The number of online travel bookings being made continues to grow globally unabated. According to a Zion Market Research report, the global online travel booking market was valued at approximately USD 765 billion in 2017 and is expected to generate USD 1,955 billion by 2026, growing at a CAGR of around 12.1% between 2018 and 2026. Even emerging economies are getting in on the act and demonstrating phenomenal take-up of online travel search and bookings.
Increasingly online travel is going mobile, with tech savvy travelers planning, researching and booking trips on the go. Easy to use apps provided by Online Travel Agencies (OTAs), hotels and airlines will continue to drive mobile uptake. Simply put online travel is big business. But with high volumes and low margins in a competitive field – agility is needed to remain successful. Analyzing and using message data being exchanged millions of times every day should be part of that success story.
In this ‘24×7’ market — OTAs represent a powerful force providing an essential distribution channel for hoteliers, especially for the small ones, while offering consumers, great choice, prices and convenience. Indeed the OTAs strengthened their position during the last economic downturn, taking advantage of a weakened market and the Hotel sector’s lack of knowledge about e-commerce. They offered an easy route to market to selling rooms, especially last minute offers. But as their dominance in the online travel space increased, the global OTAs are facing the twin pressures of
– Heightened resistance from their Hotel suppliers for the commissions charged on each and every booking
– Tightened scrutiny from regional competition authorities into their contracts and practices, especially that of rate parity.
In a bid to reduce dependence on OTAs, leading hotel chains have been in catchup mode, by investing heavily in their own direct sales capabilities. Competition is also hotting up from the new comers bringing meta-search engines into the travel distribution mix including an offering from search engine giant itself – Google. Metasearch offers the savvy consumer a better search experience to find the lowest prices available online more transparently across several websites. Many have introduced seamless booking capabilities with hotels as well. With well-publicized acquisitions such as Priceline-Kayak and Expedia-Trivago the line between OTAs and metasearch sites is blurring and may be a reflection of where these two majors see the market going. An increasing portion of OTA revenue now comes from media placements and advertising – indeed providing early brochure ware before the consumer goes to the Hotel direct for the sale.
All this points to market conditions driving change across the OTA landscape. To smooth industry relations, more equitable pricing structures are evolving between OTAs and with their inventory supply chains. Today, the simple fact remains that OTAs are an essential part of the hotel electronic distribution environment, and a hotel’s access to the buying public. As an ally they have the ability to drive volume, and they can reach markets in which a hotel brand is not well represented. When the real cost of running a live e-commerce site is taken into account such as a robust web infrastructure and expertise, direct selling is often the most expensive in the electronic distribution portfolio.
So what should OTAs do to maintain competitive positioning and dismantle distrust from their suppliers? Ultimately, hotels are the ones who control the levers of inventory and price, and thus are the ones who can switch on or off any particular channel if they really want to. With the right technology, there is much that OTAs can do to both demonstrate the value that they deliver, and to monitor the speed and effectiveness of their suppliers. Two particular areas that spring to mind are to:
– Use their technology platforms combined with insight from analytics to demonstrate key performance indicators
– Deliver an improved search experience to their users.
Key Performance Indicators
OTAs, either directly or on behalf of their extensive affiliated networks, sell directly to consumers via their search and booking systems. To satisfy consumer requests speedily real-time connectivity to a wide and diverse range of travel suppliers such as wholesalers, aggregators and hotel chains is crucial. XML is the adopted industry standard for request and reply message exchanges, including the ability to operate with and present the available content. In simple terms the OTA platform and network, holds the key to brand differentiation captured in terms of simple key performance indicators against which their customer and supplier relations can be assessed.
The inbound and outbound messages of an OTA is a record of the opportunities, successes and failures with their customers’ experience measured by the timeliness, availability and relevance of the product and services being offered. The ability to tap into and analyze the wealth of information that is embedded in the flow of transactions up and down the network and to be able to do this in real time opens up a huge range of possibilities. By understanding transaction data at a granular level it becomes possible to produce a comprehensive set of detailed operational metrics and key performance indicators from which a raft of business intelligence can be gathered. Such intelligence not only helps to identify areas of improvements, but can also be shared pro-actively with suppliers. Sharing performance insight is surely one way of demonstrating value to suppliers, or indeed supplier responsiveness to demand.
The data that accompanies requests is rich in content and defines exactly what is being demanded. Similarly responses contain a list of available products or confirmation of a booking. Analysing millions of transactions each day enables a comprehensive image to be developed, pixel by pixel, of the search patterns to be built up and how businesses have responded to these demands. Real examples of the kind or business performance indicators in any given period that can be measured are:
– Look-to-Book ratios for each Agent and a list of top 20 performers
– Supply-to-Demand to establish the most popular destinations or the most popular hotels
– The revenue attributed to bookings from agents and the ability to identify the top revenue sources
– Demographic segmentation to search traffic including party numbers and length of stays
– Projecting the lost revenue due to errors etc
The real power behind raw data analysis of the data captured by the platform is the ability to aggregate and summarize data sets, look at transaction sets, then slice and dice them down further in a variety of ways to generate actionable information. Action can translate into identifying and rewarding top agents.
Using data analysis to understand the experience the user is getting can also be used by OTAs as a differentiator. Performance monitoring of the web services and applications gives insight into client satisfaction on two levels, Firstly that the applications are delivering to the client the accurate information and choices requested in a timely fashion and secondly that the IT environment is operating optimally without any glitches, errors or latency issues. Using real-time performance tools to proactively detect and isolate end-user performance issues can prevent business reputation and revenue being negatively impacted, while at the same time providing insight into application performance and its impact on user behavior. Ultimately everyone studies bookings in detail as that reflects revenue, but the ultimate big data nut to crack is search analysis leading to understanding customer needs – even better than the customer.
Recap on our recent webinar: “Drive Profits by Proactively Managing Your Distribution Channels” – which demonstrates how measuring XML search traffic in relation to booking helps companies manage distribution channels and focus on the most profitbable ones.