Online Travel Agencies: Threat or Opportunity for Hotels?

The rise of Online Travel Agents

On-line travel agencies (OTA’s) were the first companies to understand the potential of the on-line channel for hotel bookings and still lead in this sector in terms of both technological innovation and marketing.

Increasing consolidation

Two players in particular, Priceline and Expedia, emerged as the most successful OTAs and today not only dominate this sector but are the two leading global travel intermediaries ahead of traditional players.

On-line Travel Agents successful model

Leading OTAs are able to consolidate the fragmented hotel offer. Other strengths of their business model are technological innovation and large on-line advertising investments, but especially a strong focus on consumers’ needs.

Opportunities and challenges for hotels

While OTAs represent an important resource for hotels to generate revenues and reach new markets, they also represent a challenge due to significant commissions and competition for on-line promotion and customer loyalty.

Risk of commoditisation

The main risk for hotels is commoditisation as price, discount, location, photos, reviews and rating scores become more important than brands for consumers when choosing a hotel.

Hotels’ possible strategies

To deal with these challenges hotels need to focus on consumers and technology, strengthen alternative distribution channels as well as make the most of their partnerships with the increasingly powerful OTAs.

A constantly changing competitive landscape

The next few years will see significant changes in the on-line hotel distribution competitive environment including the rising importance of mobile apps, in-destination services and big data and the emergence of new players.