OTA Consolidation Make Hotels More Vulnerable to Distribution

OTA Consolidation Make Hotels More Vulnerable to Distribution

OTAs Consolidate

CC BY by A.Davey

A recent study published by global hotel consultancy HVS revels that the major OTAs; Priceline, Expedia, and such have catapulted their dominance in the market throught acquisitions of regional agents and specialized distribution. Today Priceline controls 62% of the European market and Expedia has approx. 70% of US market. The HVS report cautions that the trends makes Hotels More Vulnerable to Distribution as Hotels reliant on bookings from OTAs may soon have just a couple of these distributors to work with and terms and commissions are likely to get more onerous.

HVS says that “while OTAs offer a number of advantages to hoteliers including a wide, multi-national reach and big marketing budgets, the commission rates of anything from 15% up to 30% are a heavy burden on hotel profit margins.”

HVS also warns that OTAs are also launching their own loyalty programs which will further negatively impact the growing trend to favour hotel website and book direct. This says HVS is “taking them into a head-to-head battle with hotel group loyalty schemes and threatening one of the unique selling points some hotel brands offer their customers.”

Get More Direct Bookings
The report concludes that “hotels should aim for a healthy balance between OTA bookings and bookings from their own website, making sure they maximize their website bookings by making their site as up-to-date, attractive and easy-to-use as possible.”

For more on how to enhance hotel direct bookings and build brand loyalty with straetigmessaging and effective sales systems see our previous blog THe move to direct bookings >>>>



Is TripAdvisor Strategy on Shaky Ground

Is TripAdvisor Strategy on Shaky Ground

CC BY-NC-ND by Scott Beale

Is Mixing Reviews & Bookings a Shaky Strategy

In this article by SeekingAlpha, LN Investors looks at the rise and pitfalls facing TripAdvisor from an investment and financial point of view. In terms of investment it concludes that TripAdvisor is “a more attractive stock than its direct competitors, Expedia (NASDAQ:EXPE) and Priceline (NASDAQ:PCLN)”.

Although TA began life as hotel review site is now a “one-stop shop” travel booking business. As LN says “Early investors must be ecstatic from the share price tripling from about $30 to as high as $110 within the first three years.”

Of course all this comes down to marketing! First by having a clear focus and delivering to that promise.  Now as TA moves into direct competition to its major partners we wonder how clear the focus is and if indeed it is not sabotaging its primary business for added growth and putting TripAdvisor Strategy on Shaky Ground.  Already the OTAs have barked and turned away form support of the TA booking app. But to be fair transaction based services are where the opportunities for TAs growth seem to be.  The authors tell us “The online travel reservations business is highly competitive. And for TripAdvisor to maintain its previous double-digit earnings growth it either has to expand its ad revenues or get more involved directly with hotel, flight and tour reservations.”

As LN says TA has to be careful as it moves forward to compete with the major customer who are the OTAs.”About 80% of the revenue comes from ads, 69% click-based and the other 10% from display. There’s nothing wrong with that. That’s actually why the company has been as successful as it is. Viewers come for the extensive reviews and holiday ideas, and TripAdvisor gets revenue for ads and referrals. Like many others, I myself have used the site to find interesting locations and good restaurants, and it is helpful because I get the viewpoint of fellow travelers and diners.”

But 46% of total revenue was from Priceline and Expedia in 2014. There is where TA has most vulnerability – Priceline and Expedia will not like when TA erodes their business with deals like it has with Marriott Hotel where it bypasses the OTAs altogether. These mammoth OTAs may well respond in ways that put “pressure on TripAdvisor and competition can become expensive.”

TripAdvisors Margins fall

TripAdvisor’s profit margins are on the decline and net income margins has trended down since 2012. We can expect greater competition, higher operating costs and lower margins in the future, especially as TA grows its competitive booking and OTA type business.

For More see SeekingAlpha

Millennials Strike Another Blow to OTAs

Millennials Strike Another Blow to OTAs

I have covered the trend in direct vs distribution or travel agent assisted booking for some time now, its been gradual and slow but the latest stats and thinking see a dramatic change in booking patterns. Namely that travelers are moving away from OTAs and booking more direct with the hotel.

A large part of this shift is because of the fastest growing segment of the demographics. that is the millennials, or people born between 1982 and 2002. This group has overtaken Generation X and their impact will grow considerable as they mature. Conor Fitzgerald of Goldmana Sachs forecasts that “By 2038 Millennials will be the most important financial generation in America and industry will have to adapt to fill their needs.”

Millennial have a distinct approach to consumption that is shaped by the financial crises, social media and the Internet. Typically they buck the trends and have a very much more do it yourself mentality. They don’t care for frills and luxury or possession as much as their predecessor and I believe this attitude is prevailing more and more and will effect travel, banking and all sectors of the economy (see more on this at the Globe and Mail, June 25th 2015).

Having read the article in Canada’s Globe and Mail I am eager to apply that thinking to what is happening in Travel. MMGY Global’s 2015 Portrait of American Travelers (POAT) documents this convincingly and its findings are analyzed by TravelPulse in a recent article. It too concludes that Millennials Strike Another Blow to OTAs – Here is a snap summary:

Travelers are increasingly migrating from OTAs

Travel shoppers are increasingly going directly to travel supplier websites to both research and book travel. “Only 58 percent of travelers surveyed said they obtained travel information from an OTA during the past year, down significantly from the 84 percent who did so in 2014. On the booking front, the survey found that among travelers who regularly seek information from an OTA when planning a vacation, only 13 percent typically book their reservations on OTA sites, down from 36 percent just one year ago.”

It seems that the main reasons for booking direct are to get the best price (64 percent) and find it more convenient than booking with an OTA (67 percent).

Now to be accurate the study does not track all of this back to Millennials, but the point is this is precisely the sort of behavior we see with this group and it is only going to become more pronounced as they mature and influence more. The report does show that Millennials are reshaping the travel industry in surprising ways:

How Millennials are Reshaping Travel

Many believe millennials are apt to seek travel experiences in far off and more exotic locales, yet more and more are opting to enjoy adventures in their own backyard. More than any other age cohort, millennials are increasingly interested in “staycationing,” with over half (55 percent) taking a vacation close to home as an alternative to traveling a greater distance during the past year. This figure is up 14 percent from 2014 and up 23 percent since 2013. They also appear to find cruising an affordable and convenient vacation option to explore.

Millennials are also using more non-traditional options for accommodation and booking with Airbnb and HomeAway. They are first to use ride-sharing services like Uber. This trends is also hot with GenXers and boomers:

While 80 percent of millennials use these services they are popular with boomers (74 percent) and GenXers (72 percent)

Hotel Direct Marketing Needs a New Strategy

Many hotel have taken the easy road and built their distribution network at the expense of their own website. Too often Hoteliers feel the OTAs understand marketing better than they do and can afford to dominate search results with strategic SEO and marketing. They spend millions on media advertising and attracted millions of travellers. That is still true but, as we see, it is changing. For hotel managers who want to market direct, there are several things that have to be put in place. First is the Messaging. Often the hotel marketing message is fragmented and full of platitudes. This is a mistake that many business owners make- Check out the Power Consultants suggestion for fixing this and other issues – see 2 common messaging mistakes that may be killing your marketing – AllCast PowerConsultants

The MMGY Data was collected in February 2015. See details on TravelPulse>>>

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Mistakes that most hotel marketers make – by All Cast PowerConsultants

Travel Bookers Shift to Brand Sites -eMarketing

Travel Bookers Shift to Brand Sites -eMarketing

Travel Bookers Prefer Hotel Websites

travelers shifting to hotel websites for direct bookings

travelers shifting to hotel websites for direct bookings

A new study by Criteo and PhoCusWright shows that 41% booked using an airline website or app, vs. 26% who used an OTA. The same was true for hotel bookings. Over 33% choose to book via the hotels website or app whereas only 25% booked through an OTA. The trends are clear as more and more travel bookers shift to brand sites leaving on line travel agents sites.

“Other responses indicated that leisure travelers were more engaged with travel brands than OTAs. When asked if they subscribed to emails or e-newsletters from travel companies, 34% said they subscribed to those from hotels, and 32% were signed up to receive such communications from airlines. Meanwhile, 26% subscribed to OTA emails or e-newsletters.”

UBS research reveals that that travel agencies are losing share of total online travel bookings in the US and by 2019 OTAs will likely account for less than 30% of total online bookings.

“eMarketer estimates that there will be 110.7 million US digital travel bookers this year, representing 52.5% of internet users. Such activity will push digital travel sales up to $167.99 billion.” – See full emarketing article and research findings at http://www.emarketer.com/Article.aspx?R=1012550

Power marketing free strategy white papers

Power marketing free strategy reports

Our previous article on this shift to direct booking, showed that “OTAs have minimal loyalty and low brand awareness when come to large chains and brand name hotels.” Clearly hotels are in a good position to start taking back market share and getting more direct bookings.

For more TIPS on upgrading your website conversion and direct marketing see http://powerconsultants.axses.net/. The website outlines many strategies for power marketing in tourism.

Hotel Brands Dominant Online Despite OTA Growth

Hotel Brands Dominant Online Despite OTA Growth

Although OTAS have been spending millions on advertising and search engine ranking, and have as a result gained much top of the mind awareness for consumers, travel shoppers are still looking to hotels when they are ready to buy. .

In this study, Millward Brown Digital shows how “OTAs are utilized in the consumer journey, and how they can grow their share of consumer attention by reaching them at the start.” The study also shows how OTA ad spending has influenced where consumers shop. “When Booking.com and Hotels.com were at the peak of their offline advertising in the second quarter of 2014, 64% of hotel shoppers visited an OTA, compared to just 57% shopping hotel supplier sites.”

The interesting point to me is that OTAS have minimal loyalty and low brand awareness when come to large chains and brand name hotels. It certainly is an opportunity for these hotel to take back market share.

Only 66% of consumers who initiate hotel research with an OTA will book with an OTA, But, 80% of those who start with hotel site will book with the hotel supplier.

The surveys believe that only 12% of consumers start hotel research with an OTA, and that thse who do not start with the OTA are very likle to boook direct. As they say “there is a strong chance OTAs will miss out on bookings (by travel who do not start with them) without aggressively marketing their brands or booking experience. From this we can assume that brands can take business direct by competing with OTAS if they are more strategic in advertising and marketing.

Booking Flights and Hotels: Online Agents or Direct? – NYTimes.com

Booking Flights and Hotels: Online Agents or Direct? – NYTimes.com.

Its an age old battle; Direct Booking VS Agents. Now it seems Agents, especially Online Travel Agent like Expedia, Booking.com and others, are loosing out to airlines as travelers often find better deals, upgrades and extras on the airline sites.

So the forcast by some is that is the way of the future for hotels also. For hotels we know that travelers like to contact their hosts and will often check with OTAs then go direct to the hotel. Expedia had estimated that for every booking one would go direct to the hotel. Of course the hotel pricing must be as good. Often hotel managers will upgrade and offer direct guests some special attention.

Its a rocky road to the future as it has been in the past. For the last couple of years Google pulled the rug from under local hotel in favour of the big and authoritative OTA. The first pages of G search results is littered with online travel agents. mall hotels just could not get on against the heavy competition and massive authority sites of the middlemen. (see video on search as media https://www.youtube.com/watch?v=-3h5u8sdwPo)

Sadly gone is the map area targeting. This was a nice feature but not one that was widely popular.

The big problem for hotel on hotel finder is their is just no room for everyone. So only a selct few are going to get choise by brother G. There are several thinks a hotel can do to get position on this important spot. That will be something we cover in another blog!