Multiple Devices and Screens

Chat, Shop, Buy: Messaging as the New Traveler Medium

Researched and written by Douglas Quinby

April 2016 About Phocuswright

Phocuswright is the travel industry research authority on how travelers, suppliers and intermediaries connect. Independent, rigorous and unbiased, 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. 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.

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3. Chat, Shop, Buy • The Hotel-Guest Messaging Startup Ecosystem • Four Key Themes Behind • Guest Requests: What They’re Chat-based Travel Planners Chatting About • Will Travelers Chat? (And if so, Which Ones?) 5. The Next Message • The Frequent Traveler • AI, or Scaling Humans Challenge • Beyond the Message • Ten Chat-based Travel • How Chat Will – and Will Not - Planner Startups Change Travel • Further Reading

The growth of mobile messaging has been remarkable, and certainly undeniable. In Chat Apps & Their Users addition to the widespread use of traditional SMS or text messaging, Internet-based mobile 1 billion chat apps have become default means of use WhatsApp1 communication among billions around the world. According to Internet Trends 2015 800 million from Mary Meeker of Kleiner Perkins Caufield use Facebook Messenger2 Byers, six of the 10 most used mobile apps worldwide are messaging apps. 700 million Messaging is also evolving rapidly. While mobile use WeChat (Weixin) 3 chat apps emerged as free, Internet-based alternatives to comparatively expensive text 275 million messaging, numerous apps have introduced use kik4 a range of innovative features and functionality to include pictures and video, commerce, brand 200 million marketing, customer engagement and more. use Snapchat5

1. https://blog.whatsapp.com/616/One-billion 2. http://newsroom.fb.com/news/2016/01/heres-to-2016-with-messenger/ 3. http://www.statista.com/statistics/255778/number-of-active-wechat-messenger-accounts/ 4. http://techcrunch.com/2016/02/02/what-is-this-a-gif-for-brands/?ncid=rss 5. Snapchat users June 2015: http://www.adweek.com/socialtimes/snapchat-is-the-fastest-growing-social-network-infographic/624116 © 2016 Phocuswright Inc. All Rights Reserved. 5 From Messaging to Medium More Than Just Chat

Perhaps the most cited example of chat moving beyond just messaging is China’s Weixin, or WeChat. Its growth in China has been particularly remarkable. The widely popular app has evolved as much into an ecosystem* for commerce, payments and other services, and is widely hailed as a model for what the future of messaging apps could become in the U.S., Europe and elsewhere.

WeChat enables third parties to build applications and services within its platform, a model that others, such as Facebook Messenger, are also The results view of China pursuing. The most robust apps are becoming Southern’s voice recognition operating systems within the dominant mobile platforms of Apple and Android. flight search within WeChat

Image: WeChat *Connie Chan, “When One App Rules Them All: The Case of WeChat and Mobile in China” (August 6, 2015). Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium

This report examines the rise of messaging and the opportunity for travel brands to leverage chat-based services for customer engagement. Phocuswright’s Chat, Shop Buy addresses the following:

• The use of text and messaging apps among U.S. travelers; • The growing ecosystem of chat-based travel planning services; • The target traveler segments for chat-based travel planners and the challenges in winning them over; • The use of chat in hospitality for guest service and engagement; • The role of bots, artificial intelligence and people in powering chat; • The future of chat and how it will – and will not – impact travel.

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium

This study focuses on mobile messaging, including text messaging (SMS) and Internet-based instant messaging services for mobile devices. This report uses “messaging” and “chat” interchangeably to refer to Internet-based mobile apps for instant messaging. It does not directly address all forms of messaging, such as in-app and mobile OS push notifications, email and other asynchronous communication services. Chat, Shop, Buy includes new consumer research of 1,904 U.S. travelers on their use of messaging, based on Phocuswright’s U.S. Traveler Technology Survey 2015. Phocuswright also conducted interviews across a range of startups offering messaging services within travel, as well as established travel companies introducing chat-based services.

With the growing popularity of chat apps, traveler use of mobile messaging has risen dramatically, and the impact on travel – from shop and book to experience and share – will only grow. Nearly half of U.S. travelers used text messaging and more than three in 10 used chat apps to share their travel experiences in 2015 (see Figure 1, next slide), up significantly from previous years.

Text Messaging

2015 saw a Email big jump in traveler use Posting on a of text and social network mobile messaging. Messaging apps*

Writing a review on a review website

Writing a review on an OTA

0% 10% 20% 30% 40% 50% 60% 2012 2013 2014 2015 * Messaging apps not asked in 2012 and 2013. Base: U.S. Online Travelers (N=1,904) Source: Phocuswright’s U.S. Traveler Technology Survey 2015

Text Messaging

18-24 25-34 Email 35-44 45-54 55-64 Posting on a 65+ social network Travelers under Messaging apps 45 are more than twice as likely to use mobile Writing a review on a review website messaging than travelers 45 Writing a review and older. on an OTA

0% 10% 20% 30% 40% 50% 60% 70% Base: U.S. Online Travelers (N=1,904) Source: Phocuswright’s U.S. Traveler Technology Survey 2015

Facebook Messenger 52%

WhatsApp 26%

Snapchat 24%

iMessage (iPhone default) 24%

Viber 12%

WeChat 9%

Kik 7%

Telegram 6% Facebook KakaoTalk 4% Messenger

Slack 3%

None 30%

Base: U.S. Online Travelers (N=1,904) Source: Phocuswright’s U.S. Traveler Technology Survey 2015

As expected, younger travelers are far more likely to be users of all mobile messaging apps. Two thirds of millennial travelers use Facebook Messenger and more than half of 18-24 year olds use Snapchat (see Figure 4, next slide). WhatsApp is more popular among 25-44 year olds, and with more affluent travelers.

With mobile chat use driven by younger travelers, travelers who use chat should weigh toward lower income brackets (younger adults are earlier in their careers and typically earn less). However, the percentage of travelers who use messaging apps is more or less even among all income brackets. This data means travelers who use messaging apps are significantly higher earners than non-users.

Messaging apps offer travel brands an opportunity to engage with more affluent travelers.

Age Income Facebook Messenger Facebook Messenger

Snapchat Snapchat

WhatsApp WhatsApp

Do not use Do not use

0% 20% 40% 60% 80% 0% 20% 40% 60% <$50K $50K-$75K $75K-$100K 18-24 25-34 35-44 45-54 55-64 65+ $100K-$150K >$150K

Base: U.S. Online Travelers (N=1,904) Source: Phocuswright’s U.S. Traveler Technology Survey 2015 © 2016 Phocuswright Inc. All Rights Reserved. 16 So, we know more and more travelers are using mobile messaging, especially younger travelers.

Right. As we saw in Figure 1, more than three in I0 travelers used a messaging app to chat about their trips with friends and family.

The next question, then, is whether travelers will use messaging to interact with travel brands.

Do you mean for something like booking a hotel?

Exactly. Travel planning and booking, but also customer service. It could be used to get help choosing a hotel, or for support while they’re traveling.

OK, let’s look at travel planning first.

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium

Numerous entrants have emerged within the growing field of trip planning via messaging in late 2015 and 2016. Most seek to reinvent the travel planning and booking process through mobile devices and a chat-based user experience. Some, such as Hyper, Lola and Pana, have launched dedicated mobile apps built on the promise of a highly personalized user experience, powered by live travel agents, that will make trip planning easier and stress-free. Others, such as 30SecondsToFly, ETA, GoButler and HelloGbye, focus on the potential of artificial intelligence and natural language processing to anticipate traveler needs and simplify the booking experience for busy business travelers with complex, multi-faceted needs. And not to be left out, some more established companies have entered the fray with messaging-based services. KAYAK has introduced Snap, booking via text, while a metasearch competitor launched Hello Hipmunk, currently an email-based planning service using natural language processing with potential applications for messaging.

1. Messaging Is the Medium (Mostly) Mobile has become so pervasive in travel, and messaging so widely used among travelers, that chat-based travel planners assume travelers will be comfortable conversing with an agent and shopping and booking through conversation.

Most chat-based travel planners, however, offer the experience through a dedicated mobile app, and not through standard text messaging or more widely used third-party messaging apps such as Facebook Messenger. A dedicated app environment allows the agent to push content, such as tiles that display flight, hotel or restaurant options Hotel, restaurant with imagery. tiles from Hyper and Pana

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 20 Four Key Themes Behind Chat-Based Travel Planners 2. The Promise of Simpler Search

All chat-based trip planners promise to simplify the travel search-shop-buy process for busy frequent travelers. They seek to remove travelers’ need to search across multiple websites and numerous hotel and flight options by serving up instead just a handful of relevant options best suited to each traveler and each trip. They do this in the following ways:

a) In-depth customer profiling, similar to what travel management companies (TMCs) maintain on travelers, with details on traveler preferences around spend and service levels, preferred suppliers and other factors. Profiles may be developed through chat (see image at left), game-like steps (part of the initial customer setup for Lola), as well as the booking history with the service; b) Mobile phone access – as mostly mobile-only platforms, some of these services access a traveler’s calendar, location and other information on the phone to further tailor A Pana agent chatting recommendations. with a customer to c) Artificial intelligence and other techniques to identify a smaller build a profile subset of relevant options for travelers based on those profiles and the specific trip requests; d) Human agents (a.k.a. artificial artificial intelligence) to review and further curate options and finalize recommendations to travelers. Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 21 Four Key Themes Behind Chat-Based Travel Planners

3. An Anytime, Anywhere Concierge All chat-based travel planners promise a level of personal service far ahead of anything that conventional online travel sites can offer. Whether that service is powered by humans or intelligent software, travel chat customers can expect whatever is behind those messages to search, make suggestions, and be available on demand for help. On-demand trip support has long been offered by some TMCs to corporate travelers, as well as by some leisure travel agencies. However, customer care has long been a weakness of most online travel sellers. Indeed, when travelers do book offline, the desire for personal service is the most widely cited reason.* Mobile chat travel planners create a new option for A hello from a travelers who might prefer booking on their phone but with the Scout concierge kind of customer service that only offline agencies have traditionally provided.

Image: Scout * Phocuswright’s U.S. Consumer Travel Report, Seventh Edition, August 2015. Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 22 Four Key Themes Behind Chat-Based Travel Planners

4. Subscription Pricing Higher levels of service mean higher costs, and several chat- based travel planners have introduced subscription-based pricing, mostly monthly or annual fees; some offering different tiers with varying service levels or programs for businesses. HelloGbye, Hyper, Lola and Pana all have introduced subscription pricing, while GoButler, Operator and Scout are free to users (but may receive commissions or other sources of revenue). Still others are in early stages and have not released pricing plans, but several are considering subscription pricing models. Charging for travel planning services is not new. Corporate travel agencies have long charged transaction fees, while leisure agents – especially good ones – have shifted their model over the past decade and a half from a commission-based model to one more dependent of traveler fees.* However, a recurring monthly fee is quite different from a fee per trip or per booking, and it remains far from clear whether enough willing travelers will participate to support a subscription- based travel planning service – let alone multiple such services.

* Phocuswright’s The Once and Future Agent: Travel Agency Distribution Landscape 2009-2013 Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 23 Will Travelers Chat?

vs.

Images: Lola, Expedia © 2016 Phocuswright Inc. All Rights Reserved. 24 Will Travelers Chat? Travelers use messaging apps. But whether they will use them as an integral part of their trip Figure 5: Traveler Attitudes planning process, and pay an additional fee to Toward Trip Planning use them, is far from certain.

Chat-based trip planners are placing a big bet Visit multiple 43% 37% that travelers will welcome a conversational websites user experience that offers a small, curated set of options rather than a comprehensive list. This revision is a fundamental shift in how travelers search for and book flights, Enjoy planning 31% 39% accommodations and other travel. It is also vacations counter to the long-standing, prevailing trend in online travel that more is better. Travelers gravitate to those marketplaces that promise Strongly agree Slightly agree more – more accommodations (Booking.com), more reviews (TripAdvisor) and more everything Base: 1,850 U.S. Travelers Phocuswright’s U.S. Consumer Travel Report, Sixth Edition, May 2014. (metasearch). For most travelers, online travel is not broken. Four in five travelers always shop multiple websites when planning trips, and 70% enjoy the process of trip planning (see Figure 5 above).

All of the messaging-based travel services interviewed for this report indicated that Figure 6: Annual Trip Frequency they were not targeting the large majority of of U.S. Travelers, 2015 travelers who just take a few trips a year. 57% Each is targeting more frequent leisure and business travelers. 46% • 30SecondsToFly and ETA, still in beta, are 33% initially targeting unmanaged business 30% 24% travelers.

• Hyper and Pana both offer subscriptions for 10% corporate travel. • Lola, at launch, is focusing on leisure, and targeting travelers who take at least four 1-2 trips 3-5 trips 6+ trips trips a year. Leisure Travelers Business Travelers But they have their work cut out for them.

While travel is big, the pool of frequent Base: 2,010 U.S. Travelers travelers is considerably smaller (see Phocuswright’s U.S. Consumer Travel Report, Seventh Edition, August 2015. Figure 6 at left).

The most frequent travelers will not be an easy segment to crack for chat-based travel planners. More seasoned travelers may have specific preferences that could be well served through a more personalized approach, but it’s not at all clear that they want fewer options or even want a simpler shopping process. More than any other customer segment, the most frequent travelers love the hunt. The planning, shopping and expectation-building are as much a part of travel as the trip itself. These travelers are even more likely to enjoy travel planning themselves, and visit multiple websites (see Figure 7, below).

Figure 7: Traveler Attitudes by Trip Frequency "Enjoy planning vacations” “Visit multiple websites"

36% 34% 41% 38% 37% 40% Slightly agree 51% 38% 47% 37% 44% Strongly agree 25%

1-2 trips 3-5 trips 6+ trips 1-2 trips 3-5 trips 6+ trips Base: 1,850 U.S. Travelers; Phocuswright’s U.S. Consumer Travel Report, Sixth Edition, May 2014.

Converting those valuable frequent travelers will be no easy task for chat-based travel planners. Their ability to do so will hinge on at least three factors:

1. A differentiated customer experience: they must deliver a compelling – if not delightful – user experience from discover to book to in-trip support. • Service, suggestions that anticipate wants and needs • On-demand availability for help, from trip disruptions to in-destination recommendations 2. Confidence in curation: chat-based travel planners must deliver not only more relevant suggestions, but also the confidence that their users are getting the best possible options. 3. A reason to pay: online travel booking has long been more or less free to travelers. These services will have to justify paying for a subscription with additional benefits – member-only access to discounts, upgrades or gifts is an approach Lola and Pana are already pursuing.

Startup Description Powered by* Media Website AI-powered assistant for Artificial 30SecondsToFly SMS and Slack www.30secondstofly.com business travel booking intelligence Text, FB Messenger, Emma Text-based hotel booking Live agents www.textemma.com WhatsApp AI-powered assistant for Artificial ETA Mobile app www.eta.ai business travel booking intelligence AI-powered assistant for flight Artificial GoButler Mobile app www.gobutler.com booking intelligence

Mobile travel planning and Artificial HelloGbye Mobile app www.hellogbye.com booking with voice recognition intelligence

Mobile app, text, Hyper Mobile travel planning agency Live agents www.usehyper.com email

Lola Mobile travel planning agency Live agents Mobile app www.lolatravel.com

General shopping app that Operator Live agents Mobile app www.operator.com includes some travel services

Pana Mobile travel planning agency Live agents Mobile app www.pana.com

Mobile concierge for local Scout Live agents Mobile app helloscout.com recommendations and booking

*This column indicates whether customer interaction is driven primarily by live agents or automation. All startups included use both technology (e.g., machine learning, AI, natural language processing) to automate processes and live agents for customer interaction or other functions Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 29 So, despite all of the recent media attention to messaging as an ecommerce medium, you don’t think the big OTAs need to worry just yet?

Well, not quite yet. It’s still very early days and chat-based travel planners are banking on a pretty big shift in consumer behavior.

It also looks like the type of travelers and trips that chat–based services are targeting is different from what the OTAs typical cater to. I think you’re right. Those more price-sensitive, infrequent leisure travelers make up a big part of OTAs’ customers, and not targets – at least initially – of most chat-based travel planners.

What about traditional travel agents?

Great point. Leisure and corporate agencies serve more frequent, upscale travelers with complex needs. These services at first will be more directly competitive with agents.

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 30 There’s a lot of excitement right now about search and book, but perhaps an even bigger opportunity for messaging in travel is “in trip.”

Hmm. What do you mean by “in trip?”

Well, it’s really all about customer service. On- demand help, suggestions…whatever the traveler needs. No more waiting on hold.

So a chat-based concierge?

Sure. And a chat-based front desk. And ticketing agent. And flight attendant. And call center agent…

Interesting. Tell me more.

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 31 The Guest Experience: Getting the Message We Can’t Wait (for the End of On-Hold) Not too many travelers may be ready to plan and book the next family vacation via mobile messaging, but most would probably welcome the opportunity not to wait on hold the next time they need some customer support from an airline, hotel or travel agency.

Mobile messaging represents an obvious opportunity for travel brands to offer on-demand traveler support. The travel segment that has seen the most uptake so far has been hospitality. And a slew of new startups have stepped in to facilitate guest relations via instant messaging.

Numerous hotel brands have begun implementing messaging – whether in-app or SMS – for guest relations. But implementing chat-based guest communication is not simply a matter of opening an account on Facebook Messenger or opening up a dedicated SMS number.

The service needs to be tied into existing systems to link communications with specific rooms and guests, as well as to workflow processes to ensure various requests are routed efficiently to the right department – just like a phone operator or front desk staff would do with a phone call.

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium

© 2016 Phocuswright Inc. All Rights Reserved. 34 The Growing Ecosystem of Hotel Guest-Messaging Startups Of the many startups targeting this new hotel guest-messaging opportunity, some – such as Alice, GuestDriven and Moncierge – are larger guest service management platforms that include messaging along with a range of mobile content as well as more form-based means of structuring specific service requests. These platforms also include hotel staff-facing applications and some workflow management. Another group of startups, including Checkmate, GoMoment, Kipsu, Whistle and Zingle, are focused more narrowly on messaging and guest communications. They may either plug into existing hotel workflow systems (such as Zingle’s partnership with Newmarket’s HotSOS) or provide custom routing to ensure each message reaches the right hotel staff. Scout, a chat-based trip planner for local activities, also provides its service as a chat- based mobile concierge for hotel guests.

Travelers appear to be using chat for a range of requests. Below are breakouts of messaging samples from two companies, Checkmate and GoMoment. Each offers distinct services, and each company parses and categorizes its messaging differently, but both charts show guests making a range of requests: service and room-related reservation requests, as well as informational queries (see Figures 9 and 10).

Figure 9: Guest Messages by Topic Figure 10: Guest Messages by Topic (Checkmate) (GoMoment)

Thanks 28% Reservation-related 23% Room requests 20% Check-in/Check-out 20% Check-in/check-out 19% Housekeeping 19% Service request 10% Room-related 14% Information request 9% Transportation 8% Wi-Fi 7% Other 6% Other 16%

Data from Checkmate, based on a sample of Data from GoMoment, based on a sample of 10,000 guest messages with hotels. messages from 5,000 guests with hotels.

It’s still very early days for chat-based guest services in hotels, but indications from messaging startups and hotels suggest a positive response from travelers. Hotels that have integrated mobile-based requests effectively – whether chat-based or structured – into workflow have reported improvements in guest satisfaction scores. or

The biggest opportunity for hotels is the migration of their guest service management from manual entry on ledgers and walkie- talkies to digital tracking and routing through mobile-device-enabled workflow systems. ? Automated tracking of requests will improve staff responses and create new data and insights on hotel service-level performance.

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 37 The Next Message Humans vs. Bots vs. AI Whichever tech wins, all travel services built around messaging will have to figure out how to scale

The rise of messaging in travel commerce could give the impression that travel is going backwards after two decades of digital innovation that has driven the rise of online travel. More and more, travelers handle their own travel arrangements on a computer or phone, and fewer and fewer live agents are involved in that process.

Adding people in the travel planning mix certainly adds cost, but it also poses new challenges for growth. How can human- powered travel services scale efficiently when live agents have to touch every transaction, or even every customer search request? How well-prepared are hotels to handle an onslaught of new text messages every time a guest has a problem with Wi-Fi or wants to check the pool hours? One of Scout’s scouts

One solution to scalable chat is simply not to involve humans at all, but to make it seem like travelers are interacting with a human. This scenario is where AI, or artificial intelligence comes in. 30SecondsToFly, GoButler, ETA and GoMoment are all betting on artificially intelligent agents to meet the needs of travelers and travel brands. GoMoment’s Ivy leverages the IBM Watson cognitive computing platform to simulate interaction with hotel staff to support guest requests and solicit feedback. GoMoment’s Ivy texting with an unhappy hotel guest; Flight search on GoButler Underpinning intelligent computing is the concept of machine learning, whereby software systems continually learn and improve through data analysis.

Image: GoMoment and Forbes; GoButler Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 40 Who Needs People? The Bots Are Coming Another approach is bots, or simpler software that responds programmatically to select requests. Microsoft has recently introduced a hotel booking bot on Skype, while Kayak has launched a search bot for Slack. Assist is a commerce bot that is available across multiple platforms, including Facebook Messenger, Telegram, Kik, Slack and SMS. It offers local shopping, restaurant reservations and hotel booking. Designed to automate simple functions, bots may indeed offer more efficient scaling, but bots only work well where the response options are constrained. They are not designed to handle the variety and complexity of possible human responses. More sophisticated bots today give specific directions to users on how to Assist on Facebook respond to each query. See the example of Assist hotel booking at right. Messenger

But today’s bots are a far cry from true simulation of live interaction with human beings, and even startups leveraging AI acknowledge that a critical part of the intelligence they are building is self awareness: the system must know when to escalate a message to a live human.

Several startups, rather than pursuing AI, are developing a range of tools to make their agents more efficient. They are automating as many traditional agent tasks as possible so that agents can offer a personalized experience to many customers simultaneously. Some examples:

1. NLP, or natural language processing, to parse message-based travel requests and initiate flight and hotel searches in the GDS or other APIs so the agent does not have to; 2. Targeted bots that handle a narrow set of common messages and responses; 3. Agent-facing prompts that offer suggested messages that the agent can review before pushing to the customer.

Currently, mobile messaging between travelers and brands today is occurring mostly within the dedicated apps of hotels and, to a lesser extent, chat-based travel planners, as well as via text messaging. The next widely expected step is services enabled through third-party messaging apps such as Facebook Messenger and WhatsApp. Facebook, which announced a platform for third-party developers to offer bots within Messenger at its F8 conference this April, has already begun introducing services to enable brands to engage with travelers via Messenger (KLM now allows travelers to get their boarding pass via the app). Facebook also has been in beta with M, a concierge service through Messenger that, similar to the startup Operator, offers the ability to purchase goods and some services as well as make informational requests. Kik, another messaging app, is pursuing bot services so local businesses such as restaurants can let their customers place orders via a bot. Image: Facebook Messenger via The Verge Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 43 Moving Beyond the Message Text vs. Chat vs. Apps

A key question before any travel company looking continue to struggle with driving app at engaging customers through messaging is, downloads and usage. which medium? The ideal, of course, is in-app messaging. This feature links the messaging Third-party messaging apps are expected thread to a customer profile and gives the to introduce more functionality via their company complete control over the user APIs to enable external developers to experience. But travelers have to download the offer more rich capabilities, such as app first, and they also have to use it. Amid ever pushing forms, graphics and tiles as well more crowded app ecosystems, that step is as user authentication to link users to a becoming only more difficult and expensive for customer account. This could become a any app developer. compelling middle-ground to help travel Generally, hotels and hotel messaging service brands message with the hundreds of providers report a much higher uptake for text millions of users of third-party chat apps. messaging, while hotels User Uptake Functionality and Control Text High Low Chat Apps Medium to high Low, but lots to come Brand Apps Low High

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 44 From Text to Talk Customer service via text or chat, while still relatively new, points to a future in which user interfaces and customer interaction with software systems are much more natural. Siri, Microsoft’s Cortana and Amazon Echo all point to less typing and more talking. Natural language processing is already widely used by several travel firms for everything from travel planning to translation services. Among the chat-based travel planners so far, HelloGbye has pursued voice recognition most aggressively.

Amazon already allows some ordering of services through its Echo, including ride-hailing service Uber. Skyscanner offers flight search via Alexa on the Echo. Hotels are already looking at in-room technology whereby guests could change the room temperature, lighting or close the blinds all through voice activation.

Images: Amazon Echo; HelloGbye, via Sparksheet Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium © 2016 Phocuswright Inc. All Rights Reserved. 45 The Future of Push Can brands use messaging for marketing?

Messaging offers incredible commercial Travel companies engaging in messaging potential not only because it’s so popular, should take a cautious approach. Most but also because it’s so personal. It hotel messaging services send an initial provides a unique opportunity for brands to text welcoming the guest to the hotel and engage with travelers in real time, informing them about the option to individually and – potentially – at scale. message the hotel if they need anything. This option also presents an obvious GoMoment’s Ivy can ask the guest to rate marketing opportunity for travel their experience (see image on page 38). companies to push targeted offers to Chat-based travel planners could message customers. their customers during their trip just to check in, or if they need a restaurant While most apps do some push marketing suggestion. through notifications, an obvious extension for chat-based services would These types of “soft sells” are designed be to add proactive messaging in addition to foster traveler comfort and to responding to customer requests. But engagement with a new service. Overt travel companies must tread with care. marketing pushes, especially those out of Chat can be incredibly effective because context of the existing conversations it is so personal. Companies that abuse between a traveler and a brand, could that intimacy could quickly alienate imperil customer trust. customers.

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium

1) The future of chat-based travel planners remains to be seen: subscription-based pricing will limit their appeal to a narrow band of more frequent, affluent leisure and business travelers. The services also assume travelers will accept a big shift in travel planning behavior, and there is no guarantee those travelers – especially for leisure trips – will accept the shift.

2) Chat-based travel planners pose no threat to OTAs (for now). They are more likely to eat into the market share of traditional leisure and corporate travel agencies, who already service the travel needs of more frequent and affluent leisure and business travelers.

3) The biggest near-term opportunity is in-trip and on-property: the consumer use case for on-demand guest service via messaging on property at hotels is clear, and there is a growing ecosystem of startups offering solutions that facilitate guest engagement via mobile and provide options for integration with – or improvement upon – hotel workflow management.

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium

4) For hotels, messaging is not another guest service burden, but an opportunity to elevate service-level performance: by integrating with staff workflow systems and processes, messaging platforms can digitize and monitor guest requests and create new insights through data collection and analysis.

5) OTAs and activity sellers such as Viator could leverage chat to help travelers with in-destination decisions. Most tours, attractions and activities are purchased in-destination. OTAs and other sellers of in-destination services could improve the still leaky mobile shopping experience for – and improve conversion of – activities by offering mobile chat in the shopping flow. HotelTonight has already introduced this capability with its Aces Concierge service to support customers during the trip.

6) It is still early days for AI. Amid the growing attention to AI, human agents and staff will continue to play a role in monitoring quality and support more complex, personalized requests.

Source: Phocuswright’s Chat, Shop, Buy: Messaging as the New Traveler Medium

© 2016 Phocuswright Inc. All Rights Reserved. 48 A Little Further Reading Travelers will find no shortage of media coverage and papers on messaging and AI interfaces. Here are a few short articles for an introduction to some of the issues raised in this report:

. Connie Chan, “When One App Rules Them All: The Case of WeChat and Mobile in China” (August 6, 2015). http://a16z.com/2015/08/06/wechat-china-mobile-first/ . Casey Newton, “The Search for the Killer Bot” (January 6, 2016). http://www.theverge.com/2016/1/6/10718282/internet-bots-messaging-slack- facebook-m . Sam Lessin, “On Bots, Conversation Apps, and Fin” (January 16, 2016). https://www.fin.ventures/letters/on-bots-conversational-apps-and-fin . Chris Messina, “2016 Will Be the Year of Conversational Commerce” (January 19, 2016). https://medium.com/chris-messina/2016-will-be-the-year-of- conversational-commerce-1586e85e3991#.hnc6b9czv . Ted Livingston, “The Future of Chat Isn’t AI” (March 1, 2016). https://medium.com/@tedlivingston/the-future-of-chat-isn-t-ai- b07f65bc252#.jom45ogut

Researched and written by Douglas Quinby April 2016

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