24 Mar Why OTAs Has Been Taking Over the Travel Industry Irrespective Of the Disadvantages
Travel industry and OTAs are the best frenemies in town. OTAs the abbreviation of online travel agencies is a steady source of hotel bookings that comes at a heavy cost with commissions starting from 25%. The relationship Travel industry and OTAs share is complicated as in this digitally developing world OTAs have made sure to provide the highest ratio of the bookings to the hotels as compared to direct bookings.
The steep reduction on the price offered by hotels on OTAs can be either seen as a marketing cost to generate demand or a tax, imposed reluctantly on hotels by a powerful intermediary, these can be hotel’s second largest expense after labour. In the recent times, one of the core focuses in revenue management is decreasing reliance upon OTAs with smart pricing strategy.
OTAs are no longer considered cutting-edge technology; they are now a major driver of hotel room sales and online bookings. Although large hotel chains like Hilton have managed to reduce their dependence on OTAs, many independent hotels rely entirely on OTAs to drive their bookings, even if they do not have their own booking engine. The business model for OTAs ranges up almost to 25% commission for some of the smallest properties.
Consumers were able to begin looking for and booking travel on their own until the internet gained traction. During the latter half of the 1990s, when the internet transitioned from something you did at work to something you did at home, there was a surge of interest in the consumer internet. Booking travel required a phone call or an in-person visit to a travel agent in a retail store or a reservations agent at an airport counter prior to the internet.
OTAs have managed to capture a significant mass of travel demand and place themselves between travellers and suppliers here are some benefits offered by OTAs-
- Consumers, first and foremost, tend to have all of their options in one place. They want to know if they’re seeing all of the options for a particular quest. It decreases the level of uncertainty.
- Second, customers want to be able to compare costs. It’s easier to compare rates when you have all of your options in one location. OTAs remove the need to open several tabs to search individual hotel websites, which saves time and effort.
- Finally, these options and price comparisons are presented in a user-friendly interface that emphasises rich content. In addition, the user experience is consistent across the board.
In essence, OTAs put their customers at the core of their business and worked diligently to enhance the user experience in ways that hotels never did. OTAs offered consumers just what they wanted; leapfrogging hotels that were struggling to keep up with digital revolutions like ecommerce and mobile shopping. Hotels will continue to be at a disadvantage as long as OTAs succeed at the digital user experience.