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What the $15 Billion Virtual Goods Market Can Teach Airlines and Hotels

As I chatted with my friend in Europe well into the night last night on my iPhone, I accidentally stumbled into the “store” of the LINE app I was using to conduct the chat. With the click of a button, I could buy entire volumes of cutesy “stickers” featuring some cartoon-like character that I could incorporate into future chats, as if the image of an animated bear and bunny sharing a motorcycle together was far more important than anything I could possibly have to say.

I was able to fight off the urge to drop $1.99 on said stickers, but apparently there’s plenty of other people who weren’t. Intrigued by this concept of selling virtual goods, I stumbled upon an article that estimated the worldwide market for virtual goods at $15 billion. To think, people thought Mark Zuckerburg was crazy to pony up $1 billion for Instagram, and it turns out we could collectively by  Instagram 15 times over for what we spend on…nothing.

What can the airline and hotel industries learn from this cute animated couple?

What can the airline and hotel industries learn from this cute animated couple?

Can Travel & Hospitality Companies Get Involved in Virtual Goods? Are they already?

The article went on to say that the Asia-Pacific region leads the global push, with $8.7 billion in virtual goods sales, spearhead by China with $5.1 billion alone. With the explosive growth of the world’s most populous country in recent years (don’t look now Atlanta, but Beijing’s Capital Airport will be officially the world’s busiest any day now), I can’t help but fill with intrigue at the untapped potential there.

While the vast majority of this overall virtual spend is on gaming, with the free-to-play revenue model gaining steam (whereby users can start to play a game for free and then must pay to continue to progress beyond a certain point), what can this massive market lend to the airline industry? Considering that the industry has been revived by the rise in ancillary revenues in recent years, I can think of several ways for airlines to steal a page from the psychology of gaming companies to squeeze more money out of customers, without facing the negative PR that perceived annoyances like baggage fees seem to create.

Virtual Goods are Experiences, Which Hotels and Airlines Already Provide

Virtual goods can be likened to experiences, which airlines and hotels already provide. This market has played off people’s inner competitiveness and desire to accomplish something, or achieve a certain sense of recognition  (and achieve it right now). How can this be incorporated into the range of offerings airlines and hotels put together? Perhaps offering instant status upgrades based on spending a few bucks? We all know that airlines sell miles now, but perhaps it isn’t packaged so obviously as to highlight the instant gratification element of “status”. Could airlines link with gaming companies to allow gamers to continue their quest for virtual greatness on board (which in-flight wifi will obviously facilitate)? Instead of charging for checked luggage, could they offer that free while adding some kind of “tracking” or expedited delivery service for a small fee, for peace of mind that bags won’t be lost? Or what about actually creating new games, or promoting the trivia-type of games that already exist on seatback entertainment systems and tying them to sponsors, offering paid hints or “power ups”, and promoting some in-cabin competition? If 10 people spend 99 cents to enter, a glass of wine to the winner certainly won’t hurt the carrier.

Facilitating Virtual Transactions Through “Virtual” Currency

In India, one of out every 5 virtual goods transactions is facilitated by prepaid cards, while bank transfers (at 18% of transactions in Egypt and 15% in Saudi Arabia) are prominent in the Middle East. And as for the stickers I referenced at the beginning article, or anything else we may purchase through the infamous App Store, we don’t actually have to take our credit card or any cash out to make the transaction–instead we just click a button and allow the card that is already on file to give us the goods. To me, this poses another opportunity for airlines to facilitate impulse “experience” purchases if they can just create some sort of seemingly virtual currency linked to credit. In the example I mentioned above, nobody is going to pull out their credit card for that 99 cent purchase. But if that part of it is already set up on the back end, people will click a button or enter a password. I’m simply amazed that today, each time a customer checks luggage or buys a snack in-flight, he or she is actually required to pull out that credit card or cash to make it happen.

Looking Ahead

These are obviously just back-of-the-envelope, not so well-thought-out examples. But I believe the potential for airlines and hotels in the virtual goods market is infinitely larger than what is currently being promoted, and with a little creative thinking (and a lot of effort to get customers preferred transaction methods “on file”), this could be what pushes the travel & hospitality industries even further into the black–especially important for industries in which neither competition nor market conditions are going to get any easier moving forward.

 

 

 

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