Saudi Arabia's online travel market is thriving, with further growth expected

The rise of online booking platforms has had a major impact on the global travel and tourism industry as use of traditional travel agencies has given way to purchases made through online providers, or online travel agencies (OTAs). Although take-up of internet booking in the MENA region was initially slower than in other, more developed regions, there is a steadily increasing tendency to book online. Indeed, mobile has been a game changer in the region. The rising usage rates for mobile internet via smartphones and tablets means firms are increasingly tailoring their strategies around the mobile model.

According to research carried out by Phocuswright, online purchases are set to hit 31% of total travel and tourism revenues in the Middle East in 2016. This is up from 25% in 2014 and 27% in 2015. By the end of 2017, online travel bookings in the region are projected to account for 36% of all bookings. Some 19% of all online revenues, meanwhile, came via supplier-direct websites and 12% from OTAs. Phocuswright estimates that the value of the Middle East’s online travel market will rise from $18bn to $35bn by 2018.

Al Mosafer is currently the leading player in online hotel bookings in Saudi Arabia, and in 2015 its share of the Kingdom’s total market increased by 300% to 5%. “The book-now-pay-later option has built trust with customers who have been wary of online purchases in the past,” Farooq Al Jeraisy, founder and CEO of Al Mosafer, told OBG. “This way we have been able to transition people from offline to online booking.”

Mobile Generation

The rapid evolution of smartphone and tablet technology over the past 15 years has been mirrored by faster mobile internet speeds, the rise of increasingly easy-to-use, mobile-friendly websites and the emergence of a multibillion-dollar app development industry. The result has been a corresponding shift towards mobile-based internet browsing. According to Euromonitor International, 70% of Middle Eastern travellers had used smartphones or tablets to plan trips in 2014, and 48% had used a smartphone during the previous 12 months to carry out travel-related research.

Google research indicates that 72% of 18-35-yearolds in Saudi Arabia start research a week or less prior to a trip, compared to 48% in the US. As a result, many in the industry are now offering last-minute deals in a bid to generate on-the-go bookings.

“The booking window is very narrow, and we often see significant changes in our occupancy rates within just two or three days,” Haider Azam, cluster revenue manager at Double Tree by Hilton Riyadh, told OBG. “This is especially the case during holidays when people will often make their bookings one hour before arrival, while en route from Dammam to Riyadh.”

Online Investment

The younger generations have been largely responsible for driving the trend towards mobile. This is especially the case in the Middle East where 50% of the population is under the age of 25. In Saudi Arabia, 30% of 18-35-year-olds only browse the internet on their smartphones, and with mobile data traffic in the MENA region set to grow faster than any other region between 2014 and 2018, companies have recognised the need to “tech up” if they want to attract customers in this crucial demographic. Euromonitor estimates that in 2015 more than 50% of tourism sector businesses’ marketing budgets went towards investments that enhanced and simplified the online user experience. Indeed, the drawbacks for failing to make these investments are clear: according to Google, 43% of 18-35-year-olds in Saudi Arabia will look for another site that is mobile optimised if they encounter difficulties accessing a site on their mobile. In the UK this figure is 27%.

As such mobile’s role is only expected to grow in the coming years as companies increasingly opt to develop their online strategies around the mobile concept, building brand awareness and efficient, easy-to-use mobile applications to drive bookings.