Is OTA Market Growth is Losing Steam?

search, social media, and content cogs turning
Arielle Sanchez
Arielle Sanchez
September 9, 2013
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The time of the OTA rule is slowly coming to an end. OTAs, or Online Travel Agencies, such as Expedia, Travelocity, and Priceline, have been dominating the travel market for the past several years by persuading customers to book hotel rooms through their websites. When customers book a room through an OTA, that company will receive a commission of around 25% from hotels. Without even realizing it, hotels end up paying thousands upon thousands of dollars in commission fees to OTAs every year. The growth period for OTAs, however, has started to come to a standstill. There are several factors that can be attributed to this.

search, social media, and content cogs turning

Traditionally, OTAs perform well during times of economic downturn. The recent recession was a perfect opportunity for OTAs to capitalize on the market since hotels were in need of gaining more bookings. Now that times are beginning to return to normal, hotels no longer need desperate means to gain bookings and are attempting to find ways of encouraging customers to book directly. Second, up until recently, high competition did not exist for OTAs. OTAs were able to obtain high profits without spending large amounts on advertising as they now have to. According to hotelnewsnow.com, Hotwire spent around $4.4 million on television ads in June 2013 alone, with their commercials airing about 3,069 times. OTAs have also had to find other ways, aside from advertising, of keeping profits up. For example, Travelocity and Expedia have recently merged in order to pull resources. Third, Google has shaken up the OTA game by taking more of an interest in hotels implementing tools such as Hotel Finder and the Google Carousel. These tools gives customers more options when choosing where to book a hotel.

With the decline in growth of the OTA market, now is the time for hotels to take advantage of lower-cost channels such as Social Media and Social Search Optimization (SSO) and reduce dependency on OTAs. Hotels can invest less money into building social media presence than the traditional 25% commission given to OTAs and still see results. Channels such as social media and SSO drive customers to book directly with the hotel itself, which leads to higher revenue. In addition, social media gives hotels the opportunity to engage directly with their customers and build a relationship. This way, not only is your hotel building trust and a relationship with the customer, overall you are paving the way to reach new and create repeat customers. Hotels should take advantage of all that social media and SSO have to offer by implementing them into their online marketing strategy.

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