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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.

With the boom of technology in the region, Southeast Asia has become home to young startups, and investors hoping to help fuel its rapid growth.

Some examples of investment news surrounding the region only this year include Chinese ecommerce giant JD.com confirming a $500 million joint venture with Thai retailer Central to build up the ecommerce and fintech sector in Thailand; Malaysia Debt Ventures set aside a $238 million fund to target technology-based companies like AR, VR, etc; and 500 Startups has made its debut investment in Myanmar backing a social media monitoring and news discovery app.

A recent report commissioned by Google and AT Kearney also highlights just how much money has been funneled into the region, which market is the most attractive and where are the most deep-pocketed investors coming from.

Southeast Asia’s golden child

Although the investment for startup companies in Southeast Asia only contributed to 8% to the total $90 billion of investment into Asia, this value has grown 23 times from 2012 to 2016 from $0.3 billion to $6.8 billion.

Most of the money has been pumped into Singapore and Indonesia that captured 60% of the entire investment.

Indonesia startups investment

Singapore gained most of the startup investment in Southeast Asia

However, nothing shone brighter this year than the myriad of Indonesian startups that have been stealing the attention of global industry giants like Tencent, Expedia, and Tim Draper from Draper Associates who invested in the early days of Tesla, Baidu, and Skype.

The country has produced three startups that classify as a ‘unicorn’, a company valued at more than $1 billion. They are Traveloka, Tokopedia and Go-Jek.

The first is valued at $2 billion after a $350 million investment from Expedia in July, and both Tokopedia and Go-Jek also are worth around $1 billion and $3 billion respectively.

Where’s all the money coming from?

Attracting the Chinese investors

In a short span of four years time from 2012 to 2016, Indonesia has seen 31 times growth of investment value from $44 million to $1.4 billion. During 8 months in this year alone, this value has grown more than two times to $3 billion driven by later-stage investments.

Indonesia startups investment

The staggering growth has AT Kearney predicting the ecosystem could attract more investment than the oil and gas industry — which contributed $23.7 billion or 3.3% of the country’s GDP last year.

“Due to the massive growth, the value of startup investments in Indonesia may surpass the nation’s oil and gas investment which was $5 billion in 2016,” said AT Kearney partner, Alessandro Gazzini.

From all of the investment raised by Indonesian startups since 2012, ecommerce received the biggest chunk of gold taking 58% of the total investment value.

Transport and fintech quickly follow behind with 38% and 2% respectively.

Indonesia startups investment

Indonesia has also become a hotbed for the expansion of Chinese companies as the country sees a growing interest from Chinese investors this year.

94% of the startups investment in the country during 2017 have involved Chinese investors, up from only 2% last year. Two of the infamous Chinese BAT, Alibaba and Tencent, are raising stake in Indonesia by investing in Tokopedia and Go-Jek respectively.

Meanwhile, JD.com diversified its portfolios with investment in Traveloka making Indonesia the official battleground for Chinese companies to fight their proxy war.

Indonesia startups investment

The involvement of Chinese investors in Indonesia is something that the government has encouraged across all sectors. Indonesia’s Investment Coordinating has even set up a special China desk to attract more investors.

With the country still at a nascent digital stage, there is no precise measurement to find out the country’s true potential until company’s try but as the famed venture capitalist Tim Draper said about Indonesia, “it is a great place to be”.

Here’s what you should know today:

1. President of Indonesia signed the ecommerce road map

President Joko “Jokowi” Widodo has signed the long-awaited ecommerce road map that was expected to be issued at the end of this year

The road map will provide guidelines for the country’s digital economy sector, including issues such as payment, logistics, cyber securities, taxation, human resources development and consumer protection.

The ministry was also designing a measure to record online transaction information from the marketplace, in coordination with the Finance Ministry, Central Statistics Agency (BPS) and Bank Indonesia.

Read the full story here.

2. Facebook enters China with photo sharing app

Facebook is testing a photo-sharing app called Colorful Balloons in China after banned in the country since 2009.

Colorful Balloons works like Facebook’s Moments app by allowing users to share photos with friends and family members.

However, instead of using Facebook’s interface, it relies on WeChat, and was released by a local company called Youge Internet Technology.

Read the full story here.

3. Indonesia’s niche ecommerce players attract JD.com 

Chinese internet giant JD.com continues to show its interest in the market by pursuing new partnership with niche ecommerce players in Indonesia. The company is also said to be open to making an equity investment.

JD.com is learnt to be interested in partnering with Laku6 although that relationship may not be an equity based one. The firm aslo recently participated in Traveloka’s $500 million funding round.

The rumour of its talks for investment in Tokopedia has been around for months with its rival Alibaba also showing interest in closing the deal.

Read the full story here.