Online travel agencies have been a dominant force in the holiday booking space for years, but this dominance is coming under threat.
How hotels view working with OTAs is a subject covered recently by Hotel News Now, but STR’s Consumer Travel Insight reports offer a different angle on the rising pressure that OTAs face due to shifting perceptions among travellers.
This five-report series was based on the results of a comprehensive survey asking travellers about their behaviour and experiences undertaking international leisure trips. The survey was answered by 2,228 respondents of the STR Traveller Panel, a community of nearly 30,000 engaged global travellers.
Good signs for OTAs
In the first report in this series, travellers were asked about their holiday booking methods and results were compared to the previous study conducted in 2017. The analysis highlighted that travellers were more likely to book their international holiday or short break accommodation using an OTA than by booking with accommodation providers directly.
Millennial travellers, a key target market for many travel brands, were most likely to use an OTA—more than 60% booked their accommodation using this method. These findings appear to bode well for OTAs. If today’s younger travellers prefer to book using this method, presumably OTAs have secured a user base for years to come. That is, unless other factors convince these travellers to book elsewhere.
Success highlights vulnerability to new competition
Asked why they had chosen to book their accommodation with an OTA, travellers gave as their key reasons:
Paradoxically, the key driver in using OTAs—namely, “to see all accommodation options”—reveals a vulnerability that OTAs have to other services which offer accommodation search features. The most obvious example of this is Google, which has been encroaching on OTAs for some time.
It seems ironic that the most important reason to use OTAs, cited by more than half of customers, could be the reason why they might lose travellers to new platforms and technology in years to come. As a consequence, there appears to be a serious risk of potential customers being intercepted before reaching OTA services, by Google or perhaps the return of Amazon to the travel space.
Extensive advertising along with regular deals and promotions are certainly helping to attract new and repeat OTA customers. However, these methods are coming under increasing scrutiny. The U.K.’s Competition and Markets Authority has recently completed its investigation over concerns of misleading discount claims, pressure selling and other issues. One key outcome being the development of new principles to curtail methods which have given OTAs a helping hand in recent years.
Convenience and price: The battleground between accommodation providers and OTAs
Convenience and an easy booking process are strong motivators for travellers. Allowing customers to secure their accommodation with as few clicks, swipes and details entered as possible gives brands an advantage in trying to convert the time conscious traveller. Which is why it might be a little concerning to OTAs that these were the main reasons given by travellers who opted to book their accommodation direct:
The crossover between the motivations of direct bookers and OTA bookers is striking, as the key reasons for booking direct were prominent drivers for booking using an OTA. These findings highlight that accommodation providers’ websites are generally providing convenient and intuitive booking experiences, which in turn are driving up conversions.
In particular, it seems that millennials are most appreciative of a “slick” user experience: 66% of millennial travellers cited convenience and ease of booking as a reason to book direct.
While developing booking methods to ensure they are on the cutting edge for ease and convenience, accommodation providers should not lose sight of the selling proposition that is helping them win customers: value. Nearly 40% of travellers stated that a direct booking offered them the best deal, and 25% chose to book in part because of a loyalty or rewards scheme.
A further significant reason for booking direct, cited by 10%, is one any industry would be envious of: customers wanting to benefit the business directly. The latter result is one facet of a growing backlash to OTAs as some question their overall benefit to the local economy. This finding emphasizes the importance of accommodation providers showing off their authentic local credentials with a focus on how they put money into the economy around them to help secure guests.
How OTAs stand with other online travel brands
The CTI reports gauged travellers interactions with major online travel brands, including OTAs and metasearch sites. Travellers were asked if they had used these brands to plan and/or book an aspect of their international holiday.
How many travellers used online travel brands
Overall, 86% engaged with an online travel brand while they were planning and researching a holiday. Meanwhile, 69% actually booked an aspect of their holiday using one of these brands. Evaluating travel brand conversion rates—the proportion who researched and went on to book using the same channel compared to those who only researched—helps to identify their effectiveness. Interestingly, conversion rates varied significantly across travel brands, which highlights travellers’ propensity to use multiple brands for holiday researching and planning before settling on selective channels to book.
The CTI reports calculated conversion rates for a range of online travel brands, including OTAs such as Booking.com and Expedia:
Conversion of planners into bookers for Expedia
Converting users who are researching a holiday into paying customers is a top priority. OTAs invest a great deal of effort in finding out how to capture people’s attention and secure a purchase through advanced user experience research and digital marketing. The CTI reports reveal how these efforts are perceived from the customer’s perspective, as travellers were asked what they felt were the main reasons for choosing to use a site.
Why is this your most used online travel brand?
Years of refining the customer journey and user experience throughout the site has obviously paid off as 63% of those who used Expedia did so because of its ease of use. There was also evidence of a form of loyalty, as almost half of travellers who used Expedia to book their holiday did so in part because of familiarity with the site.
The importance of user experience cannot be overstressed as almost twice as many travellers cited ease of use as the reason for booking, as opposed to the site’s ability to find the best value deals.
After years of rising dominance in the travel industry, OTAs are finding themselves challenged more and more. Google threatens their ability to offer travellers all options for choosing their best holiday, while accommodation providers are competing to offer the best booking experience. On top of these factors, they must continue to innovate against other OTAs and new online travel brands. In the coming months and years, it will be interesting to watch how OTAs leverage their years of expertise and design experience to maintain their position in this competitive landscape.
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