If you have planned and booked some accommodation online, be it for a vacation or business trip, you will surely have come across some Online Travel Agencies (OTA’s), for example, companies like Agoda, Trip Advisor, Expedia & Booking.com. These OTA’s have been around since the late 90’s and early 2,000’s and each year they have been growing in size, strength and popularity, so much so that in today’s online market you literally pretty much are unable to avoid them when you are booking any kind of travelling arrangements online; anything from hotels, villas & rooms to cars & bikes and also flights – You will always see a handful of OTA’s on the first page of Google results and also dominating Google Adspace positions. Of course with the rise of this monster sized travel agencies, there has been a continued growing concern coming from Hotel owners, Car Rental companies and other businesses that need to capture more direct bookings to avoid being totally or almost completely reliant on third party booking portals. The reason for the concern of course if because of the profit loss that the businesses have to take on when receiving their bookings from booking agents rather than directly from the consumers; the rates do slightly vary from each agency, although it is never going to be so small a % that it doesn’t have a noticeable impact on the providers ‘bottom-line’. Hotel and property owners for example are required to pay anywhere from 15-35% commissions to the OTA’s for any bookings received, the % value is usually dependent on the location of the property/hotel and also on the number of rooms they have listed within the OTA (the more rooms they list, the lower the % commission they will have to pay to the OTA).
With this big expense that comes from partnering with OTA’s, you might think to yourself, ‘why do the Hotels & Resorts continue to rely on the third party booking agents when they could be enjoying much larger profit margins from capturing direct bookings?’ this is something that all accommodation providers will have considered and pondered to themselves & discussed with their teams and the answer really is that most of them now are in a position where they just can’t live without the OTA bookings. Unless the Hotel or Resort is one that has on its own gained so much notoriety and is so popular that they can successfully fill their rooms all year around, then it is a case of having to join up with an OTA or a few so that they can survive. Actually even with the notorious and popular hotels and resorts I am referring to, there will be low seasons and other times and occasions when booking numbers will be low and a need for additional exposure to bring up room/villa bookings will arise; so in reality partnering with the OTA’s is now a necessity for all companies that are in the holiday accommodation business.
Where Did These OTA’s Come From & Who Owns Them?
When talking about OTA’s most people will be picturing a handful of companies, who are really the main ‘big players’ that have extremely aggressive marketing activities to ensure that pretty much all travelers will frequently see their brands & promotions, both online & in offline locations. The four most well-known OTA’s are Expedia, TripAdvisor, Agoda & Booking.com; these are room booking platforms that are creating the biggest shift in the market and the ones that will be on most Hotel owners list for partnering with. Out of these four agencies, the oldest two are Expedia which was formed by a small department within Microsoft back in 1996, and then Booking.com that originated in Amsterdam also in 1996. Trip Advisor came next in the year 2000, formed out of a small office in Massachusetts, USA and last but not least came Agoda, formed in 2002 and originating from Bangkok, Thailand. In actual fact, nearly all the main OTA’s and online booking platforms are now owned by and come under the umbrella of only two main, monster sized organizations; Expedia Inc is one and the other is The Priceline Group.
So to answer the original question of this post which was asking how the OTA’s are affecting the holiday accommodation booking industry; for the consumer it is really just making all accommodations more accessible and the user experience has been greatly improved with it being much easier and more efficient to compare different locations. Also having the additional benefit of being able to check out reviews of each place prior to making any booking is another positive change that the consumers can enjoy. For the accommodation providers on the other hand, it has had some negative effects and also some positive. The commissions and additional costs for better placed listings within the OTA websites heavily eats into the profits that can be made by the property owners, but on the other hand for many hotels, resorts and other accommodation providers, having the exposure that they get from listing within the OTA websites means that they are now able to get many more rooms booked and at the same time their brand/location is put ‘on the map’ so to speak, and as long as they provide good rooms at a good price, with an efficient service, then they will be able to grow over time because of the support they receive from their OTA partners.
All in all, I think the OTA’s are a positive for the industry.