Suppliers Build Lead Over OTAs in Online Sales

Traditional travel agents once identified OTAs such as Expedia as a primary threat, but recent findings from PhoCusWright confirm that the bigger online threat comes from supplier websites.

The threat may be more consequential for OTAs than for traditional agents however.

While growth in online bookings as a percentage of the U.S. travel market has slowed considerably, supplier websites continue to build their lead over online intermediaries.

According to PhoCusWright’s U.S. Online Travel Overview, 13th Edition, supplier websites are increasing their dominance over OTAs in every segment but cruise. (See related story.)

In 2012, supplier websites accounted for 64% of online sales – compared to 36% for OTAs; supplier sites are expected to account for 66% in 2015.

Favorable factors
“The slow economic recovery, paired with high pricing – particularly in the air and hotel sectors – favors suppliers,” PCW stated.

The trend is especially pronounced in the airline segment. Airlines’ gross bookings via their own websites are expected to increase from 73% in 2012 to 76% in 2013, while OTAs will see a 7% decline in air sales.

Among factors driving the trend are improvements in supplier websites that have created a better online shopping experience for consumers.

Better websites
PhoCusWright noted suppliers’ investment in functionality and displays, stating that supplier sites “are doing a better job of keeping up with OTAs technically.”

In the airline segment, airline websites “provide access to more complete information and offerings, specifically regarding ancillary options, than OTAs,” according to the report.

PCW also noted the addition of more reviews, maps and destination information on hotel websites.

Another factor favoring supplier websites over OTAs is consumers’ growing comfort with online search, allowing them to shop around for the best prices then book directly with specific suppliers.

Slower pace
Overall, growth in online bookings – as well as in the overall U.S. travel market – is expected to continue during the next few years, albeit at a slower pace, PCW predicted.

Growth in online channels will outpace the overall market, with an 8% gain in online leisure and unmanaged business travel bookings in 2012. Growth of about 6% is projected for each year through 2015.

But the shift from offline to online channels has slowed. Online channels are predicted to increase their share of U.S. travel bookings only by about one percentage point per year. The share of online travel bookings is predicted to climb from 41% in 2012 to 43% in 2015.

Hotel is the only online travel segment to grow by double digits during 2012 and 2013. In 2013, online share will reach one-third of all room revenue.

Mobile is hot
Meanwhile mobile bookings doubled in 2012 and are projected to double again in 2013. Led by gains in the hotel segment, mobile (including tablets) is expected to account for a quarter of all online bookings by 2015.