Online Travel Agencies, commonly referred to as OTAs, play a central role in how travellers discover, compare, and book accommodations, tours, and experiences. If you’re a business in the travel and tourism sector you’ve probably considered partnering with online travel agencies in an effort to boost your revenue. In this blog, we’ll explore the advantages and disadvantages of working with online travel agencies so you can make an informed decision about whether it’s the right choice for your business.
What is an Online Travel Agency?
An OTA is a digital platform that facilitates the booking and purchase of travel-related services such as flights, hotels, car rentals, vacation packages, tours, and more. Put simply, they are an intermediary between customers and travel suppliers, offering a centralized platform for travellers to search, compare, and book travel services online.
Well known examples of OTAs include Booking.com, Expedia, Airbnb, and Viator. These platforms invest heavily in marketing, search visibility, and user experience, which is why they frequently appear at the top of travel related search results.
How Do Online Travel Agencies Work?
At a foundational level, OTAs connect travel businesses to travellers through centralized booking systems. Travel providers upload availability, pricing, imagery, and policies to the OTA platform.
Many large OTAs are connected to Global Distribution Systems, or GDS platforms. GDS technology allows OTAs and traditional travel agents to access real time inventory from hotels, airlines, and tour operators at scale. This infrastructure enables OTAs to display accurate pricing and availability across thousands of suppliers while offering travellers a seamless booking experience across multiple destinations and providers.
5 Advantages of Working with Online Travel Agencies
Working with OTAs can provide several advantages for businesses in the travel and tourism industry. Here are the top five advantages:
1. Increased Brand Awareness
For smaller hotels or tour operators without large marketing budgets, OTAs can function as an additional discovery channel. Partnering with OTAs allows businesses to tap into their vast user base and reach a wider audience. Listing your business on popular OTAs such as Expedia or Booking.com may significantly increase your brand visibility and awareness among potential customers who may not have discovered your business otherwise.
2. Lower Cost of Operations
OTAs can handle various aspects of the reservation process, including managing bookings, handling returns or exchanges, and customer support. From a customer perspective, this convenience can increase conversion rates, particularly for travellers who prefer to compare multiple options in one place before making a decision. By offloading these operational tasks, businesses can reduce their internal workload and operational costs, allowing them to focus on other core areas of their operations.
3. Access to a Wider Customer Base
OTAs often cater to a diverse range of travelers, attracting customers of various demographics, regions, and preferences. By partnering with OTAs, businesses gain access to this extensive customer base, exposing their offerings to a broader audience and increasing the chances of attracting new customers who align with their target market.
4. Ability to Leverage Their Marketing Budgets
OTAs often have substantial marketing budgets to promote their platform and offerings listed on their site. By partnering with OTAs, businesses can benefit from this marketing power and leverage their advertising campaigns, reaching a larger audience and gaining exposure that may be challenging to achieve independently.
5. Simplified Bookings Process
OTAs typically provide user-friendly platforms that allow customers to browse, compare, and book various travel services seamlessly. By integrating your offerings into an OTA’s booking system, you can provide a hassle-free experience for customers, leading to increased bookings and customer satisfaction.
5 Disadvantages of Working with Online Travel Agencies
While there are several advantages to working with OTAs, there are also some drawbacks that travel and tourism businesses need to consider:
1. Lack of Direct Client Relationship
Since the OTA acts as an intermediary between the business and the customer, it can be challenging to establish a direct line of communication and build a personalized connection with clients, potentially limiting opportunities for upselling or personalized service.
2. Brand Dilution and Loss of Customer Ownership
By listing offerings on OTAs, businesses risk diluting their brand identity and losing ownership of the customer experience. Customers may perceive the services as being solely associated with the OTA rather than recognizing the business behind it. This can weaken the business’s unique selling proposition and diminish the opportunity to foster long-term customer loyalty.
3. Commission Fees
Working with OTAs typically involves paying commission fees for each booking or transaction facilitated through their platform. Commission rates vary by platform and category but often range from 15 to 30 percent. These fees can eat into the business’s profit margins and impact overall revenue. Therefore, the costs associated with commissions should be carefully considered and factored into your business’s financial calculations.
4. Limited Customization and Branding
Online travel agencies often have standardized templates and formats for presenting travel offerings, limiting the level of customization and branding that businesses can apply. This can restrict the business’s ability to showcase its unique features, highlight its value proposition, or differentiate itself from competitors on the OTA platform.
5. Dependency on Third-Party Platforms
Relying heavily on online travel agencies for bookings and customer acquisition can create a dependency on third-party platforms. While OTAs provide valuable exposure, businesses risk losing control over their distribution channels as any changes or disruptions in the policies, algorithms, or availability of the OTA platform could directly impact the business’s visibility and revenue. Diversification across channels is critical to reduce this dependency and maintain control over long term growth.
OTA vs. Direct Booking: Which Is Better?
OTAs and direct booking channels serve different purposes and perform best when used together strategically.
Direct bookings typically offer higher margins, stronger brand control, and better access to customer data. OTAs, on the other hand, excel at discovery and capturing high intent travellers who are still comparing options.
For many travel businesses, the most effective approach is a hybrid model that uses OTAs for visibility and demand generation while investing in SEO and paid search to grow direct bookings over time.
When Do Online Travel Agencies Make Sense?
OTAs tend to be most valuable in the following scenarios:
- Launching a new property or experience
- Entering new geographic or international markets
- Filling last minute availability or low season inventory
- Supporting visibility while direct booking channels mature
Should You Work with Online Travel Agencies?
Deciding whether or not to work with OTAs is a strategic decision that requires careful consideration. While working with OTAs can expand your reach and boost your bookings, that doesn’t mean you should neglect your marketing efforts of generating direct bookings.
At Foundery, we specialize in driving direct bookings for our clients in the travel and tourism industry. Our marketing campaigns can complement your OTA program or replace them. Contact us today to discover how our comprehensive digital marketing services can support your business goals and ensure a successful online presence.
Want to drive direct bookings for your travel & tourism business?
