OTAs must do more to capture consumer attention earlier in the travel purchase decision funnel, says new research by Millward Brown Digital.
OTAs have been buying share through advertising since the dawn of the business — one of the surest ways to grab a consumer's booking was to be present when that consumer was making a purchase decision in travel, thus pushing them to book away from the supplier and logging a commission for the OTA.
However, the focus has been more on capturing that last click — the one that leads to the purchase.
Since the focus is on that last click, there is a direct connection between advertising spend and revenue — the money must be invested in ads to secure the bookings. The research found this correlation to mean that supplier direct bookings soared in the fourth quarter of 2014, jumping from 61% in the previous quarter to 69%.
The share of those travelers looking at both OTAs and suppliers also dropped significantly, from 22% in the third quarter to 17%. This led to a drop of 13% in OTA shoppers overall.
So if advertising is a necessity to maintain share, what can OTAs do to improve the efficiency of their advertising spend?
The report suggests looking earlier in the purchase cycle. It breaks down the percentage of travelers looking at various travel sites during the nine weeks leading up to a trip.
OTAs are very top-of-mind closer in to the date of booking, beating out hotel suppliers for day-of bookings by one percent: OTAs see 26% of same-day share compared with 25% of hotels.
For flights and cars, the numbers are even more significant. Flight/car suppliers see a steady 20% of share early on in that 9-week cycle, diminishing rapidly towards day-of-travel. OTAs never manage to push past 7% of share, meaning that there is a disconnect between those that book hotels on OTAs and those that book flights.
In fact, the research authors suggest an opportunity for OTAs to manage this disconnect:
Consumers spend a disproportionally larger amount of time shopping other travel products prior to booking a hotel. It should be noted that of those consumers who book a flight on an airline supplier site, 80% would choose a supplier site for their hotel booking. Conversely, just 50% of those who book a flight on an OTA would also use an OTA for their hotel booking.
The findings also suggest that certain channels have extraordinary stickiness when it comes to where a consumer initiated the research and where they ultimately complete a booking. The graph below shows the booking location for those who initiated research at the source — so those that booked OTA or hotel supplier, and where they started their research.
For those who start researching hotels on an OTA, 66% will complete that booking with an OTA. For hotel bookers who initiate flight/car research with an OTA, 58% will ultimately book a hotel with an OTA.
Hotel suppliers actually see the most stickiness when it comes to research leading to booking: 80% of consumers who started their trip research on a hotel supplier site will book with a hotel supplier.
While advertising will continue to be an essential driver for inbound traffic and conversions for OTAs, the core takeaway is that OTAs should also consider the earlier weeks in a consumer's path to purchase.
The ads might be more affordable and the competition less stiff as the consumer begins to feel out a specific trip — and if the deal offered looks good, the opportunity to immediately capture that booking is one that not only increases revenue but keeps it out of the hands of competitors.
NB: Tipping the scales image courtesy Shutterstock.