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Millennials are shaking up the travel industry with their penchant for authentic, unique experiences and Muslims are no exception to this rule. The size of the Halal travel industry is expected to skyrocket with more millennials entering the workforce and pocketing greater disposable incomes.

That’s one of the key takeaways of “Halal Travel Frontier 2018”, an industry report published by Crescent Rating in conjunction with MasterCard.

Crescent Rating, which first started analyzing the Muslim travel market in 2008, says that there were an estimated 126 million Muslim travelers in 2016. The number is expected to grow by nearly 30% in the next four years, settling on 156 million travelers in 2020.

In 2015, Crescent Rating estimated total purchases by Muslim travelers to be roughly US$145 billion. This factors in expenditure on Halal food, hotels, excursions & experiences, and shopping. The number is expected to rise to a colossal US$300 billion by 2026 – more than doubling in volume in a little over a decade.

A large chunk of this growth is fueled by millennial Muslim travelers in the fast-growing economies of Indonesia, Malaysia, Turkey, and Gulf countries. 60% of the population in Muslim majority countries is currently under the age of 30 – a stark contrast to the global average, which is 11%.

It’s a demographic that players in the travel & tourism space simply cannot afford to ignore anymore.

“Brands would also need to increase their level of empathy and find new ways to better connect with Muslim travelers,” explains Fazal Behardeen, CEO of Crescent Rating. “This will be key in order to both appeal and empower their Muslim travelers.”

What are Muslim millennials looking for?

One of the seminal insights proffered by Crescent Rating is the emergence of the Muslim female travel segment. This particular demographic is gradually becoming a force in its own right with females opting to travel with their friends & family in small to medium-sized groups.

The key purchasing factors for such consumers are “specialized travel products and lifestyle services.” Destinations looking to attract female Muslim travelers are advised to engender a safe and accessible environment that respects the cultural and religious sensitivities at play.

South Africa and Indonesia are tipped to be major travel destinations for Muslims, but Asia as a whole is expected to eat up the largest chunk. The Indonesian government itself has set up an ambitious target of attracting 5 million Halal travelers in 2019, more than double the 2 million that visited in 2016. Other popular destinations are Malaysia, Thailand, and Singapore.

Sporting events in Asia such as the Winter Olympics in South Korea this year as well as the Tokyo Summer Olympics in 2020 are also expected to court significant numbers of travelers from Muslim-majority countries.

Outbound travel markets. Photo credit: Crescent Rating

The potential is undeniable. How can brands cash in?

Muslim travelers tend to weigh in specific factors before reaching a firm decision on a travel destination, according to Crescent Rating. There should be facilities that allow for accessible prayer areas, restaurants & cafes serving certified Halal food, and toilets with provision for ablution. Most travelers will flock to social media or do extensive research on the web prior to embarking on their journey.

At the same time, governments also have an opportunity to help local businesses by offering prayer facilities and Halal food in public locations like airports, railway stations, and places of interest. Taiwan is cited as an example of a country actively working to meet this demand.

Like millennials around the world, Muslim travelers will likely start their buyer’s journey on the web by searching for travel content but most mainstream sites – Booking.com and Agoda, for example – don’t have dedicated listings for Halal-friendly establishments or significant insights on where Muslims might feel comfortable.

“We find that Muslim millennial travelers are like most millennial travelers apart from their uncompromising faith-based needs,” explains Raudha Zaini, marketing manager at Halal Trip, a B2C travel portal for Muslims. “They seek what we call the 3As when they travel – Authentic Experience, Affordable Facilities and Accessible Network – all within the radius of their faith requirements.”

According to the Pew Research Center, the Muslim demographic around the world is expected to grow twice as fast as the overall world population between 2015 to 2060, reaching a projected 3 billion individuals. In terms of consumer spending alone, the global Islamic economy generated US$1.9 trillion in food and lifestyle expenditure in 2015 with projections that it’ll grow significantly to US$3 trillion by 2021.

For brands looking to appeal to a gargantuan demographic hiding in plain sight, they’ll have to focus on crafting their message and developing empathy. That’s key if they’re looking to connect with young Muslims on a personal level. One thing for sure is that the market will continue to expand at a ferocious rate.

So far the rate of adoption has been slow, at best. UK-based retailer Marks & Spencer launched a burkini swimwear collection in 2016 to a spurt of criticism. Despite dissenting voices, the line completely sold out showing there’s real demand.

Other examples are the 2017 launch of the four-star Al-Meroz hotel in Bangkok, the first Halal hotel in Thailand as well as Expedia’s US$350 million in Indonesian online travel platform Traveloka the same year.

But these are tepid responses to a market valued at hundreds of billions. Larger brands can, and should step up to match smaller incumbents like Indonesian halal cosmetics company Wardah, India’s IbaHalalCare, and California-based AmaraCosmetics.

THE BACKGROUND

Popular travel site Expedia had its humble beginnings as a travel booking division by Microsoft in 1996, known as Microsoft Expedia Travel Services. The goal was to provide a groundbreaking method for customers to research and book their trips.

In the early 2000s, American media and internet company, IAC took over Expedia and what followed was a string of other ecommerce site acquisitions: Hotels.com, Hotwire, TripAdvisor, and China’s eLong.com.

“Buy, not build” would become the company’s repeated business strategy. Five years later in 2005, Expedia was listed on Nasdaq.

“We are always opportunistic,” commented Mark Okerstrom, Expedia’s then CFO. “The M&A team is never closed for business. We are always on the hunt for interesting opportunities and we’re fortunate to have an incredibly strong core business, which gives us the confidence to go out and do some of these acquisitions that are a little bit more intensive.”

Expedia Southeast Asia

Source: Expedia

THE CHALLENGE

Technology, as with most industries, has disrupted the travel business at a blink of an eye, shaping the expectations of travelers. New forms of “travel tech” such as fare comparison, travel design and emerging business models like Airbnb’s share economy, shook an industry that relied on travelers thinking only “where do I sleep?”

The internet granted people the luxury of a hassle free travel booking; best location, best hotel, best flight all for the best (lowest) price on one platform.

The arrival of Airbnb in 2008 changed the mindset of travelers – mainstream hotel chains no longer attracted them. Travelers sought property in remote, funky neighborhoods and relied on the local know-how of their host to explore destinations. Could Expedia compete with its traditional hotel offering?

Expedia Southeast Asia

Source: Phocuswright

THE STRATEGY

In order to cope with the volatile industry, Expedia did what it does best – opened its wallet for another acquisition. The company added Airbnb competitor HomeAway to its portfolio for a price tag of $3.9 billion in 2015.

Expedia Southeast Asia

Source: Nikkei Asia

The acquisition helped Expedia increase market share but is still behind Airbnb. In Q2/2017, Airbnb captured 15% of the global home-sharing market while Expedia and Priceline secured 12% and 9%, respectively.

Expedia, already with a stronghold in North America, realized that it needed to focus on emerging markets where 50% of the world’s millennials live and where its competitor, Priceline, established a leading position via Agoda.com and Booking.com.

Asia’s travel industry is expected to rise with a 12% CAGR during 2015 – 2020 to reach sales of $434 billion.

Asia Pacific is expected to remain the main driver of this performance, registering a 20% CAGR over the next five years, as internet adoption picks up in the region.

Expedia Southeast Asia

Source: Skift.com

In an attempt to compete with Priceline’s popular Booking.com, Expedia made a recent investment of $350 million into Indonesia-based Traveloka to bolster its presence in Southeast Asia as the company services six of the region’s primary markets.

“The US used to be the driver of our global strategy and other areas would follow,” expressed Dara Khosrowshahi, then CEO of Expedia in June 2017, only months before embarking to Uber. “But Asia is now driving our strategy.”

Unsurprising as the region’s internet economy is expected to grow from $31 billion in 2015 to $197 billion in ten years time. Travel is estimated to account for 45 of that, according to Google and Temasek.

“Our target is to at least double our share of the online travel marketplace in Asia[-Pacific]. I think we are on our way,” said Dara Khosrowshahi.

More specifically, Dara expected to increase gross number of bookings from its non-US businesses from the current 36% to two-thirds. It’s quite possible with Traveloka as an aid because Expedia can capture more of the 168 million Muslims expected to go abroad by 2020 as Indonesia is home to the world’s largest Muslim population.

Before his departure, Dara said there are two keys to winning Asia:

  1. Understanding Asian consumer habits
  2. A mobile-first attitude

To achieve this, the company operates Expedia Innovation Lab in Singapore where it uses sensor technology to understand how users feel while browsing Expedia-branded websites in 14 Asia-Pacific markets, including Australia, China, Thailand and Singapore, most of which have larger traffic volumes coming from mobile users.

Expedia Southeast Asia

Expedia Innovation Lab uses sensor technology to understand how consumers in Asia interact with its websites and services. Source: Nikkei Asia

THE FUTURE

The company is trying to fight for a stake in the fast-growing home-rental industry in Southeast Asia, where home rentals are still illegal as regulations have not caught up to the “share economy” while expanding its core hotel-booking business.

The company already has formed strong alliances with powerful players in the region such as AirAsia. Expedia acting as an official distributor through its agency AAE Travel can bundle AirAsia flights with hotel packages. But in a nascent market such as Southeast Asia, strong discounts are only the beginning as consumers have a plethora of travel agencies to choose from.

Good news? No single company occupies over 23% market share in any major Southeast Asian country.

The name Dara Khosrowshahi has been everywhere in the news lately. Why? The Expedia CEO of 12 years has officially confirmed reports that he will be joining Uber as its new CEO.

The ride-hailing platform has had its fair share and sometimes self-inflicted misfortunes. In Southeast Asia alone, it is under high scrutiny from the Thai transport authorities calling for a crackdown, it recently paid $9.6 million in fines after the Land Transportation Franchising and Regulatory Board in the Philippines banned it, and is going up against Grab, the region’s unicorn soon to close an investment round of $2.5 billion backed by Toyota, Softbank, and Didi Chuxing.

Who is Mr. Khosrowshahi and what does he bring to one of the world’s most valuable and troubled startups?

A great answer was shared by angel investor Terrence Yang, excerpt below:

In a perfect world, Uber would just hire Sheryl Sandberg. But in the real world, there’s no way Sheryl would ever join Uber. If you were Sheryl, would you? Becoming Uber CEO poses massive downside risk and and only moderate upside for Sheryl.

Among other things, former CEO Travis Kalanick keeps meddling/trying to come back, Uber has massive problems with recruitment and retention, Uber is highly unprofitable and probably needs (not wants) driverless cars to happen sooner than later to make the economics work (but Alphabet’s Waymo is suing Uber for, shall we say, inappropriately appropriating and basically colluding with Lewandowski to steal Waymo’s self-driving tech).

Here’s what’s great about Dara:

  • Dara is a grown-up Travis. Like Travis, Dara was and remains ruthless, smart, tough. But unlike Travis, Dara developed empathy and soft skills that Travis failed to do for years. Dara is also much more humble and learns fast, including learning soft skills.
  • Travis was the right person to lead Uber when he did. Uber was the fastest growing big startup company in the world by some measures. It’s a truly impressive accomplishment. Travis will go down in history for that. But Travis also went down – because Travis never evolved. Dara did. That’s why Dara is the best realistic choice for Uber.
  • Jeff Immelt and Meg Whitman just don’t know much about the travel industry. I don’t see how leading GE, eBay or HP is very relevant to leading Uber. Dara’s experience is much more relevant (and, no, you are not going to be able to hire the CEO of Lyft right now).
  • Dara bought HomeAway, which competes with Airbnb. Expedia also tried to compete with Airbnb directly. Airbnb is a good model of how to technically violate laws (e.g. turning homes into hotels) without pissing off so many people. Unlike Uber. And Dara is even an investor in freight startup Convoy. Uber is trying to make UberFreight a success.
  • Dara started as an investor in Expedia and CFO of that investor. Benchmark is suing Travis in part over Uber’s lack of CFO.
  • Dara learned to be a great CEO of Expedia. He’s been ranked in the top 100 CEOs in 2015 and 2016. Expedia stock and revenues are doing great.

Southeast Asian startups need…adults?

The lack of experienced digital professionals, coined the talent challenge, has always been a looming backdrop to the bustling nature of startups, especially in emerging markets like Southeast Asia. As long as someone was able to get the job done, they were hired. Age was just a number.

But given the growth of these companies from a team of 10 to 300 in the span of a few short months, businesses need leadership and maturity, two things that usually stem from experience. This is not to say that older means better but that a great leader is able to recognize what a company needs at Stage 1 is completely different than what it needs at Stage 3 and willing to implement the necessary changes.

Dara Khosrowshahi Humility

Source: Medium, Al Doan

Given the 48-year old’s track record leading Expedia to become “one of the largest online travel companies in the world” and positive reviews by Expedia senior execs, it isn’t surprising that 93% of employees told company review site Glassdoor that they currently approved of his leadership.

How many startups in the region can confidently say their leaders are this well-received?

Probably one of the biggest indicators of his maturity and most importantly, humility, is witnessed from the memo he wrote to Expedia staff regarding his departure obtained by Recode.

“This has been one of the toughest decisions of my life. I’ve had the privilege to run Expedia for 12+ years now, and most of you who have been on this journey with me know it has not been easy going.”

“I have to tell you I am scared. I’ve been here at Expedia for so long that I’ve forgotten what life is like outside this place,” he added.

Best of luck Dara.

Here’s what you should know today.

1. Amazon founder Jeff Bezos is the world’s second richest person

Jeff Bezos added $1.5 billion to his fortune as Amazon.com Inc. rose $18.32 on Wednesday, the day after the acquisition of middle eastern retailer Souq.com.

Amazon’s founder has added $10.2 billion this year to his wealth and $7 billion since the global equities rally began following the election of Donald Trump as U.S. president.

Bezos remains $10.4 billion behind Microsoft co-founder Bill Gates, the world’s richest person with $86 billion.

Read the rest of the story here.

 

2. Freightos, an Expedia for the shipping industry raises $25m

Freightos, a Hong Kong-headquartered startup that lets people compare prices and book shipping services, has raised a $25 million funding round led by GE Ventures, the venture capital arm of General Electric.

Freightos’ main product is AcceleRate, a subscription software for carriers and freight forwarders to automate calculating and managing shipping rates. The price comparison feature is a new addition to the platform.

Read the rest of the story here.

 

3. Indonesia’s Go-Jek launches new feature to book Blue Bird taxi

Indonesian ride-hailing startup Go-Jek and taxi company Blue Bird today launched Go-BlueBird, a special feature to book Blue Bird taxis via the Go-Jek app. Under the Go-BlueBird feature, users will be able to pay for taxi fare using the Go-Jek’s cashless payment service Go-Pay. The new partnership establishes Go-Jek as an “industry enabler”.

The new product is launched as Go-Jek, with other ride-hailing startups Grab and Uber, battles an upcoming revision of the land transportation regulation.

Read the rest of the story here