When people talk about OTAs (Online Travel Agencies), it is hard to believe that they are among the latest additions to the distribution channel landscape.
NB: This is an article from Smartness, one of our Expert Partners
Subscribe to our weekly newsletter and stay up to date
Yet, in just over two decades, they have managed to become both an indispensable reference point for travelers and the source of many “joys and sorrows” for accommodations globally.
Although the pandemic has been a setback even for giants such as Booking.com and Expedia, fostering a resurgence for direct bookings, the market share held by OTAs is set to grow further: from nearly $500 million in 2023, it is expected to reach nearly $2 billion by 2033.
That’s why, whatever your thoughts about OTAs, now is the time to seriously consider how much they can impact your hotel’s revenue and how to make them a valuable ally in your revenue management strategy.
OTAs and accommodations: a delicate balance
If most hoteliers don’t rave about OTAs, it’s no surprise. Compared to traditional channels, online travel agencies have global scale and unparalleled economic capacity (in 2023, Booking.com alone invested nearly $7 billion in marketing). This effectively affords OTAs a strong position in their relationship with accommodations, enabling them to impose their own rules and conditions on them.
In addition to rather high sales commissions (15-18% on average), the conditions include having to accept a rating model based entirely on guest liking − reviews − and a visibility distribution system in which those who do not “conform” to the standards are heavily penalized.
Despite all this, there are few accommodations that have the strength to really do without Booking.com, Expedia, Airbnb, and the other portals. The reason is simple: all the customers are there.
In 2023, OTAs were used by 80 percent of travelers. Not only to finalize the reservation, but also to study the properties: 61% of them visited a portal before making a direct reservation on the site of their chosen hotel.
The reasons for this preference are varied:
- for 53%, OTAs allow them to plan trips faster, making them ideal for last minute trips.
- 47% choose them because it is easier to compare prices.
- while for 42% on OTAs it is easier to save money.
Moreover, in a context where people are increasingly accustomed to buying online from giants such as Amazon, Zalando or Netflix, it is clear that the distribution of goods and services through global digital brands is set to consolidate and increase more and more. It is predicted that, as early as 2028, 76 percent of total revenue in the travel and tourism industry will be generated through online sales.
This is why striking a balance with OTAs is crucial for any hospitality establishment that wants to be competitive in the market.
