Old entrants like Google and hotel brands will likely be much more disruptive to the future of online travel agencies than Chase, Uber, and Travel + Leisure.
Dennis' Online Travel Briefing
Editor’s Note: Every Wednesday, Executive Editor and online travel rockstar Dennis Schaal will bring readers exclusive reporting and insight into the business of online travel and digital booking, and how this sector has an impact across the travel industry.
Online Travel This Week
“The OTAs will still have a role to play.”
This sentence came from an AllianceBernstein research note this week about “OTAS: In Flux.”
There is much to agree with in the research note. The online travel agencies are indeed changing. As the note points out, Expedia is trying to get more out of the business-to-business side of its portfolio, and Airbnb is fine-tuning how travelers search for properties, although there have been a lot of complaints from hosts about the awkwardness of Airbnb’s efforts.
But to state that online travel agencies will merely still have a role to play because of business shifts and the rise of new entrants is almost laughable. When I started to write about global distribution systems in 2000, I was repeatably warned that their days were numbered. As with online travel agencies, the global distribution systems are still here and are vital to the travel industry behind the scenes.
The big online travel agencies may lose share in coming years, but they will continue to have a strong position in the online travel market.
The AllianceBernstein research note argued that investors in online travel agencies should worry about “new entrants.” In that context, it mentioned that the changes that Google made in organic search in providing free links to supplement the paid ones for advertisers in Google Travel “brought many new OTAs to the market.”
The research note also cited potential inroads by Hopper, Travel+Leisure, Chase and Uber.
“Not all of these players are trying to take on the full funnel, and the OTAs will still have a role to play, but they risk having their funnel shortened,” reads the full sentence, including the excerpt we cited initially.
I agree that Hopper, with its plethora of fintech products and traction among younger travelers, is an up-and-comer that could be disruptive to Booking Holdings, Airbnb, and Expedia Group — if one of them doesn’t acquire Hopper to alleviate any potential pain. (Although Hopper would be expensive given its ample funding.)
But don’t hold out hope that Travel+Leisure, Chase or Uber will be difference makers in online travel because they don’t have the focus.
The bigger threats are not new entrants but older ones such as the aforementioned Google siphoning away more free traffic from the online travel agencies — unless antitrust enforcers step in with meaningful curbs — as well as gains by hotels making further inroads in their direct-booking strategies.
At the same time, that other older entrant, namely hotel brands as a sector, have been taking a slice of booking share in recent years as many hotel websites now have the lowest fares reserved for their loyalty program members, and they’ve carried out effective marketing to hammer the point.
A recent Similarweb report found that from January through May 2022, hotels (-20 percent) and vacation rental sites (-12 percent) emerged in better shape than online travel agencies (-36 percent) when compared with 2019 in terms of their share of global lodging bookings.
Hotel brands and Google are much more likely to be disruptive to online travel agencies than Chase, Uber, and little-known online travel agencies such as HotelWiz and eSky.com with newly found free links in Google Travel.
In the Western world, at least, how many new-entrant travel companies or sectors have really had an adverse impact on the grip of the online travel agencies on a global basis? (Sure, there have been regional players that have strutted their stuff.)
Facebook, which at one point was going to be the next travel booking platform? No.
Facebook’s Instagram? Nope.
Amazon, which tried and failed, and tried and failed again in travel, and started modestly with flights in India? No.
The AirAsia superapp? Negative.
The main disruptive forces to the online travel agencies have been Google, the emergence of Airbnb, and hotel brands taking back some share.
The big online travel agencies will see pressures, but they will have a strong role to play in the future of travel for years to come.
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