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A Race To The Bottom: OTAs and the Travel Industry

Companies in the travel industry must feel as if they are in a zero-sum business. As if the only thing anyone cares about anymore is how much they’re going to pay. Consumers say it. Businesses say it. But worst of all, it’s a race to the bottom that gives the Online Travel Agencies (OTAs) – who don’t have physical locations to pay for and manage – an obvious advantage.

It’s no wonder, then, that hotels and other travel industry players have been trying to drive direct bookings and avoid OTAs altogether. Setting aside for a moment whether or not OTAs are, in a sense, the enemy, the very way they function makes it impossible for brands to distinguish themselves amongst their own competition. When they show up on an OTA, brands end up looking like just so many cans on a shelf at the supermarket, without about as much appeal and allure.

Unfortunately, it looks as if despite the importance of this strategy being successful for hotels, it wasn’t working, as a recent report suggests. Among other things, the data indicates that OTAs actually accelerated their share of online bookings AND their share of nights booked, while the data on occupancy rates as a result of direct hotel booking did not show any clear improvement.

So what’s a travel brand to do?

They should remember this: Consumers and businesses have always said that every decision they have ever made was about price. In every industry.

AmericanTowns Media LEXETravel Blog A Race To The Bottom: OTAs and the Travel Industry

Which means it’s also true that for those who are creative, there still remains an extremely valuable position which can outflank the competition – just as there has always been.

To do that, let’s look more closely at the actual role of price in the equation in the travel industry. Vacation planners and business travelers generally have very prescribed budgets. And these budgets provide the starting point for any planning. They are the gateway through which all the rest of the decisions must pass. And why not - price creates the illusion of a decision that is tangible and clear. This hotel is cheaper than that one. This flight is cheaper than that one. Price yourself too high – or too low – and you are not even a part of the selection set as they move forward.

But price is only the gateway of qualification; it is not the final arbiter.

Because no vacation traveler looks back over photographs and thinks “yeah, that wasn’t very fun, but boy, did we get a great price.” No business traveler wants to tell his boss “I don’t know if I closed the deal or not, but at least I saved fifty bucks on the room.”

People plan vacations for memories. That’s the real goal.

AmericanTowns Media LEXETravel Blog A Race To The Bottom: OTAs and the Travel Industry

Business people plan trips to meet business objectives. That’s why they do them. Help each get what they really want, and you will have a competitive advantage – against OTAs and your industry rivals.

How? By positioning yourself as experts on the destinations in ways that OTAs haven't.

By becoming something of a travel guide to the place your potential customer is interested in, savvy hotels and vacation rental brands can create the perception – indeed, the reality – that they are helping planners and travelers actually get more out of their money than they would otherwise. Because, in fact, they are. Because that knowledge is actually perceived as currency.

Or think of it this way; a hotel in a place that is new to you and your family simply meets the most basic needs of shelter. But a hotel that comes with the kinds of insider information, the kinds of knowledge about the location that is uniquely important to you and your family, that transforms that visit into a memory that will last a lifetime – that is ultimately more valuable to you. Because it meets your real goal.

And in this way, information, knowledge and expertise, have a sort of multiplier effect for consumers. The more they believe they can rely on you for making their destination travel better – be they vacationers or business travelers - the more often they will turn to you to provide it to them. Increasing the value of their travel for them, and increasing revenue from those customers for travel industry companies.

Which in turn, gives them a reason to direct book on your site, instead of going through OTAs – moving you away from your competition, and training them to check you first in future.

The question is, of course, how? How can hotel and vacation rental brands provide this information.

LEXETravel by AmericanTowns Media in Travel Blog A Race To The Bottom: OTAs and the Travel Industry

 

Our LEXETravel solution helps travel industry brands transform into travel advisors for potential destination travel customers. With the power of Mass Local, we can put highly localized, highly specific, highly relevant information at the fingertips of your potential customers. All the kinds of things that insiders and locals would know, and that tourists and visitors aspire to. What festivals and events are happening and when. Who’s in town and how to get around. Where the cool club is that everyone will be talking about in six months. Which restaurant just opened that will be impossible to get into before you know it. District by district, neighborhood by neighborhood, block by block.

 

Information that most OTAs don't deliver, and that you can’t deliver if you’re just one more can on their shelf.

Information that fundamentally changes everything. Because you can’t beat someone when you’re fighting their game by their rules.

And they can’t beat you when they’re fighting by yours.

To learn more about LEXETravel, check out our product page or reach out to us!

Mike Raleigh
Mike Raleigh
Vice President, Growth at AmericanTowns Media and a 20 year veteran of multi-discipline marketing. Speaker. Entrepreneur. Dreamer. Passionate about making brands connect with consumers in ways that are mutually beneficial.

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