Online Travel Agencies
COVID-19 had a serious impact on online travel agencies (OTAs), according to GlobalData, which notes that the OTA market value decreased by a gruesome 60.4% year-on-year (YoY) in 2020. The leading data and analytics company reveals that this strain has amplified OTA’s existing concerns around the growing presence of Google in the market, and how the tech giant’s control could impact competitivity and, therefore, consumer choice.
Ralph Hollister, travel and tourism analyst at GlobalData, comments: “Google’s growing presence in online travel will be ominous for OTAs that have no choice but to rely on the search engine for web traffic. Regulators are starting to control Google’s practices, but the company has to be treated differently due to its position as a dominant search engine, as well as the fact that it is not offering directly competing services. Low competition can lead to rising prices, so it is vital for all travellers that the right balance is achieved.”
Laura Petrone, Thematic Analyst at GlobalData, comments:?“Google certainly has a huge responsibility when it comes to competitivity. Google has a monopoly over internet searches, and it has been accused many times of violating competition law to preserve this monopoly. Digital platforms like Google can use data generated knowledge from one market and taking advantage of their scale, they can expand their services to new markets. However, they need to be careful: in doing so they end up attracting even more regulatory scrutiny, as they are viewed as data monopolies in whichever sector they move into.”
From 2015 to 2019, the OTA market was seeing a growth of 9.4% compound annual growth rate (CAGR), reaching $480.3 billion. This rapid growth rate and future growth potential intensified Google’s focus on online travel. By 2019, the OTA market was already blaming weakened visibility in Google search results for poor third-quarter earnings. Expedia Group’s net income fell by 22% YoY in Q3 2019, which is partially blamed on changes to Google’s algorithm, resulting in lost visibility.
Hollister continued: “Google really ramped up its activity in online travel prior to the pandemic. When looking at 2019 alone, Google launched its Travel Hub, added flight check-in and hotel booking abilities to Google Assistant, attached lodging listings to its Maps function, created a search site for hotel availability by destination, and Alphabet even launched its own ride-hailing app.
“Google clearly has both the business model and capital needed to better weather an event like COVID-19: by 2020, Alphabet’s (Google’s parent company) revenue was over 15 times the amount of Booking’s and Expedia’s combined. Struggling OTAs will rely more and more heavily on Google Search traffic as they look to recover from the impact of the pandemic. Google will have to be mindful not to expand or act too aggressively in the short-term, or it will face more frequent anti-competitive claims, lawsuits, and fines.”
What should you consider when choosing an Online Travel Agency (OTA)?
There are many OTAs to choose from, and they come in all shapes and sizes, from large, global OTAs to local and niche-interest ones. Here’s what to consider when comparing OTA options.
Who is their audience?
Many OTAs target specific audiences. Think about the region and segment you want to target and whether an OTA caters to this audience. For example, if you own a small B&B mainly catering to families, you would want to avoid signing up with an OTA which mainly targets business travelers.
You can find out more about an OTA’s target audience by looking at the properties listed on their website, or by simply asking a representative at the OTA before?signing up.
What is the user experience for guests?
Take a look at their traveler-facing websites and get a feel for what the searching, browsing and booking experience is like for your potential guests.
If you find the experience difficult or frustrating, it’s likely other travelers will too. Frustrated travelers are likely to look elsewhere to make their bookings.
What features do they offer to partners?
Every OTA has a different set of?tools and analytics?to help with revenue management, pricing decisions, and promotion of your property. Some larger OTAs have whole teams dedicated to creating these tools, so it is worth assessing which OTAs offer the most useful tools for you.
Another important thing to consider is whether an OTA integrates with your?channel manager. This integration will be important to your?distribution strategy, helping smooth management of bookings and eliminating the risk of overbooking errors.
How to Distribute Your Hotel Inventory With All Online Distribution Agencies?
One major challenge for hotels that use online travel agencies involves distributing a hotel inventory to as many online platforms as possible. The best solution to this problem is a hotel distribution channel management solution, which allows the various distribution channels to be managed from one place.
What is an Online Travel Agent (OTA)?
An online travel agency, or OTA, is a website or service that sells travel-related products to customers. These products may include hotels, flights, travel packages, activities, and car rentals. Crucially, OTAs are third parties reselling these services on behalf of other companies, including those in the hotel industry.
Typically, an OTA will offer many benefits of using an offline travel agency, with added convenience and more of a self-service approach. They will also include a built-in booking system, allowing for instant bookings.
The Most Important Online Distribution Channel
Although online travel agencies can play a vital role in distribution, allowing those within the hotel industry to reach a wider audience, it is important to understand that your website should always be the number one priority. After all, bookings made through your website do not require you to pay a commission to a third party, which is important for revenue management, as it maximizes the money you receive.
Sales can be made via OTAs (Online Travel Agencies), the wholesalers. Placing offers on multiple channels allows optimizing online presence and achieving the Billboard Effect: many visitors see your property somewhere else but eventually book through the hotels’ own website not to pay the commission. Therefore, an integrated booking engine or booking button is an essential feature to get more direct reservations, and providers often include it in the package.
Obviously, hotels need the Channel Manager. However, how to pick the one that best suits your needs? Let’s discuss this below.
Criteria to consider when choosing a Channel Manager
If you're looking for a Channel Manager, you might think that there is a broad range of factors to consider. In a nutshell, these are key criteria to keep in mind when choosing the right tool:
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Global Distribution System (GDS): What Are the Benefits for Hotels?
A global distribution system (GDS) is a network allowing travel agents to access hotel inventories and sell rooms to their clients. For those in the hotel industry, this functions as an important method for distribution, allowing access to a wider customer base. In this article, you will learn more about what a global distribution system is, how it works, and what the benefits are for a hotel using such a system.
Global Distribution Systems Explained
A global distribution system is a computer network, which empowers service providers in the travel industry to carry out seamless transactions. In particular, a GDS is often used by a travel agency, to see real-time information and data about the availability of hotel rooms, flights, and other travel services.
Travel agents can then sell travel products and services to their clients using that information.
What Are the Benefits of Your Hotel Using a GDS?
Although those operating in hotel management aim to maximize the number of direct bookings they attract, using a global distribution system helps reach more customers. This is because the GDS provides a single point of access for thousands of travel agents across the globe, who can then book hotel rooms for their customers.
Furthermore, a GDS can be especially beneficial for a hotel aiming to attract business or corporate travelers. This is because many organizations still turn to a travel agent to book business travel, rather than attempting to book directly, as it can be easier to manage expenses this way.
What Are the Costs of Using a Global Distribution System?
While there are numerous benefits of using a GDS, it comes at a cost too. Standard practice is that a hotel will pay a small initialization fee, followed by transaction and/or agent fees on every booking. These fees can vary significantly, but it is not unusual for them to account for around 10 percent of the amount paid.
For hotel owners, it is important to balance room rates with this in mind. Ideally, to optimize revenue, a hotel should keep room rates low enough to maintain a good relationship with travel agents. Still, it should also ensure they never drop low enough for the payment of transaction or agent fees to become too problematic.
The ‘Big Three’ Global Distribution Systems
Hotels can turn to several different GDS systems around the world, with each one having its own unique features and target markets. However, it is generally accepted that there is a ‘big three’ within this industry, which are responsible for most travel agency bookings.
1. Amadeus GDS
Amadeus GDS ranks as the market leader when looking at market share for global distribution systems. It is estimated that somewhere in the region of, 40 percent of all travel agency bookings using GDS systems go through this network. However, most of these bookings are linked to flights, rather than hotel rooms.
Nonetheless, Amadeus can provide the hotel industry with excellent access to the European market, particularly as its database is hosted in Germany and its company headquarters is situated in Germany.
2. Sabre GDS
The Sabre global distribution system is the closest competitor for Amadeus regarding total market share, and it is more proportionally reliant on the hotel industry than Amadeus is. It is estimated that more than 200,000 hotels use the network to connect with travel agencies.
The company is in the U.S. state of Texas, and is comparatively stronger in the North American market than its rivals. Sabre also offers several hotel technology solutions.
3. Travelport GDS
Finally, Travelport is a company that owns the Worldspan, Galileo, and Apollo systems. While the parent company is based in the United Kingdom, the Worldspan, and Galileo GDS databases are in the United States. As an organization, it provides GDS services and various other travel industry solutions.
One thing to note about Travelport is that it offers access to diverse markets, including those in the Americas, Asia, and Europe. Galileo is slightly more popular with hotels, as Worldspan is more closely associated with airlines.
Connecting Your Hotel to All Global Distribution Networks
Mostly, hotels connect to GDS networks via a GDS provider. Such a provider will function as an intermediary between the hotel and the global distribution system, and in most cases, a GDS provider will connect your hotel to all of the three major GDS systems at once, rather than focusing on a single one.
Moreover, a typical GDS provider will also have links to at least one property management system (PMS) or Hotel Channel Manager. This means that hotels can manage their hotel description, room listings, photos, and other information across different GDS systems from a single place, while usage can also be automated.
When optimizing revenue, a hotel may prefer to attract as many direct bookings as possible. Still, a global distribution system can be essential for increasing demand and reaching a wider audience. While fees will usually need to be paid to the GDS and the travel agent, room rates can usually be adjusted to ensure all parties benefit financially.