Everything you need to know about Apple Pay and the travel industry

The new iPhones and Apple Watch sure got most of the buzz after the latest Apple launch event a few weeks ago.

But Apple Pay, which launches this week with the release of iOS 8.1, may end up being the most impactful announcement in the long term.

There has been a fair amount of coverage of Apple Pay in a number of media outlets, including Propelics’ own blog. But most of the coverage has been on the mechanics of the technology and unsurprisingly has been focused on its use in traditional retail environments.

So I thought it might be more interesting to try to figure out what kind of impact Apple Pay could have in the travel industry.

But before we dive into use cases and projected impact, let’s recap what Apple Pay is first.

The last, best hope for mobile wallets

Apple Pay may be our last, best hope for delivering a mobile wallet solution.

Many others have tried to crack this particular nut and failed.

Some, like Google, stumbled because there were very few devices in the wild that could support NFC at the time. There was also an inability to get a meeting of the minds with the card issuers over control over the data.

The carriers have tried the same with SoftCard (née ISIS) to little effect because… well, they’re carriers and can’t market their way out of a paper bag and have engendered little trust with consumers.

Apple has approached the problem in a uniquely Apple way – it’s an elegantly simple solution from an end-user perspective and puts consumer concerns about privacy and security at the forefront.


It’s an elegant solution for sure, but it’s more of a sustaining innovation, rather than a disruptive one. It removes some of the friction from the process, but it doesn’t change it in any meaningful way – you still use the same payment processors and banks.

The status quo of the payment system value chain is largely untouched.


Nor is it significantly different than Amazon’s 1-click payment, PayPal or even Apple’s own iTunes purchase methods.

The fact that it can be extended to any app (rather than having to enter – and share – your card info to every app in which you may want to make a purchase) and also for use in physical retail stores is highly valuable.

But sustaining innovations can still have a really big impact. And if successful, the impact on Apple’s bottom line could be pretty huge as the marginal cost of the service is close to zero.

Not that Apple, who is famously profitable already needs any help.

And for participating merchants, not only is the likelihood of conversion higher by simplifying the process, but unlike prior attempts at mobile wallets – by the sheer dominance of the iPhone – there will be in excess of 100 million iPhones in the market that support Apple Pay within 12 months making this a large scale deployment.

That is in stark contrast to the situation that Google had with its wallet, where only a handful of Android devices that supported NFC could take advantage of the service.

Impact on the travel industry

So is the travel industry ready for Apple Pay? And if so, what kind of impact might it have?

A study by Atmosphere Research in early 2014 of more than 5,000 US travelers from shows that one in five smartphone-owning leisure travelers and one in three business travelers who have smartphones have mobile wallets on their phones now.

Twenty percent of both leisure and business travelers who don’t have mobile wallets on their phones are interested in getting one.

Thirty-seven percent of leisure travelers with smartphones and 49% of business travelers who use smartphones believe mobile wallets would be helpful when traveling.

Now personally I think those numbers may be inflated by apps pre-loaded onto devices, but the numbers do show that there is at least a strong interest in mobile wallets by travellers.

And that’s good. Though these numbers don’t appear to reflect the reported usage.

There is great potential for Apple Pay within virtually all sectors of travel that can help reduce the sales cycle, open up higher conversion rates of high profit ancillary products, especially in combination with location-aware and context-aware applications which will make offer presentment more relevant and effective.

Atmosphere Research’s Henry Harteveldt is bullish on the potential of Apple Pay:

“Apple has the brand trust and product features that will help. Apple has designed Apple pay to fulfill the promise of ‘click okay and walk away,’ which will make it a very consumer-friendly tool.

“Just as Starbucks has seen its mobile app help speed up customer check-out at its cafes, Apple Pay could be used by a hotel guest to check out of a hotel, let an airline passenger pay for ancillary purchases such as upgrades or lounge passes at the airport, and pay for ground transportation or activities.”

American Airlines has often been an early adopter of Apple technologies and is often singled out in its keynotes.

So I spoke with Phil Easter, director of mobile apps for the carrier, to get his perspective.

Easter sees many possibilities for Apple Pay.

“A lot of people will see this as cool, but when people start to understand the impact, especially with Apple Watch showing up next year, you will see all kinds of new use cases that consumers will dive into.”

American believes Apple Pay will provide additional opportunities to promote and convert last minute impulse ancillary products, such as seat, upgrades and day passes to lounges.

With beacons and proximity and contextual awareness, smart travel marketers get those offers to the passenger closer to the time of departure and hit them at those moments of need. And Apple Pay can make accepting those offers even more convenient.

Easter adds:

“Anytime there’s an opportunity to reduce barriers to entry or use, we have to embrace it. Consumers’ expectations that we provide better and better experiences only get higher and higher. Steve did that to us.

“He created an environment where elegant apps rule the world. And Apple Pay is another step in that journey.”


The end of the room charge?

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

Hoteliers look at RevPAR to see how they’re doing at the room level, but it’s spend at gift shops, restaurants, spas and other retail outlets at hotels and resorts are how hoteliers look to increase their share of wallet of the guests’ trip spend and can drive a lot of profitability.

There is no doubt that paired with location awareness – perhaps via iBeacons – there will be offers to present offers to hotel guests and have them pay via Apple Pay at higher conversion rates than seen previously.

Often, people charge to the room based on convenience.

Perhaps it’s that they don’t have their credit card with them at the time, if they’re at the pool for example. But today, nobody goes anywhere without their mobile phone.

And one-touch payments is likely to be seen as infinitely easier than a written signature. With (now) Priceline-owned 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 yet, nowhere in the US. It’s a thousand times more convenient for the consumer, 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 of Apple Pay to reduce the number of purchases that get charged to the room.

“Hoteliers are really interested in better understanding spend, which means they need to see the spend.

“But if the on-site spend goes through Apple Pay straight to the credit card instead of via a room charge to the folio, the hotels won’t like this because it reduces their visibility to guest spend.”

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

  1. What if anything are you doing to be able to support Apple Pay (to satisfy guest demand)?
  2. What can you do to help me reclaim the visibility to my guest spend that comes through Apple Pay?

Today the answer to question #2 is probably going to be “not a lot” because Apple hasn’t yet provided any mechanism to get at the data.

But Apple’s typical strategy is to deploy the technology initially in a limited way and then in the following year, open it up for partners to leverage in a responsible and secure way.

We’ve seen that pattern most recently with Touch ID and it wouldn’t surprise me 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 their loyalty card stored in Passbook and geo-location.

That would not only provide visibility of on-property spend to the specific hotel the guest is staying at, but also back to the marketing teams at the brand level which could then drive better offer targeting into the future.


But let’s not get ahead of ourselves

With all the excitement about the launch of Apple Pay, we need to temper expectations. It appeared to work seamlessly in the demo, but we have to see how well it works in the wild.

Easter is cautiously optimistic for Apple Pay’s success, but recognizes that the tech industry’s mobile wallet failures of the past 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 that this gets resolved as Apple Pay matures and they extend the platform, especially as the big three payment networks (Visa, Mastercard and American Express) and many of the largest issuing banks are supporting consumer cards via Apple Pay.

Harteveldt adds:

“However, travel sellers need to be prepared to accommodate their Apple Pay customers.

“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 (and another fellow Tnooz Node), notes that 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 supporting 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 nore 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 bookings, particularly through OTAs comes through search. And many of those searches come from people who arrive at many booking sites as a guest.

And many of those prospective bookers abandon their search before booking. Sometimes it’s because they are looking for a better deal elsewhere before they commit.

But sometimes it’s because when they start to go down the booking path, there are forms and fields to fill in, including their credit card information.

It’s hard enough to do that on a desktop, but can be really painful on a smartphone.

So if there was the ability to invoke Apple Pay to reduce the friction of the transaction and increase conversion, which beyond having the benefit of increasing revenue, it would also improve the ROI on search engine marketing… that is until Google changes their algorithm.

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

Please share your thoughts in the comments below.

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Glenn Gruber

About the Writer :: Glenn Gruber

Glenn Gruber is a contributor to tnooz and senior mobility strategist at Propelics , an enterprise mobile strategy firm.

Previously Glenn was AVP travel technologies at Ness Technologies, responsible for developing the company’s strategy and solutions for the travel industry.

Prior to Ness he held leadership roles at Symphony Services, Kyocera and Israeli startups Power Paper Ltd and Golden Screens Interactive Technologies. He also writes a personal blog, Software Industry Insights



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  1. Vanessa

    I am thrilled about the potential for Apple Pay to simplify lives. I believe the scenario you just described in which large suppliers, credit cards, and even small businesses adapt to embracing Apple Pay et. al, and its use will make this safer system become 2nd nature to consumers. 20 years from now we will look back incredulously at our former time-consuming and vulnerable use of credit cards. Apple Pay sounds like a safer option. Time to buy more AAPL stock!

    • Sceptical Corporate Traveller

      Your are right “in 20 years time” – exactly my point. Except that Apple Pay will be one of a range of options, probably not even the major one – see first post below.

  2. Yomadic

    I would like to put my money in control of a corporation who values the security of my cash as much as Jennifer Lawrence’s nude photos. Where do I sign up?

  3. Sceptical Corporate Traveller

    And yes, I would love a single device that cleared my wallet of the plethora of payment, membership and loyalty cards it contains. But to achieve that masses of infrastructure from my golf club upwards and outwards has to change.

    I’m not holding my breath! The ability to do this even for payment, let alone the mass of loyalty programmes might just be approaching ubiquity in 5, probably 10 years, time. Remember, I only need a <1% number of cases in which I CANNOT do this to pretty well force me to keep on carrying phone and wallet!

  4. Sceptical Corporate Traveller

    What tosh! Apple simply does not have the market share to make this dominant, and the probability of them climbing down from their “walled garden” attitude to produce an Android version is negligible!

    Even in the USA Android has roughly 2/3 of the mobile phone market!


    • Glenn Gruber

      Hello SCT whoever you may be.

      First off Kantar ComTech from which the BGR article quotes provides notoriously bad data. Reports that quote numbers of activations show the numbers in the US to be right around 50/50 once Apple was available on the 4 big carriers. And that doesn’t factor in that Samsung, far and away the largest seller of Android devices, has been getting it’s clock cleaned the last quarter or two and has lowered guidance moving forward.

      But beyond that, Apple doesn’t need to be dominant in the US or any market for this move to have a large impact. We’re talking about a user base that is upwards of 700M (based on iTunes accounts). That’s already a massive number. You also need to factor in that iOS users spends significantly more time on their devices in apps and browsing and purchases more on their devices than the typical Android user by at least a factor of 2. Taken together, this still will make a big impact in the market.

      But moving beyond mere market share, Apple is dominant in the affluent portion of the market. When looking at the top quarter of the market (based on consumer buying power), Apple’s share of that lucrative segment is closer to two-thirds and by some estimates creeping up on 75%. And that lead is showing no signs of slowing. This is where the big travel spend is likely to be and why Apple can have a disproportionate impact without “winning” the market share game.

      And I grant you that in other countries Android has a huge lead, primarily in developing countries, but Spain is a good example in Western Europe (but if you’ve seen their economy it’s arguable they’re a developing country). But many of those countries have populations with lower incomes and therefore aren’t good candidates to be spending a lot on travel. They’re not buying Galaxy S5s. They’re buying phones that are < $150 WITHOUT a contract. In China and India volume leading phones go for $100, sometimes less.

      You might want to read an article I wrote for Wired a month or so back for more background: http://insights.wired.com/profiles/blogs/why-the-apple-ibm-deal-is-a-greater-threat-to-android-then-you

      • Sceptical Corporate Traveller

        I suggest we are in vehement agreement, but looking at things from slightly different angles. I don’t doubt that ApplePay will work and so, by definition, be influential, and the security structure that have put around it is to be applauded.

        But, if one looks at it from a customer service perspective as a travel service provider – what percentage of your customers are you willing to annoy by NOT providing a convenient means of interaction? All the ones YOU don’t class as affluent enough because they use Android? All the ones who have an iPhone but won’t use Apple pay because it is not pervasive enough, doesn’t work in the countries they go to? The very high proportion who travel an handful of times a year or less – remember they are an awful lot of room nights/seat kilometres between them – and awful lot of customer interactions, which, presumably, you want them to feel good about?

        This is not about technology per se, nor about the frequency of travel of iPhone users – it is about large scale change of behaviour and the necessary infrastructure to support it – which is really hard. For goodness sake, the USA has singularly failed to move effectively to chip and pin cards, which have been around for years and have a blindingly obvious benefit to all concerned.

        All I am suggesting is that we are way off reaching a critical mass that will make this really convenient. The first part of the “hockey stick” curve is always longer and slower than we want to believe or care to remember. When the day to day retail that even your “poor” Android users (double pun entirely intended!) experience frequently shows sings of this being routine this, then travel companies need to pay serious attention. Still not holding my breath!

        (BTW – whilst, like most cloud providers Apple’s security is not perfect, I agree that the evidence points to classic exploitation of weaknesses in user behaviour rather than hacking of Apple itself!)

      • Kevin May

        Kevin May

        @glenn – thx for responding to the comments here on your excellent and thorough article…

        And, indeed, Mr SCT, whoever you are… if you’re going to say something is “tosh”, maybe have the guts to do so publicly?

        Or maybe not?

      • Yomadic

        Walmart, the biggest retailer in the world, has blocked Apple Pay. So has 7-Eleven, Kmart, Best Buy, Rite Aid, CVS and many more large retailers. They have decided not only not to support Apple Pay, but to go into competition.

        Meanwhile, Apple Pay is supported by just 34 retailers – 8 of which are Footlocker companies, and 1 is Apple themselves. Data taken from Apple’s website.

        • Glenn Gruber

          OK, I have been trying not to respond to your curious vehemence towards Apple Pay (partially because the lack of the ability to insert line breaks into comments drives me crazy), but I can’t resist.

          For one, the group known as MCX (Merchant Customer Exchange) is an initiative that has been planned for some time now, not a reaction to Apple Pay. Their objective is not to blunt Apple Pay in specific, but to reduce the use of credit cards of any kind in their stores to avoid payment of the 1.5%-3% fees charged by the credit card companies.

          However, their solution is laughable to the point that I might pee myself. They are enabling CurrentC only for accounts linked to personal bank accounts, merchant gift cards and merchant-branded debit/credit cards. And on top of it, their mechanism to use their still yet launched system….wait for it….QR codes on your mobile phone. And this is happening in a year when regulations are requiring all credit/debit cards to adopt Chip-and-PIN for added security. Their solution is a step backwards and less secure.

          But let me ask you a question. If you walked into Best Buy or CVS and they told you that you couldn’t use your credit card as a form of payment, would you complete the transaction? I’m willing to wager that for a vast majority of consumers (like 99%) that the answer is no. Personally, I would walk out of the store and leave my potential purchases at the register. People like using their credit cards. They like the mileage or cash back programs associated with them. They like not having to have individual cards for every store they shop at. The MCX approach in almost every way is wrong-headed and ill-conceived.

          And just one more thing (as Mr. Jobs used to say). So far the uptake of Apple Pay has been quite strong. Tim Cook reported yesterday that more than 1M credit cards have been activated on Apple Pay in the first 3 days. Consider that the TAM for Apple Pay today is the only iPhone6/6+ sold and activated in the US. A rough guess is that it equates to ~10M phones so far. That’s a 10% conversion rate — amazing. Also consider that Starbucks, by all accounts the most successful mobile wallet app, has only 12M users after 2 years. It’s not “Mission Accomplished” just yet, but even you would have to admit it’s an incredibly strong start for Apple Pay. And that’s before the MCX stores come crawling back to Apple.


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