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Online Agents Challenge SuppliersFebruary 24, 2011 By: George Dooley
Hotel chains and airline websites lost ground versus online travel agencies (OTAs) in the first half of 2010, according to a new report from the travel industry authority PhoCusWright Inc. conducted in partnership with Compete Inc. The supplier share of unique monthly hotel and air bookers declined, as online travel agencies benefited from price-conscious comparison shoppers, Phocis Wright reports.
Hotel websites generally commanded 67 percent to 72 percent of monthly online hotel bookings in 2008-2009 (OTAs represented the balance at 33 percent to 28 percent). In 2Q10, however, hotel website share dropped substantially to 57 percent to 69 percent. A less dramatic shift to the online travel agency channel was also seen among air bookers.
Both traffic and conversion played a roll in the share shift, PhoCusWright says. Although supplier websites and OTAs attracted fewer visitors in 2Q10 versus 2009, supplier category visitors declined more than OTA shoppers. Supplier conversion rate losses played an even greater role.
While supplier websites have historically been able to drive substantially higher conversion rates than OTAs across products, an overarching trend has appeared over the past few years: OTA conversion has improved while supplier conversion has declined. For example, airline website conversion dropped from 12 percent in 2Q08 to 10 percent in 2Q10. In contrast, OTA conversion for air grew from 7 percent in 2Q08 to 8 percent in 2Q10.
"The drop in conversion rates among airline and hotel websites was likely the result of supplier-driven price increases," said Carroll Rheem, director of research at PhoCusWright. "The return of corporate travel prompted suppliers to raise rates, but it appears that leisure consumers were not so ready to pay those higher prices, and online travel agencies reaped the benefits of their sensitivity."
Although 2010 brought increased revenue across airline and hotel products, traffic to most transactional categories declined. Traffic is expected to increase in 2011 as leisure travel rebounds, and suppliers will have to play a careful balancing act to regain lost share while raising prices.
PhoCusWright and Compete Inc. partnered to measure and track the increasingly complex flow of Web traffic and bookings. PhoCusWright's Online Traffic and Conversion Report Second Edition studies two critical online consumer-behavior metrics: traffic (monthly unique visitors) and conversion (the percentage of monthly unique visitors who complete a transaction).
Using these metrics, the report analyzes major categories within the travel vertical, including both transactional and nontransactional sites. Individual products, such as air, hotel and car rental, are tracked to explore the dynamic between supplier sites and OTAs, as well as how nontransactional sites, such as deal publishers and review sites, affect conversion.