There's plenty of opportunity for innovation in both the enterprise and consumer segments of the online travel agent (OTA) industry. OTAs like Booking, Kayak and TripAdvisor are today’s leading methods of booking travel, however the demand for personalized recommendations has consumers increasingly turning to social media for early stage research.
On the B2B side hotels need OTAs and vice versa, however tensions over commission pricing and data transparency are putting a strain on the multi-billion dollar relationship.
Since the displacement of the traditional travel agent, the booking sector has seen the proliferation of a handful of OTAs which collectively own a 39% share of the entire $1.6 trillion travel industry and projected gross revenue growth of 10% per year. Platforms like Booking.com and Expedia have created an overwhelming supply of accommodations, experiences and destinations that often leave consumers paralyzed by sheer volume. As our options have increased, our ability to curate has decreased: a service historically provided by the trusted human travel agent.
The generic list of popular activities in a given destination no longer suits today’s traveler. A recent Airbnb report found that over 80% of millennials seek unique travel experiences and prefer to discover them from locals. Further, over half of the study’s participants agreed that discovering hidden, local places is more important than visiting major tourist attractions. Today, travelers are using social media to uncover these local gems, oftentimes cutting out OTAs and their mainstream recommendations altogether. This pursuit of unique authenticity is driving a behavioral shift in consumers that has the potential to upend the travel Industry.
To make matters worse OTAs have a contentious relationship with their main service providers; the hotels driving the majority of their revenue. They act as the middleman between hotels, charging commissions of up to 20% while maintaining a duopoly on the market. The two largest players, Booking.com and Expedia make up more than 90% of the travel industry. Booking’s list of brands include; Priceline, KAYAK and OpenTable while Expedia owns Trivago, Orbitz and Travelocity to name a few.
Despite pricing and transparency concerns, hotels and service providers have few options but to cooperate with Booking and Expedia in order to remain competitive. They provide a network and resources for smaller hotels allowing them to market their businesses at a global scale.
At otto, we recognize that technology and social media are evolving the travel industry. Our personal and extended networks are filled with valuable data and recommendations. We are creating tools to help consumers centralize travel tips and book trips using recommendations from people they know and sources they trust. We recognize that OTAs aren't going anywhere, however, as travelers become more sophisticated, the tools they use to plan and discover will need to evolve in order to meet their needs.