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HSMAI Section: The True Value of an OTA

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October 25, 2017
OTA | Update
Abhijit Pal

So much has been written about the friction between hotels and online travel agencies (OTAs). The stereotype of OTAs being competitive to hotels is a vestige of the industry’s early days. Today, OTAs are more than a distribution channel, they’re tech companies that specialize in travel. Abhijit Pal talks of the true value of an OTA. 




So much has been written about the friction between hotels and online travel agencies (OTAs). The stereotype of OTAs being competitive to hotels is a vestige of the industry’s early days. Today, OTAs are more than a distribution channel, they’re tech companies that specialize in travel. In 2016, Expedia alone invested more than $1.2 billion in technology to help its travel partners improve their business with industry-leading consumer and market insights and business management tools. 
 
Similar to the free apps you get preloaded when buying a phone, OTAs like Expedia come with several great apps that help hotels price rates and availability, attract and convert new travelers, as well as improve the in-stay experience and post-stay brand reputation management. The goal of these companies is to help power the hotel industry by bringing breakthrough, technology-driven solutions to make hotels stronger, more competitive and successful.
 
Technology-first, Driven by Test-and-learn Culture Innovation is driven by disruption, and it’s a natural cycle in all industries that they will advance and change course. Stagnation of an industry or company leads to end of life – think film and Kodak, video rentals and Blockbuster, even social media and MySpace. It’s important to stay ahead of disruption. Expedia understands that its travel partners need to focus on hospitality first and foremost, and has honed its value proposition to do what Expedia does best on the technology front. 
 
Expedia conducts more than 120 test-and-learns each month so that it can stay informed on both evolving consumer habits and partner needs. Expedia iterates and tests quickly through A|B testing, working alongside partners who share their needs and likes. While the company tries to anticipate industry evolution, it’s also careful that it innovation is inline with both consumer and partner preferences. Expedia does research and testing, to make sure it’s always working to future-proof its offerings. 
 
Deep, Actionable Insights and Booking Offerings With tens of billions of flight and hotel searches made last year on Expedia sites alone, OTAs have a wealth of insights from every aspect of the booking funnel, from inspiration to purchase, and spanning all corners of the globe. This wealth of data reveals insights around search and booking patterns, not just from those who book a specific brand or property, but from an active and diverse global travel audience. These rich demographic and behavioral insights, which can be filtered, understood and targeted, can help hotels better understand and reach their unique traveler.
 
Beyond hotel data, the addition of flight data that OTAs can provide gives hotels an indicator for demand, giving partners a much earlier look at what a market is going to do. And with package bookings, a unique OTA offering at scale, hotels gain access to a large international audience, proven higher ADR, longer booking windows and stays, and with half of the cancellations of stand-alone bookings.
 
Marketing Prowess Expedia has a true global audience, reaching more than 75 countries, 200 points of sale, in 35 languages, proving that OTAs have opened the world for hotels who can’t get that reach on their own. Expedia spent nearly $4.4 billion in 2016 on marketing to this global travel audience, driving incremental bookings and revenue for hotels. 
 
With less than .5 percent of the Expedia audience searching for specific brands in their hotel search, OTAs drive true incremental business. An OTA customer mix is younger, brand agnostic and international. And in addition to bookings, OTAs also help with selection, even driving to brand pages. comScore looked at more than half a million unique visitors to property pages of a major leading hotel brand on a leading global OTA and they found that more than 1/6 of those visitors later visited brand.com sites before completing their hotel booking.
 
Tools that Improve Your Revenue and Bookings Smart revenue management is key to maximizing both revenue and bookings – but many hotels are still using Excel spreadsheets as their main revenue management tool. Revenue management tools offered by OTAs provide actionable data and insights to empower partners to make smart decisions to optimize their revenue. 
 
So, What Would the World Look Like without OTAs?

We can’t really answer this, because the evolution of the travel industry to include marketplaces was a disruption that occurred across almost every industry. Think of a world without grocery stores, department stores, Amazon, Zillow, Art.com – all marketplaces that bring consumer convenience. 
 
Expedia sold 246 million room nights in 2016 for its partners, but its value today is not about room nights alone. While Expedia remains committed to increasing incremental bookings for its travel partners, its goal is to leverage technology prowess to help hotels do smarter business.
 
OTAs can’t be everything to everyone, and there will always be those who may not see the OTAs true value for what it is. The OTAs can keep doing their best to help the industry move forward, and continue to bring better, smarter tools to hotels. When considering OTA compensation in the future, remember to factor in cutting-edge, future-proof technology that helps do business smarter – driving everything from targeted traveler bookings to higher ADRs. The true cost is on par if not more efficient than other channels.


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