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Why do travelers prefer booking with OTAs?
The latest report by Phocuswright, “Channel Surfing: Where Consumers Shop for Travel Online,” reveals that leisure tourism is growing around the world. In China, greater financial freedom among a burgeoning middle class has seen a boom in traveler numbers, while the amount of adults traveling in established markets is also increasing since the economic downturn of 2009.
More and more consumers are also booking online. By 2017, it’s predicted that online will account for 37% of all bookings in Asia Pacific, 45% in the U.S., and 52% in Europe. But the channels and devices customers are using to research and book their plans differs around the world, influenced by economic factors, cultural norms and the technology at their disposal. The Phocuswright report also highlights another significant trend: in each of the global marketplaces covered, the vast majority of customers prefer booking with OTAs instead of supplier websites.
In developed markets, between 61-75% of customers used an OTA to shop for hotels and accommodation, but just 15-44% visited a hotel website. In emerging markets the gap is greater still. In China, for instance, 9 out of 10 online shoppers used OTAs, but less than 4 out of 10 used hotel websites. While the reasons for this vary between regions, there are also key trends that specifically reveal why hotels are losing out.
Why are hotels losing out to OTAs?
One of the reasons OTAs are preferred comes down to content aggregation: they allow customers to compare lots of products based on price, availability and guest reviews all in one place. But that’s far from the full story. When diving into specifics, the Phocuswright report identifies 10 fundamental reasons that travelers choose to book through OTAs over supplier sites.
The survey shows the top 10 reasons that travelers use OTAs, and although perception of lower price is one of them, it’s surprisingly NOT the top reason. Let’s break down some of these reasons, and how hotels can use them to win travelers back.
“The website is easy to use”
OTAs have become the masters of user experience, orientating themselves towards an increasingly tech-savvy customer. It’s an investment that’s clearly paid off: a huge 47% of customers stated that they like OTAs because the websites were easy to use.
OTAs have invested heavily in conversion-orientated websites to give customers everything they need to make a booking decision efficiently and with confidence. As mobile usage has grown, OTAs have invested in dedicated apps and created an optimized experience across all devices, enabling users to easily browse and book a hotel room anywhere, any time.
How hotels can win travelers back:
Far from requiring vast budgets, hotels can make their own websites easier to use by focusing on a few key principles of user experience.
Easy navigation: A website should feature clear navigation tools so customers can easily locate the information they need from anywhere on the site. If navigation tools are oddly positioned, hard to see, or absent from pages outside of the homepage, customers will quickly get frustrated and potentially leave the site.
Minimal options: Studies have shown that too much choice can overwhelm customers and damage conversion rates. Instead of displaying all possible room options and rates in one view, hotels should split the decision-making process into multiple steps, allowing customers to choose a room before offering the various room rates and add-ons.
Mobile-friendly: A mobile-friendly website allows customers to enjoy a seamless transition between devices, making for a much more satisfying user experience. As well as optimizing text and images for a smaller screen, mobile-friendly sites are easier to navigate and benefit from faster load times.
Simplified booking process: When it comes to the point of purchase, simplicity is crucial. In the case of Expedia, customers only need to fill in their name, email and credit card details to complete the booking. By simplifying forms at the checkout, hotels can also eliminate unnecessary friction that can lead to cart abandonment.
“Online travel agencies typically have the best prices.”
While price wasn’t the biggest influencer, a hefty 30% of OTA bookers said they preferred OTAs because they felt they had lower rates. Leisure travelers are even more convinced of this fact. In the U.S., almost 50% of all leisure travelers agreed OTAs have better prices than supplier websites, while just 15% disagreed with this suggestion.
So why does this perception persist? The Phocuswright report partly attributes it to the way customers use OTAs to compare similar products (such as “4-star hotels in Paris”) to find the lowest comparable price. The nature of this search may lead to assumptions that, overall, OTAs have the best rates.
Also of note is the way that major hotel booking sites showcase prices, often using bright colors and fonts to create the illusion of a good deal. In the example shown below, though the OTA price is in complete parity with the hotel website’s price, the use of the crossed-out “original” price and notation that the room is “-43% off today” lends to the perception that the consumer is getting a huge deal.
How hotels can win travelers back:
Price parity legislation in the U.S. prevents hotels from undercutting OTAs on price, but certain brands have found ways around this. Marriott’s “It Pays To Book Direct” campaign and Hilton Worldwide’s “Stop Clicking Around” campaign both announced that loyalty members could get the lowest rates by booking direct with the hotel.
Clearly, not all hotels can leverage huge loyalty programs to attract direct bookings, but there are other ways to deliver added value, such as offering package deals and other incentives on the hotel website, such as offering free Wifi for booking direct.
That said, hotels also need to persuade customers that they can be more competitive on the price of the room alone. The rise of comparison tools such as Kayak and Trivago have helped educate consumers to this fact by aggregating prices from OTA and supplier websites. A number of hotels are now integrating price checking tools into their own websites, displaying OTA rates alongside their own. This integration means customers don’t need to leave the hotel website to price shop elsewhere, and it’s an approach that shows potential. By catering to the way customers shop online and offering price transparency and even automatic rate matching, hotels can begin to overcome a significant cause of lost direct bookings.
“I trust this brand.”
OTAs have become an important part of the travel research process, and this isn’t going to change anytime soon. As also stated in the survey, many travelers have simply become “used to booking travel this way.” Ultimately, OTAs are going to always play some role in a hotel’s distribution mix—the question is simply how much. OTAs have been incredibly useful for helping hotels reach new international markets and get business where they otherwise might not have. But are they also capturing bookings that the hotel would have otherwise gotten on their own?
How hotels can win travelers back:
Hotels need to win consumer trust by building up their own online reputation. In addition to having a website built on solid SEO principles, hotels will also need to cultivate and manage online reviews from guests, maintain their Google Business Listing, engage with fans on social media accounts, and invest in a solid digital advertising strategy that captures travelers that are ready to book your hotel.
Secondly, hotels need to ensure they get all repeat business from OTA guests. Because OTAs are notoriously protective of customer data, it’s important that hotels make every effort to capture guest information and build a relationship with them directly during and after the stay.
By gaining a customer’s email address, a hotel can establish an ongoing direct marketing relationship. This presents the opportunity to stay in touch with a past guest throughout the year, using email marketing to maintain brand awareness and incentivizing repeat bookings through targeted offers and promotions.
A shift in momentum
Around the globe, the hotel industry has seen market share eroded by OTAs in the direct booking space. As online bookings have continued to grow, OTAs have surged ahead by offering superior user experience, earning brand loyalty, and creating a perception they have the lowest prices. All of this has led to a culture of habitual bookers who see OTAs as the first option in their travel search.
While there are no quick fixes, addressing some of the areas highlighted in this article could see a shift in momentum. Changing the browsing and booking habits of travelers may take time, but as OTAs continue to attract a growing number of online shoppers, it’s clear that the time to act is now.
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8 thoughts on “Why do travelers prefer booking with OTAs?”
Great article Gautam! We constantly see the metasearch channels using their own assisted booking models (i.e. TripAdvisor Instant Book) to help increase booking conversion rates. Aside from being mobile optimized, they all consistently employ a “Click, Click, Book” methodology that is often more efficient than the hotel’s own website.
Thanks Dean. That “Click, Click, Book” methodology was one of the driving principles in our creation of the booking engine for Stratosphere Hotel, which we modeled off many aspects of Expedia’s booking model. Since launching that booking engine, we were able to help them double their conversion rate in a matter of months.
I chocked when reading: “Online travel agencies typically have the best prices”! This shows that people either have not the patience or savvy to find better prices than what OTAs offer which force the hotel to have higher rates than they wish to in order to pay exorbitant booking commissions to the OTA. I have NEVER booked via an OTA and always able to obtain a better price…private hotels are best for this. Also hotels are to partly to blame for allowing OTAs to dominate as they (or their GMs) are too lazy to make their sites more user friendly.
We agree, it’s a terrible misconception that OTAs have better prices than the hotel website itself. In most cases, they do not—the prices are in parity as they should be. But even so, we have known some unscrupulous OTAs to lower the price by a few bucks on their end, breaking rate parity even though it’s against their contract. Hotels usually don’t have the manpower or technology to catch such violations. That’s why we always recommend hotels use price checking tools such as Rate Match on their sites to catch such issues.
You nailed it. Wish the hotels would get it. Time. We can go to an OTA and say what we want and get a price for it. Go to a major hotel website and they want to add on dinner, maybe a show. If you book this day instead of that day you get this rate. Have a code? Here is another discount. No, I just want to know bottom line what it will cost to stay from Monday to Wednesday for two people!
Here in Las Vegas, the hotels have found a new way to be greedy and underhanded, meaning a another reason to avoid doing direct business with them. Resort fees. You want to screw me on hidden resort fees? I will let you pay high commission to Expedia.