For hotel companies, the success of online travel agencies represents both an opportunity in terms of additional revenues and promotion in new markets and a threat because of the significant commissions they need to pay and the rising competition for customers’ loyalty. To be successful in such a challenging and constantly evolving competitive environment, hotel companies need to learn to cooperate effectively with OTAs as well as to implement innovative strategies to increase direct bookings.
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.
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.
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.
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.
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.
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.
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.
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