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How Do You Survive The OTA Duopoly - Priceline vs Expedia?

Online Travel Agencies, better known as OTAs, have been around for almost 20 years, so we really shouldn’t treat them as a novelty by now. Expedia was launched back in 1996 while Priceline was founded in 1997. In the earlier days, OTAs were seen as a convenient distribution channel where hotels and airlines could sell extra inventory.

Online distribution was not really a priority back then and now fast forwarding to early 2015, the relationship between hotels and OTAs has gone somewhat sour. Why is that?

How Do You Survive The OTA Duopoly - Priceline vs Expedia?

In a competitive hospitality landscape, hoteliers must fight on a variety of levels, from customer experience where free wifi, hearty breakfast and quality room amenities are expected, to convenient location and, of course, best possible rates. In a context where RevPAR (revenue per available room) is a mantra indicator that requires constant optimization, hoteliers turn to reducing costs to increase their profitability. And that’s just the thing: commission levels paid out to OTAs are high, between 15-30%, and their share of online sales is increasing year over year!

In a recent report by TravelClick, looking at Q4 results in 2014 for North American hotels, the agency noted that the OTA channel had the strongest growth year-over-year (compared to Q4 2013), with a 12.7% jump in bookings. So if OTAs are taking a bigger piece of the online pie, and there is less competition with a de facto duopoly, will it eventually mean higher commissions for hoteliers, airlines and other industry players who rely on this distribution channel and have little negotiation power?

TripAdvisor, Google and others…

There are many other players in the online distribution landscape, including TripAdvisor which is becoming less of a review site, and more of an integrated booking solution for everything related to the travel experience: hotels, restaurants, vacation rentals, attractions, etc. Hence, its new “Plan. Compare. Book” advertising campaign, meant to get consumers to not only check out TripAdvisor for its comparing features, but also to book directly on its platform.

And then there is Google. Will it ever launch a direct-to-consumer travel solution, as many industry experts have been predicting ever since it bought the ITA software, back in 2010? Flight Search and Hotel Finder are both available but haven’t gained the kind of traction that would worry the OTAs at this stage. Yet. But we are seeing clear signs leading us to think there may be more at play, in particular with mobile search and bookings growing so fast.

So while the OTA scene has become a mere duopoly, it doesn’t necessarily mean there is less choice for airlines and hotels. It does mean, however, that travel brands must realign their online strategies and tactics to make sure they make the most of their owned media, before relying too much on external sources such as online travel agencies, TripAdvisor or Google, among others.

Original Article: eHotelier

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