So why is this? Do consumers trust a small collection of OTA brands more than the vast array of individual accommodation brands with their own booking mechanisms? Is there the perception that OTAs deliver better value (ie the lowest price)? Are consumers more comfortable with uniformity and making choices by comparison? OTAs that effectively display accommodation options in an easy to digest grid arrangement can make a comparative purchase decision for a consumer transparent and simple.
Recently I was talking to an OTA employee about her particular brand and she told me that a lot of R&D work goes behind the scenes to maintain the the look and feel of their website. The consumer booking process is constantly monitored by tracking visitor web paths and using feedback from regular focus groups. Small tweaks to the booking engine are often made to make the process intuitive as possible to ensure maximum conversion. A simple change of colour to a hyper-linked button can have a dramatic affect on sales conversions (here's a tip - never use red!).
OTAs are essentially a one-trick-pony that primarily resells accommodation from willing providers online. The more they sell - the more money they make from commissions, so they have become experts in the science of this medium and are highly skilled at turning lookers into bookers.
It's a wet-dream of most accommodation providers to be able to drive the majority of online bookers to their own commission-free booking engine on their website. While some accommodation providers have claimed isolated successes in diminishing reliance on OTAs in favour of direct online bookings, OTAs are likely to continue to dominate source business in most cases.
At this time the most common successful online marketing formula for accommodation providers seems to be listing and working with various OTAs and agreeing to parity for all advertised online inventory in return for exposure and collective marketing services. It goes without saying that the accommodation provider must also have a sound online strategy that includes maintaining their own corporate website with an effective booking engine. Ironically there is anecdotal evidence to suggest that an increasing percentage of online bookings received via the accommodation provider's own website can be attributed to The Billboard Effect of listing with OTAs.
While there has been impressive increases in business flowing through OTAs, the year on year dramatic increases of the past are being replaced by more subdued growth. There is now more competition and financial uncertainty has dampened down travel - particularly in domestic markets. Costs of doing business are increasing for OTAs with marketing the biggest ticket item. By necessity, unprecedented resource is being invested into marking both online and offline.
Expedia-owned, Hotels.com is an OTA that is a mover and a shaker at the moment. As an example of the mega-investment OTAs are investing in marketing, Hotels.com are currently running a multi-million dollar campaign consisting of display ads, social media, a microsite and television commercials.
The centerpiece of the promotion is the successful and nifty Hotels.com mobile app that is available on iPhone and Android. It is reportedly already been downloaded more than one million times.
By all accounts, mobile connectivity via an app is the undeniably hot, must-have accessory item to sell travel products. I must admit that I have never booked travel via smartphone, however I'm aware from analysing my own domestic web stats, that even though New Zealand is lagging behind markets such as the United States with mobile e-commerce, guests are increasingly using mobile devices to look and book.
By its not-so-insignificant investment, Hotels.com obviously reckon that mobile is one important channel that will give a return by generating an increasing flow of bookings.
As part of Hotels.com's current promotion, check out “extreme athlete and stuntman” JT Holmes showing the uninitiated that booking accommodation via smartphone "on the fly" is a reasonably quick and easy process. I may give it a go myself...
