As of the end of 2021, results (Globaldata Q4 2021) showed that 19% of people polled had never booked a holiday. Perhaps they just jump in their car and go for an extended spin, or show up at the airport for a last minute flight, but it is a puzzling number.
Meanwhile, the remaining group use a variety of ways to go on holiday, including online travel agencies (OTA), accommodation sharing websites, and direct bookings, but 7% of them use a bricks and mortar travel agency.
So, around three quarters of vacationers use online booking agencies to plan their time away from home. That’s good news for online businesses, and the percentage can only increase with time.
OTA mobile apps try to offer a complete package to users, and normally it is more than enough for most people. They specialize in flights, accommodation, car hire and other reservations in one app, and people can book their complete trip from the comfort of home. In app purchases are also available to the potential travelers.
But how do these types of apps make money to keep improving their services, find new potential users and stay at the top of the app listings?
First, a look at the market in general and how it is responding to post-pandemic life.
A small problem with the travel and tourism industry
During the pandemic, many businesses were forced to close completely or reduce their staff costs. That includes the travel and tourism business in a big way. Dependent on visitors, vacationers and tourists to generate income, they suffered a lot and some of them will never recover.
Airlines laid off pilots and crew, and reduced hours in the remaining staff. Pilots will have to be rehired and probably retrained before returning to service, as will support staff.
According to the World Travel and Tourism Council, over 60 million jobs were cut in the industry in 2020, and while many of these jobs are being filled, many workers do not want to be at the forefront of customer bad behavior and disrespect, which is a growing problem.
Tempers have risen during the last two years with the stress of working under a cloud of increased prices and decreased freedom of movement. The slightest mistake can cause a furious response.
Restaurants have complained that it is hard to find cooks and servers, and hotels are short of housekeeping staff.
The travel industry’s response
Some hotels are streamlining their services using technology, with artificial intelligence in robots to do regular cleaning, security and room service deliveries. Travelers can use booking apps to check in and out with many other hotels, and can make local reservations, such as health and beauty appointments and additional travel services, online.
In fact, travel and tourism apps are taking the place of most of the human services in the industry, with flights, bookings, tours and events all managed online.
While there may be some initial problems with travel in 2022, they should all be ironed out by using mobile apps, robotics and artificial intelligence.
An underdeveloped market?
There aren’t too many high street travel agencies left, most of them have retreated to an online presence, dealing with potential clients via the internet rather than face to face. Marketing is harder, and access to data is limited.
The publishers of travel mobile apps, on the other hand, have aggressive marketing campaigns and are primarily thinking like technology companies. Such applications use strategies including artificial intelligence, big data and machine learning in the development process.
The key players in the travel and tourism market are investing heavily in new technologies, and the more their travel mobile apps are used, with more data stored, the more benefits and opportunities to offer personalized travel services and insider tips to the general public and also increase their revenue.
Lesser known travel mobile apps are also gaining popularity and brand recognition due to the wide variety of alternative tourism available, including adventure based, cultural, wellness, historic, educational and all the way to extreme shopping tourism.
So what about the money?
If you have developed an independent, specialized travel app for a smartphone, there are a few different monetization models and I will list them below.
A major player in the travel and tourism industry will likely use a different revenue model, which I will also list below for comparison.
Independent travel app monetization
This option works pretty well for any kind of mobile app, but especially for tourism and travel apps. They can be a little annoying to app users, but if you can find advertising that is a close match to the application, the annoying ads might turn out to be useful. There are several forms of in-app advertising, including native, text, video and banner ads. There are also full screen ads that run in between activities or pauses. Because tourism is such a huge industry, everything from toothbrushes to currency conversion can be advertised.
This income derives from the service that is listed on your app. Every time someone uses your app, any businesses that show up on the app might pay a commission to you. For example, if you have an alternative travel app that works with scuba diving, costs, locations and reviews, you can negotiate with the connected businesses for exposure.
Smaller travel and tourism app publishers can use affiliate links as another way to generate income. By subscribing to different affiliate programs, publishers can increase profits. Basically, it is advertising a product or service that is associated with the same market, and the business benefits each time a user clicks on the link.
A layered membership option
A basic freemium model with in app ads is the first step, the customer uses the mobile app and likes it. Some of the functionality is limited but the app is still free to download from google play or as an iOS app, the two main mobile platforms. Moving up to the premium version will offer the user an ad-free product, with the additional extra features on the mobile application, and the costs to the user would be minimal. This paid version usually works out to the price of a cup of upmarket coffee.
This is aimed towards business to business (B2B), where a business that wants to appear on your app pays a regular subscription for that right. It is a good revenue system for medium to large app developers and provides good exposure for hotel and resort owners.
The merchant model
This is a little tricky for a startup business, and involves block purchase of a product (hotel rooms, walking tours, event tickets) anywhere in the world, putting them on the mobile app and reselling them at a profit to customers. It’s risky, but immensely profitable if the product sells. Block purchasing means you will be getting a lower cost for the product than normally offered. The requirement is to know the target audience and what it wants.
Now onto the big boys.
If you type into a few search engines ‘top five tourism apps’ you pretty much get the same results. I don’t have to mention them here but I think you will know most of the names.
Big brand travel app revenue models
Supply and demand
As a sort of in-between operation, this business model relies on the customers (demand) and the hosts (supply) and transaction fees. A company using this model will take a percentage from both ends of the equation, introducing the customer to the host with the use of their travel app. Customers choose where they want to stay, for how long, and the host shows the ranges of possibility and bookings. All interactions, bookings and payments are carried out using the travel app, so the app owner has complete control.
A travel app can generate revenue by driving traffic to online travel service providers. The app owner partners with selected travel service providers and well known brands to offer a wider range of choices to the user. Every time the user visits the partner site, the app owner makes a commission.
This model is typically used with an app that already has plenty of users. Brands that are in the same niche market are able to place ads on screen. The normal ways of revenue generation are monthly subscriptions and equal division of income.
In app purchases
Many travel app users are drawn to completing the whole package in one go on their mobile devices, and therefore a good way to increase revenue from a travel app is to have ‘extras’ that can be added to the total. Specialized backpacks for the adventure traveler, family luggage sets, cosmetics bags, the list is endless, and everything adds to the experience, whether the user is a novice or well versed in tourism.
The app publisher allows certain companies to add some pizzazz to their presence on the travel app, by offering more images, video, price updates and push notifications for the user. The travel app owner can also profit from offering a paid service to the users that gives them exclusive access to various options in the travel industry.
As you can see, the established travel and tourism companies use mainly less-personalized ways of generating income, with a steady stream of money coming from advertisers and sponsors.
Although the same can be said for smaller companies, they usually are more proactive in finding backers, using every skill they can to increase the app download and use.
There are some developers who produce a minimum viable product and upload the idea onto crowdfunding platforms for public support.
On the whole, customers like to remain loyal to their travel apps, and in a way become part of the development process. Push notifications about discounts and coupons are becoming more prevalent, and the popular flight booking apps are dealing well with the constant changes in flight movement and cost, using price prediction algorithms.
Maybe travel agents are a thing of the past, but in the world of travel and tourism, mobile applications with their booking services, offline maps, notifications and money saving features rule the roost for the present.
They will continue to make money by saving their loyal customers time and money. And that is not a bad way to do business.