One of the central tenets of the Power Paradox in travel is how some of the biggest brands ever assembled in the industry "have aggregated the content, established the trust and amassed the war chests to defend against upstarts."
This scenario is no more apparent than in the influence and position of the global online travel agency giants: namely, Expedia Group and Booking Holdings (with a dose of Ctrip thrown in for good measure, given its growing position and ambition outside of its domestic market in China).
The two U.S.-based companies are spending billions of marketing dollars each year ($4.1 billion for Booking Holdings in 2017, for example) in customer acquisition - a strategy that is obviously expensive but one that ensures it can both feed the volumes required to maintain their dominant positions and, lest the industry forget, supply their hotel and airline partners with heads on pillows and bottoms on seats.
Depending on who you ask, OTAs are wonderful partners that soothe the process of bringing in customers, or a necessary evil.
But is their position one that can be sustained?
The Power Paradox theme for The Phocuswright Conference 2018 examines this in detail, asking if their "sprawling empires fracture more easily than one might expect," and in turn, put them "on edge" due to their size and apparent slowness to innovate.
There are a number of elements to this that are of note: a duty to grow (as publicly listed companies); an ability to push the technological envelope; and ease with which the product and user base can diversify.
The question as to whether the giants of the intermediary world will continue their enormous levels of marketing spend for customer acquisition is concentrated around their respective eagerness to invest in a channel that is increasingly conspiring against them (i.e. Google).
Google does not want to bite the hand that feeds it, obviously, but it is a long way down a path that leads to an expanding relationship to connect directly to suppliers (hotels and airlines).
This puts it at odds with OTAs that may, at some point, be forced at the same time (either strategically from the emergence of new channels or because their investors demand better ROI) to consider their options.
This, of course, arguably swaps the power in the market from a number of giants to one entity in its own right.
Where the OTAs have a better chance of maintaining their influence in the market is with their efforts to keep up with the technological changes being driven by their customers.
Both Booking Holdings and the Expedia Group talk passionately about their "test-and-learn" strategies, putting new products and processes in play on a daily basis to improve the customer experience and try out new methods of engagement.
Their development and "innovation" departments are well-resourced and, with the right attitude, can introduce new ways to how they handle many aspects of the model quickly.
Many point to how quickly same-day booking, when HotelTonight emerged on the scene earlier this decade, was a mechanism that was seemingly switched on overnight.
This is seen as a prime example of recognizing an apparent market need and acting quickly.
The final area is with diversification of product - an ongoing strategy at both organizations that, despite not immediately bringing the financial returns that, say, the air or hotel sectors can give, does ensure they remain relevant (maybe even leaders) in emerging categories.
These include, in particular, tours and activities (witness Expedia's ramping up of Local Expert and Booking Holdings buying FareHarbor).
Issues for online travel agencies
Some key areas for discussion at The Phocuswright Conference:
- Ability to diversify marketing strategies
- Reassuring partners that OTAs remain a vital channel for distribution
- Ensuring they keep up with existing competitors and new businesses/models to innovate the technology
REGISTER NOW! Expedia Group, Booking Holdings, Ctrip, MakeMyTrip and others speak at The Phocuswright Conference 2018