6 Travel Industry Trends for 2016

What a prolific year in the travel industry in 2015! Maybe you didn’t notice.

This is a $1.3 trillion industry, but it’s often overlooked by social networking, e-commerce, software and even gaming and dating apps when investors look for potential unicorns or when magazine editors at Inc or Fast Company do CEO profiles. The funny thing is, travel is one of the industries most likely to produce a winner, particularly on the consumer side. Priceline, Expedia, TripAdvisor, OpenTable, Yelp, HomeAway, Airbnb and to some extent companies like Google, Uber, Lyft and Pinterest can credit much of their success to the tireless global love for travel.

Let’s recap some of the big moves in the industry in 2015…

Expedia acquired Orbitz at the start of the year for $1.3 billion and is finishing the year with the acquisition of HomeAway for $3.9 billion.

Airbnb reached a $25 billion valuation and went from industry challenger to industry titan.

Marriott announced it would acquire Starwood Hotels for $12.2 billion to roll up more rooms in the growing battle with vacation rentals.

American Airlines officially completed its merger with US Airways.

President Obama loosened travel restrictions on Cuba (something I took advantage of last month).

Lyft announced a huge Avengers-style (sans Iron Man; Uber is definitely Iron Man) partnership with fellow Uber rivals Didi Kuaidi (China), Ola (India) and GrabTaxi (Southeast Asia).

And — something to look out for before year’s end — last-minute hotel booking app HotelTonight might be up for sale, though its CEO says it’s not.

Although we won’t see a travel company reach $100 billion in valuation in 2016 (unless Priceline manages to buy Airbnb) but several things I expect in 2016 we’ll get the industry much much closer.

Priceline’s CEO Darren Huston recently stated that his company (and the travel industry in general) needs “to find a way to take our seat at the table (with Amazon, Alibaba, and other Internet titans). We need to think through the tactics to achieve that.”

Some of the trends I share below should help not only Priceline, but the travel industry at large, but first I want to share a little personal background so you can understand the position I’m in to offer these predictions.

After traveling more than 100 days for seven straight years, I can say without a doubt that travel is a true passion for me. But I know I’m not alone. Whether you’re Brian Chesky or someone backpacking through South America, many people share the realization that travel is an amazing way to connect to the world and extend a lifelong education.

My professional interest in travel goes back to my college years when I interned in the Dallas headquarters for Southwest Airlines after my sophomore year at UT-Austin and learned the ins and outside of the airline industry. The interest continued to grow through my stints building fashion-focused segments for travel-destination events like South by Southwest and ESPN X Games and consulting the Beijing Olympics. In the leadup to their 2012 IPO, I transitioned from my role as director of operations at Bazaarvoice to create the company’s travel market strategy as clients like Hilton, Starwood and IHG were being onboarded. Today, I take enough trips to maintain my A-list status with Southwest, secure Mosaic status with JetBlue, earn tons of Starwood points, leverage my Tablet Plus membership and use Airbnb and HotelTonight dozens of times a year.

Most importantly, I serve as the CEO and co-founder of Localeur, a travel startup that has helped more than 1 million people experience local wherever they go. In 2013, we were named the Best New Startup in Austin. Forbes, Time, The Today Show, MTV, Men’s Journal, the San Francisco Travel Association and others have named us one of the best new travel apps. We’ve grown our monthly user base 1,500% this year while expanding to 20 cities nationwide with just 4 employees and no VC funding although we do have angel investments from folks like Blake Chandlee (VP of Global Partnerships for Facebook), Heather Brunner (CEO of WP Engine, just recently named Austin’s Best CEO), and the current or former leaders of Bazaarvoice, Spredfast, Silicon Labs and CS Identity to list a few.

Simply put, more and more people, Americans especially, are seeing the value in traveling to new cities both domestically and abroad, and Millennials especially are seeing the value in ditching the tourist experience and experiencing cities the way locals do. But if you thought 2015 was a busy year in the travel industry, here are some things to look out for in 2016:

  1. The merging of travel and local.

Google bought Zagat in 2011 and things didn’t quite go as planned, and Priceline bought OpenTable in 2014, and both of these moves were early signs of what’s to come in full next year. As Millennials strive to feel like locals wherever they go, be it staying in Airbnbs or using Localeur for recommendations, we’ll see more integration of travel services into local platforms and local services into travel platforms.

Case in point, my startup Localeur is currently in contract negotiations with a leading airline and a leading hotel brand for partnerships for 2016, which is only the beginning of the growing role we plan to play in facilitating this Millennial-led pattern to merge high-price travel decisions with high-volume local behavior. This will become the dominant factor in travel by 2020.

2. More mobile, less problems.

The problem with travel planning on desktop devices was all the windows. The average person would view something like a dozen to 24 different websites before fully booking their trip. You’re constantly having to keep tons of windows open to compare offers and prices while also looking at countless reviews on cluttered review sites like TripAdvisor and Yelp.

With mobile, you can expect a more seamless, streamlined experience with planning and booking travel. HotelTonight was the first-mover in the last-minute hotel booking space, but the major OTAs quickly played the me-too game and caught up not only on the service offering itself, but also on mobile penetration. This may be bad for a single startup, but it’s great for travelers. With mobile apps getting more sophisticated (see #5 below) and design becoming a higher priority (#6) you can only expect it to get better from here. Look out for mobile bookings to account for the super-majority of travel decisions from inspiration to booking and sharing by 2020.

3. It’s the content, stupid.

I’ve heard all kinds of reasons why various investors have passed on Localeur, but the market being too small or problem being nonexistent shouldn’t be one of them unless you’re one of these guys. Simply put, Presidents have to worry about the economy and the travel industry has to worry about content. Why? Because without content, there’s no inspiration.

Every travel company is working aggressively to get closer and closer to the revenue via bookings, but there’s a reason why airlines and hotels are putting more resources into content development: getting someone to take 4 to 6 trips a year rather than 2 to 3 trips a year doubles their bottom line. Legacy travel businesses — print travel guides, chain hotels, credit card companies and airline brands with aging customer bases — will be especially focused on online and mobile content in 2016 as they see the growing threats posed by tech startups ranging from Airbnb to Square to Localeur.

Priceline’s acquisition of OpenTable and Google’s acquisition of Zagat wasn’t just about the push toward local experiences, but also about fighting off the threat from Yelp, YPlan and other startups who are more focused on delivering end-to-end experiences from content-driven inspiration-to-booking services.

4. The next wave of rewards-driven credit cards.

If I were going to make one big non-Localeur-related travel bet in 2016, it’ll be that Airbnb will make huge strides into business travel (check out this job description at the company). The first step will be easy: inspiring business travelers to extend business trips into personal trips. Millennials are already pushing that pattern. The second and third steps will take a level of execution that will greatly determine whether nor not Airbnb’s valuation will continue moving north as Uber’s has.

With Starwood’s merger into Marriott’s portfolio, it is possible that owners of the Starwood American Express card will lose out by 2017 in order to add to Marriott’s partnership with Chase Bank via their Rewards Visa card. That opens up a lane for AmEx to explore not only a rewards card with Airbnb — something I’d think Marriott wouldn’t want to do if they can prevent it — but also a strategic investment in the company. AmEx’s travel business is a key vertical and it’s investment arm won on its early investment in OpenTable and has solid investments in companies like Stripe, Radius and Warby Parker that speak its advanced understanding of platforms, technology and Millennials. An Uber-AmEx card is also something to look out for.

Soon, not just tech-industry employers will see value in allowing employees to access Airbnb’s unique inventory (and HomeAway’s for that matter) for business trips. A rewards-driven credit card would quicken this eventuality.

5. Deep mining and deep linking.

You’ve heard it plenty. Data, data, data. Well, the travel industry is a bit behind e-commerce and social networking when it comes to data mining because without a $100 billion company there’s no single company pushing the industry to act or die a la Amazon and Google, but 2016 will be the year the industry plays catchup in a big way.

As travel industry consolidation continues and competition between hotel chains and Airbnb and OTAs and user-generated content sites heats up, organic user and revenue growth will be harder and harder to come by for publicly-traded companies (or companies like Uber and Airbnb that traditionally would have IPOd by now). Localeur may have grown its monthly user base 1,500% this year, but numbers like that are impossible for companies beyond their 7th year.

That said, data will become a greater focus for travel companies looking to mine and re-target their existing user bases and continuously market to lookalike audiences, find like-minded travelers and create upselling opportunities and deploy more authentic re-marketing tactics.

One thing that will help will be advanced deep linking between travel companies — an area that both industry consolidation and affiliate marketing deals benefit from — along with even deeper implementation of technology on flights, in hotel rooms and lobbies, and in traditional channels like post-booking emails and ticket purchasing or reservation cycles. We may even see vacation rental companies enhance the walk-in experience to more closely mirror the welcoming environment of a hotel lobby or room entry.

6. The latent adoption of good design.

E-commerce and social networking companies have historically leveraged data better than travel tech companies, and the same is true for design. Go to any OTA site like TravelZoo or traditional UGC site like Yelp and you can quickly realize that clean design is very very far down the list of priorities for these companies. Why should it be? Design gets in the way of good engineering which gets in the way of good monetization, right?

I’m highly familiar with that line of thinking not only because I’m in the travel industry, but also because I’m in Austin — a very B2B focused tech market — where designers are often not in the first 10 or 20 hires due to a belief that design is just the way things look rather than the way things work.

Thankfully, the tide is turning. OTAs are enhancing the design of their websites and bringing slightly newer approaches to mobile products. Case in point, HomeAway hired former Visa executive Mariano Dima as Chief Marketing Officer in late 2014, revamped its branding and has redesigned its homepage to better emulate the look of startups like Localeur (March 2014) Airbnb (July 2014) rather than the Craigslist style of years past.

Conclusion

2015 was a critical year in the travel business because it was a year in which the fight came to the leaders — Airbnb and HomeAway to hotels and OTAs, prompting aggressive acquisitions and heightened focus on branding and technology-driven innovation. 2016 will certainly continue this trend with industry incumbents looking to stem the tide of relative newcomers and startups like Localeur set to breakout further in the new year. Follow me on Twitter @joahspearman to keep up with the space.