Revenue Management @en

The Intermediaries Get Away From Intermediating

14 comments

25 June 2012 at 10:00, by

Reflection

Inverse shadow. Pinterest

Google is becoming the enemy that the Online Travel Agencies (OTAs) most need to defeat. It’s a nuisance that someone is acting as an intermediary to the intermediaries…even though it is what they sell to the hotels.  We can join it with the steps Google has been taking lately with respect to tourism (this and this, prompted by the purchase of ITA), although I believe it is no more than a natural step in the maturation of the digital society.  It’s an evolution of the model that will go forward inexorably.  We are still in the process of moving from funnels to platforms, of heading towards a liquid tourism.

In this progession, Google – thanks to the monopoly of its ecosystem as “gateway” to the Internet – is turning into the first platform capable of creating and distributing product through distributed networks…and without the need to sell since many “read” fear. And this will involve new dynamics that can make the current model of OTAs obsolete in the coming years. A strategy of distributed networks (with the risk that it is developed on a single monopolistic platform, but that is the new reality) strengthens agile individual nodes, or connecting points: it strengthens the hotels’ own brands, the brand.com.  And this is where Google is hinging its tourist strategy: facilitating an abundance of individual nodes only reinforces its position as the only platform.

The OTAs are now getting the same medicine they gave to the travel agencies (AAVV), nearly 10 years after their birth: either they mutate into a new model or another intermediary better adapted to the current digital dynamics will take their place as the center of the tourism distribution universe.

There is more to say here, but I would like to emphasize two points to make clear the decline of the current OTA model.

  • Margin pressure and the total dependency on the highway where they move (Google Adwords is the “legal heroin” of the OTA model) to really reach clients: the OTAs have based their model on their ability to buy from Google traffic, creating a vicious inflationary spiral that has already begun to be unsustainable.  Consequently, the OTAS have little room for alternative moves.
  • The fact of not seeing that the digital dynamic moves from the funnel to the platform has led them to construct their entire model – giving it the wings, financing and capacity to become the ecosystem by default” – on top of the platform that is really the current principal intermediary of the digital society, whose value grows to the degree that it has more and more nodes. This is exactly the opposite desired by the OTAS, which look to scarcity to gather and eliminate these nodes. Google had only to wait until the digital society matures while others did their work for them.

And now the OTAs are in a hurry. And haste is not the best guide for moving in a fast-paced environment where what seems right in the short term is precisely the worst thing for the long term, often converting decisions into a mad rush towards the precipice.

But it is also an opportunity for hotels to strengthen their direct channel strategies, taking advantage of the openings left by these movements. Agility and vision are the best allies for building and strengthening the brand.com channels across the digital platform. This is what Google wants. It is what the intermediaries of the digital society want: the value of intermediation lies not in scarcity, but in abundance.

If we think that the model online product of the digital society is what we see, we are mistaken: I believe that this has only just begun. We have not seen anything yet as to the true digital dynamics, we simply intuit what they are, because we still continue evolving and breaking through inertia and resistance… When these finish, we will see another ecosystem: we will see liquid tourism.

Idiso Digital

Idiso Digital

Marketing & Distribution Services

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