Online travel agents find themselves up against rising search engine marketing costs, declining commissions, and an aggressive rival. They need a few new tricks to stay on top.
Bruce Spear and Matthew Schabas
That awakening helped produce explosive growth for both travel and OTAs but spawned myriad challengers competing for the same customer. Eventually, the explosion of rivals led to bigger and savvier OTAs as small ones were gobbled up.The consolidation created heavyweights in the travel value chain. Booking Holdings and Expedia, the two biggest OTAs, boast a combined market cap of more than $100 billion, comparable to the four largest US airlines combined.
If a consumer visits multiple sites or even the same OTA multiple times from different platforms without making a purchase, the OTA loses money — a practice that is becoming common, as would-be travelers increasingly comparison-shop. Even when consumers do complete a purchase, OTAs struggle with how to credit the sale, given the array of click-throughs and impressions associated with it. That raises the risk of overpaying for SEM.
While hospitality and cruises have offered OTAs an opportunity to earn higher margins than on air travel, consolidation and competition here too are starting to cause problems for OTAs. Large hotel chains are determined to get their distribution costs down by negotiating lower OTA commissions and pushing their own direct channels. To accomplish this, most reserve their best deals and properties for their own channels and OTAs willing to play ball on commissions.
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