014 and 2018, with penetration of smartphones and tablets estimated to reach about 600 million devices by 2018, up from just million in 2013. It is also believed that one in six consumers in the Middle East is using the internet as their primary booking platform. Moreover, the young account for 60% of the Gulf Cooperation Council’s population, enjoying strong connectivity and update in terms of digital development and social media. Gulf countries are leading in terms of social media activity, with more than 90% (56 million) MENA region users on Facebook and Twitter, generating about 10 million Tweets per day and almost 4 million users.
It is expected that the travel and tourism industry in the Middle East will become strongly reliant on the online platform to reach new levels of customer awareness and loyalty. Key players in the industry are expected to increasingly adapt their strategy to facilitate not only the travel search and purchase, but also to enhance the online experience, providing a wider range of services for customers. Euromonitor International predicts that in 2015, major airlines, hotel and travel retail groups in the Middle East will direct more than half of their marketing budget in technology that enhances and simplifies the online experience, relying on smartphones applications and social media to increase bookings.
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