Wearables: Their Time Has Come Norm Rose June 2015

ANALYSIS

This article explores the evolution of the wearables segment, with a focus on applications for the travel industry and barriers to adoption.

This content is published by Phocuswright Inc., a wholly owned subsidiary of Northstar Travel Media, LLC.The information herein is derived from a variety of sources. While every effort has been made to verify the information, the publisher assumes neither responsibility for inconsistencies or inaccuracies in the data nor liability for any damages of any type arising from errors or omissions. All Phocuswright publications are protected by copyright. It is illegal under U.S. federal law (17USC101 et seq.) to copy, fax or electronically distribute copyrighted material beyond the parameters of the License or outside of your organization without explicit permission.

About

Phocuswright is the travel industry research authority on how travelers, suppliers and intermediaries connect. Independent, rigorous and unbiased, Phocuswright fosters smart strategic planning, tactical decisionmaking and organizational effectiveness.

Phocuswright delivers qualitative and quantitative research on the evolving dynamics that influence travel, tourism and hospitality distribution. Our marketplace intelligence is the industry standard for segmentation, sizing, forecasting, trends, analysis and consumer travel planning behavior. Every day around the world, senior executives,marketers, strategists and research professionals from all segments of the industry value chain use Phocuswright research for competitive advantage.

To complement its primary research in North and Latin America, Europe and Asia, Phocuswright produces several highprofile conferences in the United States and Europe, and partners with conferences in China and Singapore. Industry leaders and company analysts bring this intelligence to life by debating issues, sharing ideas and defining the everevolving reality of travel commerce.

The company is headquartered in the United States with Asia Pacific operations based in India and local analysts on five continents.

Phocuswright is a wholly owned subsidiary of Northstar Travel Media, LLC.

Table of Contents

Introduction 5 What constitutes a wearable? 5 The failure of Google Glass 5 Apple Watch a watershed moment for wearables? 5 Wearables in the travel industry: why the connection? 6 Examples of wearables for travel 6 The wearable wallet, ID, boarding pass and room key 8 Barriers to wearable adoption 8 The future of wearables – virtual computers? 8 Summary – the wearable future 9 Endnotes 10

Figures and Charts

Fig. 1: Examples of Wearables for Travel 7 Fig. 2: The Cicret Bracelet 9

Introduction

By 2019, 148 million units of wearable computer devices will be shipped.1 Wearables include fitness bands that track your body's physical wellbeing, glasses that provide augmented reality, watches that issue alerts and provide seamless payment capabilities, and even small thumbnail covers that allow you to control electronic devices remotely. A clear emerging leader in the wearables category is the new Apple Watch; global preorders hit 2.3 million before it even appeared in stores on April 25, 2015.2 Many travel companies and services including airlines, hotels, trip itinerary managers and flight alerts have already created Apple Watch apps. Clearly wearables have moved from hype to reality, but is the travel industry actually ahead of consumers' adoption of wearables? Why is there such a strong connection between wearables and travel? How will wearables impact the travel experience in the near term and in the future?

What constitutes a wearable?

As the name implies, wearables are computer devices that sit on top of your body, your child's body or even your pet's collar. Wearables include anything from a piece of clothing, jewelry, glasses and wrist watches and bands, to small devices that seamlessly attach to your skin or fingernail. A wearable acts as a computerized extension of your body that augments your body's natural abilities through digital technology. The overall wearables trend reflects the emergence of smaller devices with dedicated functions that act seamlessly with your body and the physical world.

Many view the calculator watch, introduced in 1975, as the first mass market wearable computer device. The calculator watch had limited success other than with science geeks and math nerds.3 More recently, from 20082014, wearables became more mainstream, with the introduction of fitness trackers led by companies such as Pebble, Jawbone, Fitbit and Garmin.

The failure of Google Glass

Not all wearable launches have been successful. The obvious example of a market disappointment is Google Glass, which was introduced in 2012. Google Glass is a computer that is built into in a pair of glasses and allows Internet searches, photos, videos and augmented reality. Google recently pulled the product from the market, as mass adoption was lacking and there were significant privacy concerns. One of the main criticisms of Google Glass concerned the issue of privacy, as the wearer could record video of anyone without their knowledge or permission. Google Glass even brought a new term into the popular vernacular, when some wearers were labeled "glassholes," due to their obnoxious behavior while wearing the device. Despite an overall lack of consumer acceptance, some sectors of the travel industry embraced Google Glass. A trial with Virgin Atlantic Airways demonstrated how Google Glass could enhance the customer service experience by driving more personalized passenger interaction. Google Glass may be off the market for now, but internal sources indicate it is not dead. The Google Glass team now reports to Tony Fadell, chief executive of the home automation business Nest, which Google in 2014.4 Google Glass is likely to reappear as a fashion accessory in the nottoodistantfuture.

Apple Watch a watershed moment for wearables?

The biggest wearables announcement came late last year with the introduction of the Apple Watch. As with the smartphone, Apple is not the first to make a smartwatch, but many believe the company will redefine the category. Airlines have rushed to ready their Apple Watch apps; American, Alaska Airlines, Air Canada, British Airways, Delta, EasyJet, Emirates, JetBlue, Japan Airlines, Qantas, United and WestJet are among the carriers that have or will shortly update their apps for compatibility with the Apple Watch. In addition to airlines, Apple Watch apps have been released by Booking.com, Expedia, FlightStats, TripIt, TripCase and Marriott, to name just a few.

The Apple Watch currently relies on the iPhone for connectivity, so today it acts as an extension of the smartphone. The ultimate positioning of the Apple Watch within the smart device ecosystem has not been fully defined. But it appears the watch primarily acts as a messaging and navigation platform, alerting the user to emails, phone messages, texts, social media updates and, in the case of travel, itinerary elements and directions. The Apple Watch is truly a firstgeneration Apple

product, so some bugs have appeared with the release. The device's "taptic engine," which enables the watch to give the user the feeling of being tapped or buzzed on the wrist, was found to be faulty, causing shipment delays.5 An even more inherent problem with the Apple Watch is the lack of usability for the primary function of telling time. The watch requires a somewhat artificial flick of the wrist when it is sleep mode in order to display the time not a very subtle move when checking the time during a business meeting.6

Despite these shortcomings, the Apple Watch is clearly a game changer for the wearables industry. As the product matures and competitive offerings from Google and others emerge, we are seeing a shift from having to pull out your smartphone to check messages or navigate unfamiliar places, to simply using your watch for this and other purposes. In this way, the role of the smartphone is changing. The smartphone continues to act as the hub for the wearable device ecosystem. But as next generation smartwatches that do not depend on the smartphone emerge, the watch for many will take its place for simple functions around messaging, social media, navigation and communication.

Wearables in the travel industry: why the connection?

Most would agree that we are at a very early stage in the wearables revolution. Why then have travel companies lined up with wearable apps, particular for the Apple Watch? The strong connection between wearables and the travel industry is based on the constraints naturally imposed on travelers. During transit we are often juggling luggage or food, and moving quickly to catch a flight, checkin to a hotel, grab a cab or attend a meeting. Travelers are naturally on the move. The handsfree promise of wearable computers provides a logical benefit to the traveler. In addition, with the continued growth of the Internet of Things (IoT) and the increased number of messages that will be microtargeted toward travelers, the wearable computer becomes a more manageable communications device. Messages about local activities and restaurants, special offers from area merchants and insight into a destination's culture, history and architecture can all be transmitted via IoT devices such as beacons. The wearable device can act as a quick notification platform for receiving these types of messages, provided the information can be filtered based on personal preferences. No one wants a world of wearable spam.

Examples of wearables for travel

Figure 1 illustrates just some of the many ways in which wearables may be used throughout the travel process. Though some of the functions are duplicated across devices, we are likely to see examples of all of these types of wearables in the near future.

Figure 1

■ Watches, wristbands and jewelry. With a Rose Gold Apple Watch model with sapphire face priced at $17,000 +, smartwatches are more than simply a utility, but a fashion statement as well. Other jewelry items, such as rings that can be used for public transit, have also emerged in this broad category. This category has the most functionality, including communication, information storage, boarding and room entry, mcommerce and mpayment. ■ Smart shoes. Smart shoes could be used to track physical exercise and allow travelers to record a specific hike or city tour that could be shared with others. ■ Thumbnail device. Researchers at MIT are developing a new wearable device that turns the user's thumbnail into a miniature track pad.7 The thumbnail enables your hand to control devices as if it were a mouse, potentially changing the way travelers interface with their computer devices. ■ Bio stamp. Researchers at Massachusettsbased startup MC10 are working to commercialize a stretchable electronics technology that will be soft and conform to the human body, staying attached as the user stretches and moves.8 As bio stamps become more common, they could be used to track children or tour participants.

■ Smart apparel. Clothing will increasingly become smarter, with micro technology sewn right into the fabric. For travelers, smart clothing could help monitor physical wellbeing, particularly for elderly or disabled travelers. ■ Glasses and "disappearables". We will likely see the reemergence of glasses that are less geeky and more fashionable, as Google and others work with fashion designers to bring new glasses to the market. As the sensors used in these devices continue to shrink over the next few years, computerized contact lenses and small earpieces that are even more seamless will enter the market. The term "disappearables" has been coined by Nikolaj Hviid, a developer at Bragi GmbH in Germany, who created Dash, a wireless inear headphone that resembles a discreet hearing aid. The Dash has a music player, 4 gigabytes of storage, a microphone to take phone calls (just nod your head to accept), and sensors that monitor your position, heart rate and body temperature.9

Wearables and marketing Travel marketers face the same challenges for wearables as with all mobile devices: delivering the right message, at the right location, at the right time within the right context. Wearables present an even more difficult challenge due to the smaller real estate of these devices. By nature, these devices will allow users to filter information in order to receive only essential alerts. Luckily, travelers will likely want to receive alerts about their trip. However, whether this extends to marketing offers is totally dependent on whether the offer is personalized enough to deliver value based on the traveler's specific preferences and context at the time it is received.

The wearable wallet, ID, boarding pass and room key

Wearables will likely increase the use of mobile payments, as passing your smartwatch across a Near Field Communications (NFC) reader will likely be perceived as a less cumbersome method than pulling out your smartphone. Airlines have already launched boarding passes on the Apple Watch, and Starwood is introducing Apple Watch room entry at 100 properties.10 Extending the wearable to store your passport or driver's license seems logical as well.

Barriers to wearable adoption

Despite all the hype around wearables, broad market adoption may still be a few years away. As smartphones have gotten bigger, consumers appreciate the larger surface that facilitates easier typing and messaging. Wearables are moving in the opposite direction, with smaller and smaller device footprints. Therefore, the user interface for these small devices must be efficient and accurate in order to drive mass acceptance. As evidenced by the examples in this article, many of the wearables offer similar solutions such as measuring movement and body functions some of which are available through smartphone apps today. To be successful, a wearable must offer unique value that is not easily obtained from current devices. Early adopters, many of whom are frequent travelers, will no doubt be the first to buy the Apple Watch and other emerging wearables. But for significant market penetration, the category needs to mature enough to provide a standalone value.

The future of wearables – virtual computers?

One vision of wearables goes beyond a fashion accessory to embrace the concept of a virtual computer. This is best illustrated with the launch of the Cicret Bracelet (see Figure 2). Currently, this is more of a vision than reality, but the idea is intriguing. The video shows a waterproof bracelet that projects a virtual smartphone on the user's forearm. Though the Cicret Bracelet is not yet a functional product, the video does point to an interesting future in which wearables may function as virtual computers without the need for extensive computer hardware.

Figure 2

Summary – the wearable future

Clearly we are at the dawn of a new era of wearables. In the near future, business and leisure travelers will likely view their wearables as essential parts of their attire. Wearables will become smaller and seamless, and thus not necessary visible. The travel industry's quick release of apps for the Apple Watch illustrates the clear connection between wearables and the traveler. Over the next few years, critical mass will be achieved that will integrate the wearable device into the travel process, with the promise of greater efficiency and an enhanced travel experience.

Endnotes

1. Tony Danova, "The Wearables Report: Growth trends, consumer attitudes, and why smartwatches will dominate," Business Insider (May 21, 2015).

2. Chance Miller, "KGI estimates over 2.3M Apple Watch preorders, 85% Sport, <1% Edition. Run rate pegged at 23 M/month," 9to5 Mac April 15, 2015).

3. "The History of Wearable Technology," RedOrbit.com.

4. "Google Glass sales halted but firm says kit is not dead," BBC News Jan. 15, 2015).

5. Shara Tibken, "Apple Watch delays may be due to faulty part," CNET April 29, 2015).

6. Anthony Wing Kosner, "Telling Time On Apple Watch: Annoying Or HabitForming?" Forbes April 24, 2015).

7. Larry Hardesty, "MIT Media Lab Researchers Develop New Wearable Fingernail Trackpad," Supply Chain 24/7 April 21, 2015).

8. Mert Bal, "Biostamp: a stretchy, twisty, wearable chip," Engineering.com March 13, 2013).

9. Jeremy Wagstaff, Jeremy, "As sensors shrink, watch as 'wearables' disappear," Reuters, April 30, 2015).

10. Ben Lovejoy, "Your Apple Watch can now open your hotel room door at over 100 Starwood Hotels," 9to5 Mac April 24, 2015).