More and more travel destinations are becoming available to customers around the world. Online Travel Agencies (OTAs) help to make these destinations more accessible to customers, while putting attraction owners on the map, helping them to market their hospitality businesses.
Customers need online travel agencies when planning their holidays or business trips. OTAs can help with the planning process and can also provide inspiration and suggestions based on the customer’s requirements.
For business owners and managers of hotels, B&Bs, airlines, destination experiences, or restaurants as examples, OTAs can help showcase their properties and businesses to an audience who may not have come across their organisations previously. When businesses work with an OTA, it can be a great outlet to attract more customers.
What is an Online Travel Agency?
An online travel agency is an internet-based platform which lists hotels and experiences in given destinations. Online travel agencies specialise in the customer’s holistic experience, i.e how they’ll get from one place to another, which accommodation they’ll be staying at and what they’ll do during their time there.
For hospitality businesses, travel agencies are very useful for getting feet through the door but conversely can also take the stress out of planning a trip for customers. Customers are able to approach them with an idea of what they want their trip to look like, and it’s then the responsibility of the OTA to take the information and put together a package suitable for the customer. If businesses work with an OTA, they can recommend your hotel or business to their customers.
How does an Online Travel Agency work?
Many travellers are turning to online travel agencies when booking trips, especially if they plan on going to countries they’ve never visited before. OTAs act as a reassuring entity for those who want to book travel but aren’t sure of the areas within their desired destination.
An online travel agency can help by recommending certain areas and experiences to customers so that they can relax on their holiday. Typically, online travel agencies follow a type of commission-based model, where they take a percentage of the total after all reservations have been made.
There are three prominent types of business models OTAs follow and each has its own set of benefits for business owners and customers alike with key selling points focussed in different areas of the agency. The most common business models are listed below:
Advertising Business Model
OTAs who earn based on an Advertising business model typically charge hospitality pages per click on their website. For example, a site like TripAdvisor will charge a hotel a set rate every time someone makes a booking, having clicked through the TripAdvisor website.
Hospitality businesses can also negotiate with advertising business model online travel agencies, to have certain appearances on the site. Paid advertising space is usually charged at a premium rate, as they will appear to customers before other organisations who rely on metrics such as customer reviews.
Advertising business models are heavily customer-focused, with great emphasis placed on the opinion of the customer. Anyone who has had an experience with a given hotel can leave a review of their time there.
Agency Business Model
The agency business model is the most common one followed by online travel agencies. This model calls for purely commission-based earnings, where a percentage of the total is taken by the OTA once all the finalised reservations have been made on the customer’s behalf, through the agency.
Businesses that work with online travel agencies who follow the Agency model, are often incorporated into promotional packages offered by the given agency. For example, an OTA using this model will list a hotel, a hospitality option, and flights as a complete package, offering paying customers discounted rates compared to if they were to book accommodation and flights separately.
When it comes to marketing their businesses, these types of OTAs will often rank higher on search engine results than the hotel or other accommodation options at the given destination due to the amount of advertising power the agency has versus the agency.
Merchant Business Model
An OTA that operated under the merchant business model sells hotel rooms, flights and experiences on behalf of the hospitality business. For example, Expedia purchases hotel rooms upfront and sells them at a slightly higher rate to make a profit off the booking.
Models like these help customers find what they are looking for on one platform instead of putting together their own itinerary and pulling together bookings from different websites. From a business perspective, the model works for hospitality establishments as it gives them more exposure in the overall industry versus advertising on their own. The model has similar perks to the advertising model but provides the additional benefit of allowing the hotel or airline to get paid for their service in advance.
Why should you work with an Online Travel Agency (OTA)?
Any business that operates within the hospitality space should consider working with an OTA as there are several benefits associated with these business relationships. When working with an online travel agency, businesses can:
- sell accommodation services at a lower cost.
- reduce the amount they spend on advertising and marketing.
- reduce time spent on reviewing customer satisfaction as this is done by the OTA.
- adjust amenities and pricing based on competitors and gain valuable insights into customer comparison.
Customers are also drawn to booking with OTAs given how easy it is for them to compare costs and facilities on OTA websites. Ease of planning and comparison is a massive plus for those planning holidays or business trips.
Things to consider when choosing an Online Travel Agency
Having looked at the models used by online travel agencies, businesses need to consider which model will work best for them. For businesses to form a functional business relationship with an OTA, they need to consider what is needed out of the relationship. For example, if a business needs more exposure in advertising or testimonials based on previous customer experience, it may want to consider forming a relationship with an OTA operating under the advertising business model.
Merchant and agency models are better suited to those businesses looking to get feet through the door or who need cash in the bank fast. When using this approach, businesses will also need to choose an online travel agency that’s well-established with good SEO rankings.