The recent PhoCusWright study examining online travel agencies in the US market revealed some interesting tidbits of information.
However in context with some other sources and developments, we are beginning to see a picture emerge that should have cause for some concern on the part of investors in OTAs.
So let’s start with the PhoCusWright study.
They state:
"The fee cuts have not eliminated the defection of OTA air shoppers to airline Web sites.
"Despite the removal of most service fees on airline tickets, OTAs still lose over half of their air shoppers to supplier Web site for booking.
"This signals that there is more to the switching behavior than just the fee element. OTAs lose more bookings to air suppliers than they do car or hotel shoppers."
Hitwise’s study on online travel show that for some markets like the UK and the USA, a significant percentage of traffic is search engine sourced.
Therefore both the feed into the OTAs and the abandonment rates are not healthy.
On November 5 2009, Expedia announced the complete elimination of telephone booking fees.
In doing so they have upp’d the ante with regard to their competitors and removed the barriers to the use of an OTA and a supplier.com website.
If we can judge by the behavior of the elimination of online fees – we should see an uptick in call center based bookings and definitely in minutes expended.
The transition to a “fee free” environment is almost complete with Expedia and Priceline now sans fees.
Orbitz and Travelocity still have some fees in place. Note that, in Australia, Webjet seems to be doing just fine with its booking fee based model.
Returning to the PCW report – they are also highlighting that for the first time ever there will be a decline in online bookings via OTAs in 2009 representing a 3% fall.
This compares favorably with the traditional off line bookings, however the model is clearly under threat. There are several other metrics that have shown declining traffic on the OTA sites.
It would seem that Expedia’s multi-brand strategy is designed to capture the fragmented market.
Thus one could easily interpret the shift by Expedia to be a harbinger of things to come.
If one looks even deeper – it should also be noted that a significant chunk of their revenue also comes from a plethora of white label private branded sites.
While I am not predicting the death of the OTAs – far from it, but I am definitely predicting a decline in the pure traditional OTA model of the mega brands.
They have reached a peak and now need to morph into something else. This is a message that seems to resonate in Bellevue.
Expedia’s strategy is now focused squarely on the TripAdvisor family – is the obvious example.
And where do I think the next wave is coming from?
I will say that we still have a number of behind the scenes factors going on – in particular the changing model for supply chain access away from the traditional GDS model.
Of course the Achilles heel remains in my opinion the poor solutions in search - ie, we don’t have real search available to us.
As long as that issue remains – then we will be challenged as an industry. In my mind some merging of search and social media looks like the genesis of some interesting value propositions.
This is where I will be keeping a careful watch.
One thing I can assure you of dear readers – the lines between pure OTA and pure offline are now well and truly blurred.
And that is a good thing. Cheers
However in context with some other sources and developments, we are beginning to see a picture emerge that should have cause for some concern on the part of investors in OTAs.
So let’s start with the PhoCusWright study.
The report states:
"The fee cuts have not eliminated the defection of OTA air shoppers to airline websites.
"Despite the removal of most service fees on airline tickets, OTAs still lose over half of their air shoppers to supplier Web site for booking.
"This signals that there is more to the switching behavior than just the fee element. OTAs lose more bookings to air suppliers than they do car or hotel shoppers."
Hitwise’s study on online travel shows that for some markets like the UK and the USA, a significant percentage of traffic is search engine sourced.
Therefore both the feed into the OTAs and the abandonment rates are not healthy.
On November 5 2009, Expedia announced the complete elimination of telephone booking fees.
In doing so they have upp’d the ante with regard to their competitors and removed the barriers to the use of an OTA and a supplier.com website.
If we can judge by the behavior of the elimination of online fees – we should see an uptick in call center based bookings and definitely in minutes expended.
The transition to a “fee free” environment is almost complete with Expedia and Priceline now sans fees.
Orbitz and Travelocity still have some fees in place. Note that, in Australia, Webjet seems to be doing just fine with its booking fee based model.
Returning to the PCW report – it also highlights that for the first time ever there will be a decline in online bookings via OTAs in 2009, representing a 3% fall.
This compares favorably with the traditional off line bookings, however the model is clearly under threat. There are several other metrics that have shown declining traffic on the OTA sites.
It would seem that Expedia’s multi-brand strategy is designed to capture the fragmented market.
Thus one could easily interpret the shift by Expedia to be a harbinger of things to come.
If one looks even deeper – it should also be noted that a significant chunk of their revenue also comes from a plethora of white label private branded sites.
While I am not predicting the death of the OTAs – far from it, but I am definitely predicting a decline in the pure traditional OTA model of the mega brands.
They have reached a peak and now need to morph into something else. This is a message that seems to resonate in Bellevue.
Expedia’s strategy is now focused squarely on the TripAdvisor family – is the obvious example.
And where do I think the next wave is coming from?
I will say that we still have a number of behind the scenes factors going on – in particular the changing model for supply chain access away from the traditional GDS model.
Of course the Achilles heel remains in my opinion the poor solutions in search - ie, we don’t have real search available to us.
As long as that issue remains – then we will be challenged as an industry. In my mind some merging of search and social media looks like the genesis of some interesting value propositions.
This is where I will be keeping a careful watch.
One thing I can assure you of dear readers – the lines between pure OTA and pure offline are now well and truly blurred.
And that is a good thing. Cheers!