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5 things to understand about digital growth in the Middle East

Apr 20, 2017

Arabian Travel Market (ATM) gets bigger by the year, and as online sales and smartphone penetration increase, the digital opportunity in the region looms larger than ever. Ahead of this year's show, we take a look at some of the key factors in the Middle East's digital growth story.

1. It is consumer-led

Consulting firm McKinsey believes the Middle East could have 160 million digital users by 2025. But it notes that while some of the wealthier Arab states have levels of smartphone and social media adoption to rival the US, "businesses and governments across the board have struggled to keep up".

The numbers bear this out. On the World Economic Forum's 1-7 rating for business-to-consumer internet use, only two MENA countries (UAE and Qatar) score over 5[i]. And according to eMarketer, digital has just a 15.7% share of the region's total ad spend (though that is expected to increase to 25.8% by 2021).

The region's businesses are playing catch-up with switched-on consumers – and that means the opportunities are potentially huge.

2. The 'youth bulge' is giving it momentum

The population in MENA is young. Almost 65% are under the age of 30, and 50% are under the age of 24 – a phenomenon dubbed the 'youth bulge'. For businesses entering the region, this means a significant proportion of their potential customers will be digital natives. An extensive Visa study in Saudi Arabia and UAE found that millennials are actively online for between 4.5 and 6.5 hours a day[ii], and according to Google, 82% of under-35s in Saudi and 59% of under-35s in UAE researched their last purchase on a smartphone.

3. Top-line smartphone figures don't tell the whole story

Research by GSMA Intelligence indicates that there are 263 million smartphone connections in MENA, which equates to around 42% of total connections[iii]. That sounds modest, but adoption varies hugely across the region, with the most advanced markets seeing penetration rates comparable to the US. Google research suggests that smartphone penetration is at 91% in UAE and 86% in Saudi Arabia; and according to the World Economic Forum, Bahrain and the UAE both have a rate of mobile broadband subscription that is comfortably over 100%[iv], thanks to widespread use of multiple SIMs.

4. Digital travel sales are growing too – and fast

eMarketer predicts that digital travel sales in the Middle East and Africa will top $40 billion by 2020. That remains a relatively small share of worldwide sales, but it represents growth of over 100% in just five years (the figure in 2015 was $19 billion). At the same time, ever-increasing tourism to the region creates opportunities for both local and global travel sellers. Dubai already has the world's busiest airport for international passenger traffic, and it is working hard to achieve a target of 20 million visitors per year by 2020[v].

Gian Caprini, Head of Digital Optimization at EAN brand says: “Digital purchases in the GCC are growing rapidly. EAN is working with several key players in the region to support an effective localized integration of the hotel product. We provide digital optimization advice as part of our offering and are currently working with key partners including local startups and established travel brands.”

5. And finally: trust matters

“Building loyalty and trust is a key factor in the offline Arabian world," explains Caprini. "Travel agencies entering the online space are facing the challenge of establishing a strong connection with their customers by creating a fully localized experience in terms of product as well as customer service. As mobile phones are increasingly becoming the device of booking and not just browsing for hotels, investing in mobile is essential to establishing a constant connection between brand and customer. In particular, getting it right on mobile devices is key to engaging with the millennials that dominate the Middle East's consumer base.”