If you have planned and booked any accommodation online, be it for vacation or business trip, you have surely come across some Online Travel Agencies (OTAs), for example companies like Agoda, Trip Advisor, Expedia and Booking.com. These OTAs have been around since the late 90’s and early 2000’s and each year they have been growing in size, strength and popularity, so much so that in today’s online market you literally cannot avoid them when you are booking any type of online travel arrangements; anything from hotels, villas and rooms to cars and bikes and also flights – you will always see a handful of OTAs on the first page of Google results and also dominating the Google Adspace positions. Of course, with the rise of these monster-sized travel agencies, there has been growing concern from hotel owners, car rental companies, and other businesses that they need to capture more direct bookings to avoid relying on entirely or almost entirely from third-party booking portals. . The reason for concern, of course, is due to the lost profits that companies have to take by receiving their reservations from booking agents instead of directly from consumers; the rates vary slightly from each agency, although it will never be such a small percentage that it does not have a noticeable impact on the “bottom line” of the providers. Hotel and property owners, for example, are required to pay a 15-35% commission to OTAs for bookings received. The percentage value usually depends on the location of the property/hotel and also the number of rooms they have listed. the OTA (the more rooms they list, the lower the commission % they will have to pay to the OTA).
With this huge expense associated with partnering with OTAs, you might think, “Why do hotels and resorts continue to rely on third-party booking agents when they could enjoy much higher profit margins by capturing direct bookings?” this is something that every hosting provider will have considered and pondered and discussed with their teams and the answer is that most of them are now in a position where they simply cannot live without OTA bookings. Unless the Hotel or Resort is one that has single-handedly gained so much notoriety and is so popular that they can successfully fill their rooms year-round, then it’s about having to partner with an OTA or a few for it to survive. In reality, even with the notorious and popular hotels and resorts I am referring to, there will be off seasons and other times and occasions when the number of reservations will be low and there will be a need for additional exposure to show room/villa reservations ; so actually partnering with OTAs is now a must for every company that is in the vacation rental business.
Where do these OTAs come from and who owns them?
When talking about OTAs, most people imagine a handful of companies, who are really the main “big players” who have extremely aggressive marketing activities to ensure their brands and promotions are frequently seen by almost all travelers, both online and offline. . The four best known OTAs are Expedia, TripAdvisor, Agoda and Booking.com; These are the room booking platforms that are creating the biggest change in the market and the ones that will be on most hotel owners list to partner with. Of these four agencies, the two oldest are Expedia, which was formed by a small department within Microsoft in 1996, and then Booking.com, which originated in Amsterdam also in 1996. Trip Advisor followed in 2000, formed starting from a small office in Massachusetts, USA and last but not least came Agoda, formed in 2002 and originally from Bangkok, Thailand. In fact, almost all of the major OTAs and online booking platforms are now owned and under the umbrella of just two major organizations of monstrous size; Expedia Inc is one and the other is The Priceline Group.
So, to answer the original question in this post, which was asking how OTAs are affecting the vacation accommodation booking industry; for the consumer, it’s really about making all accommodation more accessible and the user experience has improved a lot as it’s much easier and more efficient to compare different locations. Plus, having the added benefit of being able to review reviews for each location before making any reservations is another positive change that consumers can enjoy. For hosting providers, on the other hand, it has had some negative effects as well as some positive ones. Additional commissions and costs for top-ranked listings within OTA websites greatly reduce the profits owners can make, but on the other hand, for many hotels, resorts, and other accommodation providers, they have the exposure. they get by posting within OTA websites means they can now book a lot more rooms and at the same time their brand/location is put ‘on the map’ so to speak and as long as they offer good rooms at a good price, with an efficient service, then they will be able to grow over time thanks to the support they receive from their OTA partners.
All in all, I think OTAs are a positive for the industry.