Who are the OTAs and what impact do they have on the tourism industry?
In the space of just a few years, OTAs have become the most powerful players in the online tourism industry ... and a force to be reckoned with by all industry professionals.
But what exactly do we mean when we talk about these Online Travel Agencies, and why have they managed to make such a name for themselves? And above all, do they represent an opportunity or a constraint for hoteliers, restaurateurs and other car rental agencies?
Tourism professionals, let's take a look at the definition of OTAs and the issues surrounding their rise, to better understand the means at your disposal to embrace the new demands of the market.
OTAs: definition
What is an OTA, or Online Travel Agency?
The acronym OTA (Online Travel Agency) refers to online travel agencies marketing tourism products provided by third parties:
- accommodation,
- flights,
- car rentals,
- sporting or cultural activities, etc.
How do they work? OTAs enable travelers to easily select their services (thanks to filter systems in particular), then book them online with just a few clicks. OTAs earn their revenue from commissions charged on sales made by third parties (independent hotels, for example).
☝️ The new term coined for these web giants shows that they have been playing a decisive role in their field for some years now. Indeed, the purchase of tourism services now takes place essentially online, and the majority of customers now transit through these platforms. At the same time, the percentage of people booking directly with hoteliers has fallen.
The list of OTAs
There are many OTAs on the market. The main ones include :
- Booking,
- Expedia,
- Hotels.com,
- Priceline,
- HRS,
- Hostelworld,
- Agoda, etc.
There are also OTAs specializing in particular niches, such as CampingandCO for camping vacations.
💡 Find the full list of OTAs here.
☝️ Is AirBnB considered an OTA? In reality, it all depends on the source. However, if we refer to the initial promise (offering authentic accommodation in private homes), it isn't. But the shift the company has made, by increasingly professionalizing the services offered on its site, ultimately makes it an OTA like any other.
Why do OTAs dominate the market?
The facts are clear: over the past ten years or so, OTAs in France and around the world have steadily gained a foothold in the tourism market.
This trend has had a particular impact on smaller players, notably independent hotel distribution (hotel chains ( hotel chains already benefit from a strong brand image and a well-established customer loyalty policy).
What are the reasons for this growth?
Meeting an emerging need
OTAs naturally flourished in a context of massive Internet development in the late 1990s (the OTA Booking was created in 1996). They were able to innovate by taking advantage of a free market and optimizing online booking, a sector in which only hotel chains were already present.
In short, a need emerged (to book quickly and easily, and to have choice), and the OTAs seized the opportunity.
Offensive marketing
The hotel industry is struggling to modernize and digitize. This is due to the large number of small independents, unfamiliar with online distribution and reluctant to invest large sums of money in it.
In contrast, OTAs have spent massively on advertising, search engine optimization and so on. At the same time, they have continued to develop their visibility and marketing performance:
- by learning more about their customers' behaviors and needs;
- targeting them with increasingly personalized campaigns;
- employing offensive techniques such as stress marketing.
In short, these platforms have understood the benefits of adopting a customer-focused, rather than an offer-focused, positioning.
Just 2% of independent hotels and those affiliated to voluntary chains have a customer database. This is alarming!
Rachid Gorri du groupe France Réservation
Think customer experience
Last but not least, OTAs reassure customers. It's not easy to read reviews of certain hotels, or even to believe in the veracity of those on a site (hasn't the hotelier selected only the best?).
The OTAS review system works very well with consumers, and reassures them as to the choice of a particular establishment. In fact, according to Coach Omnium, 76% of consumers consider OTAS reviews when choosing a service.
OTAs: what are the advantages and disadvantages for tourism companies?
The advantages
Despite the growing discontent among professionals, it's clear that there are advantages to be gained from OTAs.
Greater visibility
Online booking platforms offer visibility to hotel managers, not all of whom have the resources or skills to tackle web marketing.
And this visibility extends :
- internationally, as OTAs take care of translating information about the establishment into several languages;
- on different channels, including mobile, with responsive sites.
All parameters that a small independent cannot easily manage.
Easier management
The use of OTAs facilitates reservation management: everything is centralized and automated within a single platform. All the professional needs to do is log on from time to time to update rates and information, for example. Time savings guaranteed!
Billboard effect
Finally, some studies on the subject have revealed a potential " billboard effect". This means that presence on an OTA can also generate additional direct bookings.
Basically, the web user discovers the establishment on the online platform, then goes directly to the establishment's website to obtain further information and make a reservation.
Disadvantages
High commission rates
The first drawback is the high commission rates charged by OTAs.
By way of illustration, they vary between 15% and 17% for Booking, and between 15% and 20% for Expedia.
Loss of customer data
Customer data passing through OTAs remains in their hands.
As a result, tourism professionals don't have access to the customer's contact details, so they can communicate with him or her, propose special offers, etc. - in short, enhance the customer experience.
Brandjacking
Another stumbling block is brandjacking. Brandjacking is the practice of buying a company's trade name as part of an AdWords campaign.
Although there are now procedures in place to prevent this, the consequences are as follows: Booking and Expedia, for example, appear at the top of the Google results, even before the official website of the establishment in question, even when the user types its name into the search bar.
Difficult management of brand image and e-reputation
On Booking, for example, it's impossible to manage customer comments, even when they're anonymous.
In the same vein, because of Booking's affiliate program, some platforms sell services without the hotelier's knowledge, sometimes even using out-of-date information.
Why and how to free yourself from OTAs?
The benefits of direct booking
We've already seen the limits that the OTA system imposes on professionals.
Another fact to emphasize is that the trend towards direct booking is continuing. In particular, customers appreciate the experience they get, and events such as Covid-19 have demonstrated that it's sometimes easier to deal with unforeseen events directly with the establishment.
In 2018, direct booking remained the second most important distribution channel:
Finally, as the table below shows, direct booking remains more profitable for tourism companies:
☝️ As we have seen, using OTAs has its advantages. But professionals are advised to take advantage of the different channels available to them, by using these platforms while encouraging direct bookings via their own websites.
But how do you learn to invest in the direct channel and digital marketing, long neglected in favor of management and operations?
A few tips for investing in the direct channel
- Create your own website. It sounds obvious, but it's the basis. If it's used to manage reservations directly, it must be sufficiently optimized so that potential customers can easily find the establishment on the Internet.
- Know how to communicate. Optimizing a website also requires skilful communication. Eye-catching visuals, an impactful editorial line... the web helps you sell by developing a brand image in line with your target audience.
- Attracting and retaining customers. There are a number of promising strategies for attracting customers, such as promotions. Since the introduction of the Macron law, it has been possible to offer lower rates than on OTAs via one's own website.
But the direct channel is also an excellent lever for building customer loyalty, thanks to the possibility of exploiting one's own customer files.
In short, a whole program for those wishing to emancipate themselves, at least in part, from the OTAs. But even the most novice tourism professionals need not worry. There are solutions available to support them in the digital transformation of their business.
For example, you can call on the services of expert webmarketing agencies.
Adopting specialized software, such as Asterio, is also a good solution. In fact, this type of tool can help tourism professionals create a well-constructed and referenced website to generate more direct bookings, and to manage the commercial management of the establishment in general. But above all, this software makes it possible to take advantage of customer files to undertake a real loyalty policy... something impossible if you only use OTAs.
The emergence of OTAs in the tourism sector has reshuffled the cards when it comes to selling services online, but the game isn't over yet. While the rise of the OTAs has proved that the web is the channel of choice, customer experience and proximity are still the keys to success in this sector. All the more reason for hoteliers and other service providers to take the image of their establishment online into their own hands! The aim? Take advantage of the best of both worlds, to ensure the best possible sales.
Article translated from French