Booking hotels via online travel agencies (OTA) has become insanely popular the past decade. While I was travelling through South-East Asia I have used the Booking.com mobile application a lot to ensure a stay in a great accommodation in every place I have visited. OTAs are year on year increasing their customer base as much as their volume of business. Customers do not even think about booking directly on a hotel’s website and just use the services of OTAs. However, it is important to highlight that this trend is not experienced by all OTAs in equal measure, as Booking.com customer base overshadows that of other OTAs.
What are OTAs doing better than hoteliers in order to get more sales?
The main tactic that OTAs have adopted to achieve their success over hotels are: winning new customers and maintain them. To obtain new customers, OTAs have to take three key factors into account.
First, is the factor of family and friends recommendations (positive Word of Mouth). A study by the New York Times examines the motivation that push people to recommend online services and the main reason behind this is to maintain, improve and nurture our relationships. Even if people do not feel the tendency to share their positive experiences, OTAs can introduce a so-called ‘social proof’, for example ‘’91% customers rate Expedia with 5 stars’’, that serves as a reference for potential users.
Second, personalized offers are tailored by the OTA. The ultimate goal is to provide a minimum amount of offers to the proposed customer, and at the same time, increase their relevancy. Therefore it is not only necessary to collect and analyse huge amount of data but also to collect users’ private information in order to feed the algorithms that are becoming more and more sophisticated.
Lastly, first time buyer offers via mobile application or desktop. In this way OTAs try to encourage new customers to purchase their offer. However, OTAs have to take into account that these offers have usually a limited ‘loyalty effect’ due to the fact that customers are not likely to repeatedly buy trips within a short time-frame.
But what does Booking.com differently than other OTAs?
With a million bookings per day Booking.com is one of the largest OTAs worldwide. With Expedia, Trivago and Hotels.com as major competition considered, what does Booking.com differently that it is able to improve their customerbase? First, Booking.com was the first OTA to apply the agency model unlike the merchant model most of the OTAs use. The set up most of us are familiar with is the merchant model, in this model OTAs contract with accommodations to get a block of rooms at a negotiated wholesale rate. Then they mark the price back up and resell it to customers, whom have to pay for that room upfront. But, Booking.com uses the agency model, in this model Booking.com simply gets a commission from the hotel, and does not charge the customer anything in advance, the customer can pay for the room when checking out and they even give you the chance to cancel for free.
This model is much more appreciated due to the fact that customers do not feel ‘binded’ by paying in advance. Second, Booking.com heavily engage in Search Engine Marketing. Consider that Booking.com’s AdWords sponsored links ofter appear at the top of Google pages because of their bid prices and quality scores, and then there are all kinds of features on its hotel pages to entice conversions. You will recognize all the different messages Booking.com is showing you to trigger conversion on their page, for example: ‘’It’s busy in Paris on the selected dates, so prices might be higher than normal’’ or ‘’Latest booking 35 minutes ago’’. You can go on and on considering the ways Booking.com turns lookers into bookers on its hotel pages, all over the web and mobile you will see OTAs imitating Booking.com conversion techniques.
The only question is whether it’s too little, too late? What do you think?
Sources:
http://www.nytimes.com/2012/01/12/fashion/aggressive-salesclerks-push-shoppers-to-the-web.html?_r=0
https://www.tnooz.com/article/consumers-prefer-online-travel-agencies/
https://skift.com/2012/06/25/how-booking-com-conquered-world/
Hi Alex,
Thank you for your post.
Indeed, the popularity of Booking.com is unmatched by any other OTAs.
However, Booking.com uses both the agency model and the merchant model. For certain hotels (generally the most popular destinations), Booking.com buys blocks of rooms and then resells it as an agency. That’s the reason why sometimes they offer unmatched prices that even the hotel itself is unable to compete with. Moreover they have their own room availability. However, for other hotels, they indeed just work on commission.
In my opinion, the hotels can still improve their online presence and reclaim some of the sales from Booking.com.
But for that they need to have a great looking website, with a user-friendly interface, that is optimised for mobile devices as well (as the Booking.com’s website is). I believe that if the hotels can offer the same prices and/or deals that the guests can get from the Booking.com, many will choose to book directly with the hotel as they would view this as more trustworthy. Moreover, as the mobile devices are an inseparable part of our everyday lives, the hotels need to have their booking engines optimised and compatible for various devices and platforms. Marketing research suggests that over 50% of digital hotel reservations are made through mobile devices, especially the last-minute reservations. Therefore the hotels should not overlook this channel. And lastly, the hotels with active presence on social platforms will help promote hotel’s brand. In case the guests have questions about the property or their (prospective) booking, enabling contact through social media will increase the chances of them booking directly via hotel.
P. S. – My family owns travel agencies, so I also know the “disrupting” effect Booking.com has on the brick and mortar travel agents.