The Middle East is a large and very
diverse region, comprising more than a dozen countries with unique
characteristics regarding politics, culture, language and religion.
The MENA area - the Middle East and some North African
countries - has an estimated population of more than 444 million people as of
2017, according
to the World Bank.
And it’s a population that is relatively young, educated and
technologically savvy.
“The Arab World Competitiveness Report 2018” from the World Economic Forum states
that, in 2015, nearly one in five people in the region were between the ages of
15 and 24. And a World Economic Forum report says one-third of the population was below the
age of 15 in 2017.
These young people have a voracious appetite for
online content and social media.
According to Global Media Insight, active
internet usage in the United Arab Emirates is more than 99%, users spend an
average of nearly eight hours online each day and 61% of the internet usage is
on mobile. According to Google, mobile watch time of YouTube in the MENA region is one of
the fastest growing in the world, rising by 90% year-on-year from 2014 to 2015.
This mix of a young, socially engaged population
in the Middle East bodes well for travel brands and destinations as it fosters
an awareness of - and desire to explore - other parts of the world.
Phocuswright’s Middle East Online Travel
Overview, Third Edition
states, “Middle East travelers are ... traveling frequently - some four to five
trips annually, on average."
And as recently as 2015, nearly three-quarters
of the search and booking activity for that travel took place offline.
“Offline channels represent the bulk of travel gross bookings
in the Middle East, a result of the prominent role that traditional travel
agents play in the region. Personal relationships, native language use, loyalty
programs and a lingering mistrust of online payment methods still influence
many travel booking decisions,” says Phocuswright’s report.
But that is gradually changing. Driven by the young
population, Phocuswright predicts online will account for 41% of travel
bookings in the region by 2021.
So what does the online travel ecosystem look like in
the Middle East?
For the third piece in our series on the region we
dive into the topic of distribution and consider some regional brands that are staking
a claim on the growing travel market.
Background
The Middle East may be playing catch-up to
regions such as Europe and North America when it comes to online travel
bookings, but the shift is picking up pace.
According to Phocuswright, online
bookings will continue to grow by double digits for the next few years,
reaching $44.5
billion in 2021.
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Phocuswright predicts online travel
agencies will capture 44.5% of that revenue with the remainder going to
suppliers directly through websites (36%) and mobile (22%).
“OTA success in the Middle East
hinges on the region's hotels and their inability to develop their own
compelling online properties. With a few exceptions, hotel brands have not
invested in the digital space, turning instead to OTAs for online distribution,”
the report says.
In the Middle East Consumer Travel
Report 2018, produced by Dubai-based Insight Out Consultancy and commissioned
by Amadeus, Tajawal and Jumeirah, global powerhouse Booking.com came out as the “top of mind brand” in the
region.
The study found Booking.com captures
39% of website visits during travelers’ search process, followed by Trivago
(33%) and TripAdvisor (22%).
The company has multiple offices - in
Israel, Egypt, Jordan, Saudi Arabia, Turkey and the UAE - it was the first
global OTA to localize content in Arabic and, the report notes, “the success of Booking.com reflects
the preference for accommodation payments at the hotel vs. online. Credit cards
are used as a guarantee only online.”
Homegrown
But there are also dozen of smaller
OTAs based in the region, and several are gaining traction.
In 2015, Saudi Arabia-based Al Tayyar
Travel Group, the region’s largest offline travel company, created a digital
travel brand, Tajawal. Around the same time, it took a majority stake in online
travel agency Almosafer, and last year it completed acquisition of that company.
The two digital brands brought in about
$1 billion in net bookings as of last fall.
Musafir is an OTA founded in the UAE
in 2007 that has now expanded to India, Qatar and Saudi Arabia. It is in the top 10 for many of the metrics in
the Insight Out report. HolidayMe - another Dubai-founded OTA - has raised $39
million to date and has added offices in Saudi Arabia and India.
According to Insight Out, “Price
comparison is a key component of the traveler’s evaluation process.” In
addition to Trivago, metasearch site Wego is building a presence in the region –
with about half of its business coming from the Middle East.
Cleartrip and FlyIn
In 2012, India-based OTA Cleartrip began to
notice increasing traffic originating from the Middle East.
That prompted the company to establish a base in Dubai and then,
in June 2018, to acquire Saudi Arabia’s largest online travel agency, FlyIn.
You have 1.8 billion Muslims around the globe, and yet there is not one single brand targeting this audience.
Muhammad Chbib - Manal
“It had a lot of characteristics that were very similar to
ours, in terms of how we thought about product, how we thought about consumers,
how we addressed problems, the primary focus around technology,” says Stuart
Crighton, founder and CEO of Cleartrip.
“It’s a fantastic brand that has an awful lot of traction
specifically within the Arab world, and it’s localized extremely well."
It’s that localization - of payments and content - combined with
relationships with the region’s banks, hotels, low-cost carriers and other
suppliers that Crighton says gives Cleartrip and FlyIn an advantage over global
brands such as Booking.com.
“Booking has done a great job primarily serving two core
markets. One is the inbound market into the Middle East, and one is the
outbound market of people going abroad to Europe or America or wherever,” he says.
But the changing Middle Eastern market - driven by a young, digitally savvy,
frequent-traveling audience that prioritizes affordability over luxury and that
may not have experience with larger international brands - is changing the
distribution landscape.
“Being an intermediary
when there’s that significant offline to online shift, when content is getting
massively diversified, when the existing legacy businesses - whether in
accommodation or in the aviation space - are being dis-intermediated by
different models ... I think it’s the perfect environment to be in. And you have
to be local to take advantage of that change,” Crighton says.
Not unlike, he says, what happened in India.
“I think the homegrown brands in India, ourselves included,
managed to command a fairly sizable part of the market, which made it very
difficult for the more international players to come in,” he says.
“That’s not to say that they won’t be successful over time,
but given this transition phase, I think the requirements and opportunities are
very different than what they were perhaps four or five years ago.”
Rehlat
Rehlat founder and CEO
Bader Al-Bader agrees that localization is the key to local brands winning over
global competitors.
Al-Bader founded the Kuwait-based OTA in
2016, and it has quickly become one of the prominent players in the region with
200 employees working in offices across Kuwait, UAE, Saudi Arabia, India and
Egypt.
“We try to customize it to each country,” he says.
“For example, in Kuwait, we have payments specific to
Kuwait, content that is specific to Kuwait, deals specific to Kuwait. The same
goes on for each and every country.”
Al-Bader says having an in-house technology team has also
allowed Rehlat to customize things such as solutions for local payment
gateways, for example in the way refunds are processed, and how the platform’s
chatbot functions.
And the site is differentiating itself by adding features
that demonstrate its deep understanding of local culture.
“For example, for Middle Easterners, even people from India,
when they go visit hotels in Europe they would look for a bidet. We don’t care
anymore about Wi-Fi - we can get that on our phone - we care, does it have a
bidet?” Al-Bader says.
“So we introduced a filter where you can see which hotels
have bidets and pick based on that. That’s gained traction with customers. It’s
very low tech - just tagging hotels - but that’s what customers are looking
for.”
Like Crighton, Al-Bader also points to India as an example
that homegrown brands can compete against global challengers, and he says there
are still substantial opportunities for Middle Eastern brands to innovate in ways
that appeal to local travelers.
“When it comes to the end-to-end journey - starting from
your home, booking a ticket, taking a car to airport, all the way down to when
you’re done with hotel and want to come home - Middle Easterners really want
the whole thing taken care of instead of booking things piecemeal,” he says.
“I think there’s a lot of room for people offering those comprehensive
services.”
Manal
One new platform designed to fill that need is a startup
being developed by Tajawal founder and former CEO Muhammad Chbib.
Tentatively called Manal, the site will assist travelers booking
complex itineraries. Users will be able to put all of their desired components -for accommodations, transportation, activities, etc. - into a “shopping basket”
that the site will then share with travel agents to provide bids.
“The value for offline agents is we give them online traffic
they wouldn’t get without heavy investment into IT and online marketing,” Chbib
says.
“And on consumer side, we’re giving you an easy-to-use
platform where you save time, and you get better prices than what you get when
you go offline.”
But the site’s key point of differentiation is that its content
will be targeted to Muslim travelers.
“You have 1.8 billion Muslims around
the globe, and yet there is not one single brand targeting this audience,” Chbib
says.
“They have special
needs when they travel - privacy needs, food needs, cultural-interest needs. So
we are building a brand catering to their needs. It will be a very modern
platform, and it can serve everybody, but the marketing money I will spend will
be in this region - Indonesia, Malaysia, Pakistan, Turkey - high Muslim
populations."
After the launch of the initial itinerary builder, Chbib
says Manal will add social sharing and artificial intelligence to create smart
recommendations.
And, he says, these sorts of technology-driven solutions will
allow Manal to provide value beyond what is currently offered by OTAs, which he
believes - in their current form - are at risk of consolidation.
“I don’t think the OTA game is the game to play going
forward,” Chbib says.
“I think in the next five to 10 years in this region, there
will be a lot of offline players that will vanish, and there will be an online
consolidation as well. You don’t need an online players in Saudi and in UAE and
in Kuwait and in Qatar. You just need one or two for the region, and then you will have
the global guys like Booking, Expedia, Agoda.”
Spotlight: The Middle East Opportunity
Hear from two industry pioneers in the region on key trends happening in an incredibly young, social and mobile market at Phocuswright Europe in Amsterdam May 15-16.