Travel commerce takes flight - From vacation to staycation - holiday buyers demand more - Klarna
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Travel commerce
takes flight
From vacation to staycation –
holiday buyers demand more
Klarna Confidentialklarna.com/uk June 2018
Travel has had a digital make-over. Gone are the days of
pouring over brochures and visiting local agents. Flights,
accommodation, car hire, experiences and currency can now
all be researched and bought online. Today, the consumer
is in control and can create their own itineraries for any
destination, all from the comfort of their own home.
Online travel retailing is no longer a side channel, it’s now
big business. In 2018, global online travel-related sales
are expected to be almost 694 billion U.S. dollars and are
projected to grow to 755.94 billion U.S. dollars in 2019.i
Explosion of choice
Almost all traditional travel agents, airlines, hotels an idea of how low, the average hotel website
and independent travel advisors now have their own conversion rate (bookings divided by unique monthly
online stores. In addition, there’s now many, global visitors) is typically below 2%. That means for every
pure-play travel businesses, which have contributed 100 people visiting a hotel website less than two will
to redefining the consumer research and booking complete a booking.ii
experience. This includes online agencies like Expedia
To understand this, travel retailers are turning their
and traveller review sites such as TripAdvisor.
focus to what’s happening at the checkout. They’re
Increasingly, smart and budget conscious travellers are eager to pinpoint the emotional factors impacting
also using price comparison websites like SkyScanner sales, how they can attract and influence travel-buyers
and TravelSupermarket.com to make sure they are and ultimately convert their ‘interest’ into a sale.
getting value for money. There’s also a new category
of peer-to-peer travel businesses like AirBnB and Uber,
unlocking new types of service for the regular traveller.
Even heavy-hitting internet players are looking
to ‘ride’ this lucrative market with the launch of
travel related products, for example Google with
its Google Flights product.
Building successful For every 100people visiting
a hotel website less than two
online experiences
will complete a booking
With competition intensifying, there’s now more
emphasis than ever on the digital experience. Super-
charged SEO, high performance websites and mobile
apps are making it faster and better. But even though
browsing activity is escalating, the overall proportion
clicking through to a sale is still low. Just to give you
Klarna
Confidentialklarna.com/uk June 2018
It’s time to relook at
payment choice In the UK
With websites, now under closer scrutiny, many realise
that it’s now time to take a different approach to their
online payment strategy. Key drivers influencing this are: 87%
of people
• Increased audience and
travel segmentation
took a holiday
In the UK, 87% of people took a holiday either
at home or
at home or abroad in 2017. Overall the most abroad in 2017
popular holiday destinations for Brits are city
breaks (53%), beach holidays (41%) and
countryside breaks (25%).i
72%
of people have
• Staycations
Staycations are also on the rise, with the
taken a UK average number of domestic holidays growing
break in the significantly. 72% of people have taken a UK
break in the last 12 months, with people aged
last 12 months 35-44 now the most likely to take a staycation
at least twice a year.i
Travel businesses will have to find new ways
to target growth segments with more
personalised products and services that
appeal to their lifestyles and financial needs.
• Overseas • Rising costs across travel mix
The average number of holidays per person is A toughening economic climate, currency
now 3.8 per person with the number of people fluctuations, and uncertainty around Brexit,
holidaying abroad now 57%. Overseas holidays mean. that prices are rising. Package holiday rates
are particularly popular with the over 65s who are expected to increase by up to 9% in 2018iii.
took 2.0 holidays abroad per person.i To empower their customers, travel businesses
will increasingly have to offer flexible payment
solutions that help travellers and holidaymakers
better manage their spend.
Klarna
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• Mobile preference
As online bookings rise, more consumers are
staying on mobile to book instead of device
As online
switching. This could be due more responsive bookings rise,
web-pages, availability of mobile apps, growth more customers
of smartphones with larger-screens. After are staying
researching on their smartphone, 79% of mobile
travellers went on to complete a bookingi in 2017.
on mobile to
With online tours and attractions, this may be book instead of
even higher. It’s anticipated that most online travel switching device
options will be mobile-optimised by 2020iv.
• In-situ spending
As more people make spontaneous bookings
while on-the-go, tourism and travel websites are
investing in their own dedicated mobile apps to
reach their audience en-route or in-destination.
Mobile is also a great place to target digital ad
spend, especially for transport, destination or tour
operators selling bookable experiences. One-click
payment is a great way to make payment pages
and apps much more frictionless for mobile users.
Holiday budgets get real
ABTA research shows that more British holidaymakers Here’s what we found:
have taken more holidays than at any point in the last
five yearsix. However, a savvier breed of holidaymaker • Millennials buy more online but want
has emerged, with people responding to challenging more flexibility
market conditions by planning further ahead to get Our research shows that 25-34 year olds are the
the holiday they want, and by managing their holiday most frequent online travel shoppers – and also
budgets more carefully. the most likely to shop flexibly in search of the
Klarna recently commissioned a study to identify best deal. But with 1 in 5 citing a lack of flexible
the financial needs of online travel consumers. By payment options as their biggest online shopping
encouraging a better understanding of their thoughts frustration, and over a third saying they’d be more
at the point of sale and subsequent pain points, we likely to buy if a travel company offered the chance
want to help online travel specialists improve their to pay in instalments, travel companies stand to
checkout and payment options in order to enhance profit from handling payments more flexibly.
customer satisfaction and create positive sales uplift.
• Costs are a major concern
Anxiety over the upfront costs of travel is widely
felt, with over a quarter of people feeling
apprehensive about the cost of booking travel.
Younger shoppers are most cost-concerned, with
almost one in five 16-25 year olds experiencing
guilt over a large one-off payment.
Klarna
Confidentialklarna.com/uk June 2018
Flexible payment options, customer support and • Boost positivity
a personalised booking experience all have Holidays are meant to make travellers feel good.
a knock-on effect on customer loyalty. The survey But many feel guilty about spending so much on
found shoppers across all age groups are more their trips. Our research shows that 25-34 year
likely to buy again – and spend more on add-ons olds would feel less guilty about making such a
– from companies offering these features. large purchase in one go (26%), if they had the
option to spread their payments over time.
• Holiday browsing is now a hobby
In addition to rate comparison and access to • Generate excitement
deals, more than a quarter of people (27%) In fact, paying by instalments can actually
browse online seeking inspiration. Over 55s are create a more positive purchase environment
the keenest browsers (perhaps a consequence for travel. Generally, over 1 in 5 would feel
of having more time) and women are 10% more more excited to book travel if they could pay
likely to ‘holiday window shop’ than men. 1 in 5 over time (22%).
are willing to be flexible on destination in favour
of a good deal, with young shoppers the most • Lift sales value
deal-savvy and cost-conscious.
With rising travel costs, profit margins are being
constantly squeezed. Travel businesses are
• Flexible payments are key to
eager for new ways to generate uplift from their
boosting sales customers, by selling value adds or upgrading
From our findings, we also saw that it’s not enough hotels, accommodation and travel options. Our
for retailers to have a responsive website and an feedback shows that 18% of travel buyers would
easy to use payment page. To truly optimise their even be willing to spend more on their holiday
checkouts for travellers, they also need to offer and associated upgrades if they had the option
more flexible payment choices if they want to: to spread the cost.
• Improve conversion
Our study revealed that nearly a third (31%)
would be more likely to purchase if they could
22%
pay for the cost of travel over time. For example,
with Klarna’s Slice it, travel operators can
offer instant online authorisation to flexible
consumer financing.
• Target loyalty
would feel more excited
Interestingly more women (34%) than men
to book travel if they
(25%) said this was the case – if a flexible could pay over time
payment option was available, 35% of 25-34
year olds would be more likely to purchase.
Services such as Klarna’s Pay later can influence
decision at the online checkout. It allows users
to make more spontaneous decisions without
worrying about cash flow. And Pay later can
also improve repeat purchases by over 20%.
Source: All figures in this section above are from the Klarna Consumer Travel Survey, May 2018.
Klarna
Confidentialklarna.com/uk June 2018
Online travel personas
Ever wondered who’s buying online travel? Here’s four personas to get you into the consumer mind-set:
Escapists
Active and adventurous, escapists crave to get away from it all but still like their creature comforts.
They love the outdoors and discovering new destinations off the beaten track. Most likely to go
long-haul to exotic destinations full of natural wonders. Flexible financing helps them to travel
further afield and invest in physical and life-changing experiences.
Dreamers
They love the idea of travel and are always thinking about where they’d go if they had the time
and money. The spend their spare time reading travel magazines and travel blogs, browsing cool
destinations on Pinterest, and sharing their travel dreams with friends and family. Most likely to
splash out on a once-in-a-lifetime holiday. Flexible payments can offer them a way to turn their
dream into a reality.
Learners
These guys love culture and expanding their minds. They adore sightseeing and destinations
that are rich in food, culture and history. Most likely to go on multi-centre holidays, learn-a-skill
retreats, or tours with itineraries with immersive experiences. Flexible financing helps them
budget for add-on and in-destination activities that help enrich their travels.
Planners
Often buying for the family, they hate surprises and like to be prepared for every aspect of their
trip. Their travel experience begins online, as they try to get the best deal for their budget. They
shop around for package options, deals, and undiscovered destinations. Creating entire itineraries
and ditching them if they’re not quite right. Pay later options, gives them the flexibility to plan
ahead, while mobile apps help them plan on the go.
Klarna
Confidentialklarna.com/uk June 2018
How Klarna helps
At Klarna, we have experience helping global and
local travel businesses boost sales conversion with
an optimised online purchase journey and multiple
payment options.
This includes enabling a mobile-optimised checkout,
one-click payments for repeat customers, Pay later to
help holiday makers smooth their cash flow, and Slice
it, pay by instalment, to help those that want to travel
more or upgrade their options make larger outgoings
more manageable.
Above all, we deliver payment services that are
frictionless and fast, and that are easily accessible from
any device, in any location. All designed to help online
travel retailers build more competitive and appealing
checkout services, and travel consumers to have the
best online experience possible.
i ABTA Holiday Habits Report
ii Hotel Online, February 2018
iii Travelzoo
iv Phocuswright
* All other statistics quoted are from Klarna Travel Consumer Survey May 2018
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