Will Apple Pay Fly in the Travel Industry? – Part II

In light of the recent launch of Apple Pay, we decided to take a look at the potential impact of the new mobile wallet service on the travel industry.

In my last post, we provided an overview of the technology and reviewed some industry research from Atmosphere Research to gauge how Apple Pay might be received by travellers. We also looked at possible airline and airport use-cases.

In today’s segment, we’ll look at the impact of Apple Pay on the hospitality industry and explore adoption expectations throughout the travel sector.

As always, comments are welcome.

The End of the Room Charge?

Apple Pay should also impact the hotel sector, but not always in the way hoteliers would like.

Hoteliers look at RevPAR to see how they’re doing at the room level, but it’s revenue from gift shops, restaurants, spas, etc. that drives profitability. Paired with location awareness—perhaps via iBeacons—Apple Pay should provide higher conversion rates in response to hotel offers than previously seen.

Oftentimes, people charge to the room based on convenience. Perhaps a guest doesn’t have a credit card with him—at the pool for example. But nobody goes anywhere without their mobile phone. One-touch payments are likely to be seen as infinitely easier than a written signature. With OpenTable integrating with Apple Pay, we may see initial adoption higher at hotel restaurants that accept OpenTable.

Of course this would necessitate a change in POS infrastructure—NFC card readers and perhaps the introduction of portable NFC-capable POS terminals. Incidentally, portable POS systems are commonplace in Europe and Asia, so why hasn’t this happened in the US? But I digress.

Valyn Perini, VP of Strategic Relationships at Nor1 (and fellow Tnooz Node), notes the potential for Apple Pay to reduce the number of purchases charged to the room. “Hoteliers are really interested in better understanding spend…But if the onsite spend goes through Apple Pay straight to the credit card instead of via a room charge to the folio, hotels won’t like it because it reduces their visibility into guest spend.”

So if you’re a hotelier, you’ve got two questions to ask your POS provider:

  • What are you doing to support Apple Pay (to satisfy guest demand)?
  • How might I reclaim visibility of guest spend that comes through Apple Pay?

Today, the answer to #2 is probably going to be “not a lot” because Apple hasn’t yet provided any mechanism for getting at the data. But Apple’s typical strategy is to deploy technology in a limited way initially and then open it up for partners to leverage in a responsible and secure way in years that follow.  We’ve seen that pattern most recently with Touch ID. I wouldn’t be surprised to see the same thing happen with Apple Pay.

Perhaps we’ll see a mechanism that enables you to match Apple Pay spend with a guest by triangulating with geo-location along with their Loyalty Card stored in Passbook. This would not only provide visibility of on-property spend to the specific hotel the guest is staying at, but would also provide data to the marketing team at the brand level, driving better offer targeting in the future.

But Let’s Not Get Ahead of Ourselves

With all the excitement about the launch of Apple Pay, we need to temper our expectations. It seemed to work seamlessly in the demo, but how well will it fare in the wild? Easter is cautiously optimistic for Apple Pay’s success, but recognizes that the tech industry’s past mobile wallet failures don’t provide much margin of error for Apple with consumers.

“I’m interested to see what happens in the next 30 days after Apple Pay launches. Previous attempts to launch mobile wallets haven’t really taken off.  What we have learned is that you have to have all the players to agree to put this solution together, any of whom have competing interests involved. It’s not a technology problem – that’s been there for over 10 years. But it’s important it hits right for consumers. If Apple can’t pull it off, I don’t know if it will happen.”

And while travelers might be happy to buy their coffee with Apple Pay, will they be willing to use it on bigger ticket items out of the gate?

Harteveldt says “as exciting as Apple Pay is, I think we must be pragmatic about its adoption. This won’t change the world overnight. It’ll take a few years for Apple Pay to reach critical mass in travel. I expect we’ll see consumers use Apple Pay for less expensive, less important purchases before we see a meaningful number start using this for travel.”

One other potential obstacle for adoption pertains specifically to the corporate travel world. “[Apple Pay] doesn’t currently work with corporate credit cards, so a sizeable portion of the customer base will not be enabled,” according to Flo Lugli, Principal at Navesink Advisory Group. One might expect this to be resolved as Apple Pay matures and the platform is extended, especially as the big three payment networks (Visa, Mastercard, American Express) and many of the largest issuing banks are supporting consumer cards via Apple Pay.

“Travel sellers need to be prepared to accommodate their Apple Pay customers,” adds Harteveldt. “The early adopters will no doubt represent a valuable—and vocal—subset who will share their experiences via social media.”

Steven Joyce, CEO of Rezgo (another fellow Tnooz Node) notes adoption in the Tours and Activities sector will be severely challenged as “existing support for NFC terminals by small businesses—especially those in tours and activities—is limited.  Most have only just started supported swipe technologies.  If Apple Pay allows payment from one iPhone to another, that might make a difference, but requiring the purchase or installation of new hardware will be problematic.”

Mobile Web Support Could Open Even More Possibilities

As of today, Apple Pay only supports app-based purchases, though the next logical extension would be a plug-in to support mobile web via the Safari browser.

Much of travel booking, particularly through OTAs, comes via search. And many of those searches come from people who arrive at booking sites as a guest. And many of those prospective bookers abandon their search before booking, sometimes because they are looking for a better deal elsewhere.

But sometimes they abandon a booking because there are forms to fill in, including their credit card information. As annoying as it is to fill out forms on a desktop, on a smartphone it can be downright painful. So invoking Apple Pay would not only reduce transaction friction and thus increase conversion, it would also increase revenue and improve the ROI on search engine marketing. That is until Google changes its algorithm.

What’s your take on Apple Pay? Are you looking forward to using it? Planning to integrate it into your company’s mobile commerce strategy?

Please share your thoughts in the comments below.

Link to Part I

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