Extensive online travel agencies (OTAs) have played a large role in the hospitality industry for the past decade, but the outcomes have not necessarily been positive for all parties involved. They are a costly distribution channel for hoteliers, and have become a direct siphon for traditional travel agents.
The ultimate question to ponder at this time is what the next distribution giant will look like in the travel space.
John Burns, president of Hospitality Technology Consulting, says that he does not see much change in hotel distribution in the near future. Burns notes that OTAs have evolved over the past decade, incorporating loyalty programs into their business model, but these agencies are now fighting to compete with metasearch engines like Kayak and TripAdvisor as well.
What happens when a larger force, or a bigger name enters the travel arena? How will this affect the traditional travel agent and OTAs?
The Big Names
Whereas Burns sees the current model remaining unchanged in the near future, Bonnie Buckhiester, president of Buckhiester Management, believes that OTAs could eventually become the “little guys” in the travel industry as larger companies emerge.
Buckhiester believes that OTAs like Orbitz, Hotels.com and Booking.com could struggle to keep with what are being called “metamediaries” – companies like Google, Facebook, Amazon and Apple – entering the landscape and creating their own category of intermediary.
Competition with these major names will be difficult because of one key factor: money.
Buckhiester points out some eye-opening numbers when talking about market capitalization of these companies. Marriott, a well-known name is the hospitality industry, capitalized at $13 billion, while Facebook is $60 billion, Google is $300 billion and Apple is $400 billion. If these companies enter travel in a serious way, their presence will be overwhelming.
Where do Traditional Agents Stand?
Traditional agencies still have a very good relationship with the managed business travel sector of the industry, with hotels working hard to maintain these relationships.
Complex travel arrangements will also cause consumers to turn to a trusted travel agent when planning a trip, but niche sites including One Fine Stay, which books lodgings like castles, private homes and apartments, are trying to capture their own unique segment of the travel population.
Predicting the Future
Ultimately, it is up to the travel agents, both online and traditional, to continue to reinvent themselves and show their value. Average commission costs that range from 15-25% across the market may require adjustment in order to keep pace when big names like Google, Apple and Amazon enter the travel space in a serious way.