An array of prominent purchases has helped Expedia and Priceline cement their spots as the world’s largest online travel agencies (OTAs) as the opportunity for others narrows.

NB: This is an analysis by David Juman, senior manager for editorial and content development at Phocuswright Inc.

This February, Expedia grabbed headlines with its deal to acquire rival Orbitz Worldwide after snapping up Travelocity just a month earlier. And following its blockbuster acquisition of Kayak in 2012, Priceline gobbled up OpenTable in 2014, along with Hotel Ninjas and Buteeq, further bolstering its B2B hotel offerings.

With the global giants strengthening their positions through acquisitions and continued organic growth, the battle for OTA dominance in some markets increasingly looks like a two-horse race. For smaller intermediaries targeting the European market in particular, is it worth the effort at this point, or better to just pack up and seek opportunity elsewhere?

In Europe, local players gained early footholds in the OTA space, and as a result there is still considerable fragmentation in the market.

As of 2013, Europe’s five leading OTAs in terms of gross bookings – Priceline, Expedia, eDreams Odigeo, Orbitz and Unister – together controlled nearly 70% of all OTA transactions. But with more than three in ten OTA bookings still being handled by smaller regional or local players, niche intermediaries continue to play an active role. But the pressure is on.

There will no doubt be more consolidation over the next several years as smaller players struggle to compete with the big boys, whose massive marketing budgets and leverage in key segments is all but insurmountable. Startups or smaller OTAs looking to make a mark in Europe – or at least stay in the game – must give consumers something they’re not already getting from the well-established incumbents.

The good news is that the European OTA market still has plenty of room for growth. Online travel bookings in Europe continue to grow faster than offline transactions, as consumers – particularly those in less mature online markets such as Spain and Italy – increasingly turn to the internet to plan and book their trips. And while annual gains for OTA bookings are slipping below double-digit levels, Europe’s OTA segment remains quite healthy, and will top Euro 51 billion by 2016.

But for OTAs intent on grabbing a larger share of this dynamic market, the opportunities and challenges vary greatly from one travel segment to the next.

For instance, fragmentation in the accommodations category clearly makes that segment ripe for intermediation; in 2013, nearly a quarter of European hotel bookings came through OTAs, easily the most dependent segment on OTAs overall.

However, newcomers should enter at their own risk; Priceline’s hotel-only unit is already dominant in many European countries, with continued strong growth projected for the next several years. So there may be little left for the rest of the pack, unless they can shake up the space with a truly unique offering.

In the rail and low-cost carrier (LCC) segments, on the other hand, OTAs capture just 4-5% of all bookings. Since most European rail markets have only one or two suppliers, there is relatively little need for intermediaries.

Still, the ability of some OTAs to offer bundled hotel deals along with rail tickets could give them a foot in the door. And even European LCCs such as Ryanair and EasyJet – which have been extremely successful distributing through their online direct channels – are now actively engaging business travelers and other demographics that may be more inclined to book through intermediaries.

The OTA opportunity in other segments – traditional airlines, car rental and tour operators – varies as well. And of course, there are often enormous differences between individual country markets, where online penetration, market fragmentation, economic and other factors determine the extent to which OTAs can make inroads. While the overall picture looks bright for OTAs in Europe, it’s anything but one-size-fits-all, and winning in one market or segment is by no means a strong predictor of success in another. Online travel agencies need to do their homework, understand the specific opportunities and challenges, and have the grit (and resources) to stay the course.

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