The boundaries between different business models, such as reservation centers and metasearch engines, are disappearing and are now becoming less visible. In fact there are online agencies that offer the consumer in their searches the offers of other OTAs, in order to take advantage, although in the end they are booking in the competition. The models are converging to have the maximum information of a consumer to identify their needs and offer them the required product or service.
In this fight, Google has clear advantages, but also giants such as Amazon and, most recently, Airbnb, are competing for the same goal: having the most information about the customer.
The metasearch business model has for several years been one of the most lucrative in the tourism industry.
A report from the London School of Economics indicates that the power and size of the major hybrid travel search engines-online travel agencies with global brands and metasearch capabilities, is likely to continue growing. Therefore, their influence on the distribution chain will increase because they can negotiate better contents and conditions while still receiving commissions.
In 2012 Priceline acquired Kayak for 1.4 billion euros and Expedia took control of Trivago for 477 million. New transactions have recently been added, such as Skycanner and Momondo. Time has passed, but the results leave no doubt: it was a good investment decision. These companies maintain a great potential for growth.
The Trivago case is important to analyze it. It has become the fastest growing business for Expedia, having reached a pace of increase of 46% in sales , compared to the average of 21% maintained by all the group’s OTAs. In this matter, Expedia announced last November its intention to bring the meta search engine to the stock exchange with an initial public offering of shares for more than 400 million dollars, although the main company will maintain its participation in the organization.
Path to the market concentration
According to a report prepared by the UK consulting firm Dealroom.co, after a consolidation time, Priceline and Expedia now own 60% of the online travel agency (OTA’s) market worldwide. That is about 13% of the total reserves in the channel set. The remaining 40% of the OTA’s market is highly fragmented, based on regional online agencies and metasearch engines. In this last case, this is a growing sector for both flights and hotels, and are surpassing regional OTA’s.
Graham Floater, a travel industry specialist, commented that the growth of online travel retailers is led by the consolidation of the largest OTA’s, with global players such as Expedia and Priceline, and other OTA’s focused on specific regions or markets such as MakeMyTrip in India, Ctrip in China and Travelstar in South Africa.
“The travel agency market today is already less fragmented than in the past with two or three big players. However, there has been less movement within the TMC’s (Travel Management Companies); some experts believe that the TMC’s will continue to consolidate in the near future”, mentioned Floater.
Floater also believes that we must prepare for the growth of “hybrid meta-OTA giants” because “the size and power of online agencies with metasearch capabilities and global brands seems to grow.” As a consequence, “its influence will have a profound effect on the distribution chain, with the ability to negotiate better content and conditions, while continuing to receive commissions.”
Online agencies could offer a variety of distribution methods for consumers to choose from, including meta-mode referrals to full-service websites from different providers. The traveler could book directly with the supplier, with simultaneous variations in price and fidelity rewards.
The presence of the giant Google
At the same time, Google’s entry into metasearch is also another form of industry consolidation. Google has traditionally been a gatekeeper, such as Facebook and Apple. Since it is responsible for providing a powerful search engine for many consumers. However, the specific function of Google Flights, for example, is a direct competition with other metasearch companies and we must carefully observe the evolution of this popular tool.
Data to keep in mind
In this context, some actors try to move ahead of the consumer habits. For example, Expedia has launched a usability lab. The idea is to apply techniques to understand consumer behavior in order to optimize their app and website.
A survey by Expedia revealed that the pressure of planning a travel affects more than three-quarters of their users. And it causes the same anxiety as a traffic jam. In addition, almost two-quarters of travelers believe that the internet has made the reservation more confusing, due to the wide offer.
In the other hand, a TripAdvisor survey indicates some differences in behavior between consumers who book flights and those who book hotels. The first users choose the destination in the first place and make longer trips, those who book hotels keep the price as a determining factor when choosing.