Today we want to pass on trend number two from Innwise’s e-book on the 10 Trends in Hotel Distribution.
The new ecosystem has led to significant changes among the main players. The dominance of wholesalers has disappeared, the group that for years had assumed the main role in dealing with the end user. The retail agencies have lost their value, hurt by the emergence of the Online Travel Agencies (OTAs) and the facility for direct commerce offered by the Internet.
The initial rise of various search and meta-search engines has given way to Google’s consolidation of its position as the main generator of traffic. The overwhelming dominance of Google, however, has triggered worries among advertisers, as their marketing budgets are increasingly committed to it.
Yet if the search and meta-search engines as well as the Web sites specialized in travel, such as TripAdvisor, promote or make it possible to make reservations directly though the hotel, they no longer involve a real cost to the hotel, which we will analyze further on.
To understand the magnitude of the business managed by Google, it is enough to point out that in 2011 the global tourist sector contributed around $2.4 billion to its results, with Booking.com and Expedia leading the list of largest advertisers.
The cost of the go-between
The immense expenditures of the main OTAs on Google affects hoteliers on two sides of their business:
- They greatly increase the keyword costs associated with the product, making search-engine marketing (SEM) campaigns less profitable and favoring the direct channel.
- The large search-engine marketing budgets are financed through commissions charged to the hotels.
The inflationary spiral of the cost per click caused largely by the demand of the main OTAs and by the opacity of the bidding system itself combine to force the sector to reconsider the long-term strategy of search-engine marketing.
In Search of the Comprehensive Experience
The main players in this new scenario are looking for a way to integrate all the elements of traveling: to inspire, plan, buy and share the experience.
The consolidation of these new players and their respective business models brings certain risks but also opens up new opportunities for the sector:
- Apart from the OTAs, all bring the client closer to the provider
- They award greater visibility and prominence to the brand/product
- They favor direct communication with the client and promote transparency (prices, quality)
- They raise the bar with respect to service and client satisfaction.