Today, every hotelier knows what an OTA is. Online Travel Agencies have taken over a large portion of the hospitality industry. While it is possible for a hotel to exist without them, they make it significantly easier to gain visibility among potential customers. However, not all OTAs operate on similar principles. So today, to make the choice easier, let’s look at a cheat sheet on the Online Travel Agencies, focusing on hotel search engines, although an OTA can also be a provider of many other travel services.
How did it all begin?
The Internet changed everything, not only for the hospitality industry, but most industries around the world. Its existence brought to life countless inventions as people saw the niches to be filled – one of the largest found was in reshaping the travel industry.
It started with the airlines. Booking trips became trickier as the number of routes grew rapidly. Travel agents were the answer to those issues, however, they needed more information to satisfy the needs of their customers. Airlines provided travel agents with the required information, realising how profitable it would turn out for them as more customers sought help with their bookings.
Naturally, the next step was finding similar solutions for hotel reservations. That is why in 1996, Microsoft launched the very first hotel booking platform, Expedia Travel Services. Also in 1996, Booking.com and Travelocity were launched. Only two years later in 1998, the European version of the platform, Priceline.com was initiated. Although other hotel booking options existed before that, it is really with the rise of Expedia Travel Services that OTAs started finding their place in the industry.
The growth of Online Travel Agencies
It very quickly became clear, that it was the right move. Customers loved the idea, as the comfort of online shopping was a major factor for them. Over time, the availability, mobility and easy navigation of online bookings became the ever more important characteristics of a successful online travel service.
So after the very first online travel agencies found their way into the market in 1996, dozens, and eventually hundreds of others followed in their footsteps.
Among many others, Hotwire launched in 2000, HomeAway in 2005, Hotelsclick.com in 2006 and even recently, in 2016 companies like Bidroom.com. Recent years also saw a rise in companies dedicated to certain areas, such as the Hotelgenio for the Spanish market or Wotif.com and Webjet for the Australian market.Ê In 2011, Google also joined the race by creating the Google Hotel Finder.
On top of the rise of many new OTAs came the rise of metasearch engines. In 2000, the now-mighty TripAdvisor was launched. Only a few years later, Kayak.com and Trivago were introduced to the public, creating a whole new sector of the travel market. With them, reviews started playing a major role in the booking process, and were included not only on the booking platforms but also on hotels’ own websites.
Monopolization of the market
As it often happens when the market starts growing and showing large income possibilities, a few companies saw the potential of the online booking industry and began the process of acquisitions.
Today, two companies are in charge of the majority of the OTAs or have entirely integrated them into their own structures. Those companies are the Expedia Inc. and the Booking Holdings.
Expedia Inc. currently owns sites such as Expedia.com, Hotels.com, Hotwire.com, HomeAway and metasearch engines like Orbitz, Trivago and many more – altogether Expedia controls over 200 websites. Booking Holdings (formerly the Priceline Group) owns Booking.com, Agoda, Momondo, Kayak, OpenTable, Booking Ninjas and many more. Both of these companies cover all sectors of the online travel market, not only the hotel bookings, although hotels and flights are their main interests.
Issues with Online Travel Agencies
This monopolization, together with a few rather unfair practices, makes many hoteliers question the existence of the OTAs. While 50% of all bookings come from agencies, it is clear that most of them do not have the hotels’ interest in mind. On the contrary, for many, it is all about their own income. Rate parity clauses, brand hijacking and hefty commissions make it more difficult for hotels to operate smoothly.
At first, the commissions seemed fair, but they started to grow. Today, they may reach up to 30% of the booking price. That means hoteliers must either lift their prices to earn what they want to be earning or keep prices lower for their guests, but lose significant amounts of revenue.
OTAs in politics
Rate parity causes conflict, not only between hoteliers and booking platforms but also between these platforms and governments. Because many consider rate parity harmful to the hospitality industry, lawmakers in various places have decided to fight it.
Some countries entirely illegalized rate parity, while others introduced certain policies meant to control the phenomenon. All types of rate parity are illegal in France, Italy and Austria. Switzerland and Belgium are following in their footsteps to completely ban these agreements. Germany might not have prohibited it, but it did apply special regulations to certain OTAs. In Australia, New Zealand, and the European Union, a few OTAs have adopted narrow rate parity clauses.
As for now, rate parity is legal in most countries, but steps are being taken to fight it and give the power back to hoteliers.
Having said all that, what might be the future of Online Travel Agencies? Well, they are surely not going away anytime soon – which is actually a good thing! OTAs make bookings much easier for guests, and also enable smaller hotels and hotel chains to gain visibility. It is significantly easier for guests to find the right place to stay, and they also help hotels get more bookings and fill up their calendars. Each year new OTA companies emerge, and this trend will continue.
Additionally, other websites and online-based companies are joining the race. From Google, through metasearch engines and airlines, everybody sees the opportunities offered by online booking platforms.
Customers are now the centre of attention, making their satisfaction a priority for all online service providers. Websites must be functional, easy to use and as automatic as possible. With the growing tend to use mobile devices more often than the traditional computers, mobile sites and apps are also very important. Personalization comes in handy too. Today, guests want platforms to know their expectations and allow customization of filters and profiles. Technology is going forward and the customers know it. They expect more than ever and are not easily satisfied.
In conclusion, the growth of the OTAs was sudden and very fast, and their future seems fairly steady. Many changes, mostly involving the technological revolution, will occur, but OTAs do not seem to be going anyway. The key is to find the right platforms and fight back whenever they try to take over control.
About the author
Brought up in Poland, KlaudiaÊFere_czuk is a journalist and a blogger, with articles published in Business Hotel, MamStartup and more, as well as over 150 blog posts related to the hospitality industry and travel on her account. She focuses mostly on the travel market, with special regard to the Online Travel Agencies.