Online Travel Agencies More Than A Distr PDF

PhoCusWright White Paper
Online Travel Agencies: More

Than a Distribution Channel
Written and Researched by

Bill Carroll and Lorraine Sileo
PhoCusWright
MARKET RESEARCH • INDUSTRY INTELLIGENCE
PhoCusWright White Paper:
Online Travel Agencies: More Than a Distribution Channel September 2014
This research made possible by Expedia Lodging Partner Services.
©2014 PhoCusWright Inc. All Rights Reserved. Page 2

About PhoCusWright
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www.phocuswright.com

JANUARY 2013
Contents
Table of Contents Table of Charts
Purpose of White Paper 5 Figure 1 7 Figure 9 11
Online Travel Penetration Websites/Apps Used to
The OTA Proposition 5 by Region, 2011-2015 View Traveler-Submitted
Ratings and Reviews for
From Perception Figure 2 8 the U.S
to Reality 6 OTA and Total Market
Growth Figure 10 12
OTAs Have Global OTA Real Time Traveler
Reach and Influence 6 Figure 3 8 Assistance
OTA Market vs. Total
Travel Market (US$B) Figure 11 13
OTAs Provide the by Region, 2013
Services that Hotel Loyalty Incidence
Consumers Want 10 Figure 4 9 Figure 12 14
How We Access the Internet Influence of Hotel
OTAs Fill the Gaps 11 is Rapidly Changing Loyalty Membership on
Supplier Selection
OTAs Go Beyond Figure 5 9
Distribution 15 Mobile Bookings as a Figure 13 14
Share of Online Bookings Factors Influencing
Conclusion 18 by Region, 2013 vs. 2015 Last Hotel Decision
Figure 6 10 Figure 14 15
Appendix A 19 U.S. OTA Mobile Bookings, Typical Purchase Methods
2012-2015 (US$B) for Lodging, by Age
Appendix B 20
Figure 7 10
Websites/Apps Used to
View Traveler-Submitted
Ratings/Reviews, 2013
Figure 8 11
Typical Purchase Method
for Lodging, U.S.

Online Travel Agencies:

More Than a Distribution Channel
Written and Researched by Bill Carroll and Lorraine Sileo

Online travel agencies (OTAs) have been both coveted and criticized since they
rose to prominence in the early 2000s. Representing 13% of global travel gross
bookings and growing at 12% annually, OTAs play a pivotal and expanding role in
the travel landscape. However, in a climate where suppliers are pushing their direct
distribution, OTAs can be seen as just another intermediary in the value chain. This
view overlooks the value of OTAs, which goes beyond assisting with the sale of
excess inventory during soft demand. OTAs offer suppliers unprecedented reach
around the globe and are a valuable marketing tool. As a result many hotel suppli-
ers have built a symbiotic relationship with OTAs, benefiting from their influence
while managing their own direct distribution as well.
Purpose of White Paper

The purpose of this paper is to explain the role of OTAs in the travel landscape as a
significant and effective marketing and distribution channel. It specifically supports
OTA value at broadening reach and attracting new customers including interna-
tional guests to hotel properties and encourages hoteliers to effectively use OTAs
as an integral part of their marketing and distribution strategies. The paper applies
current research from PhoCusWright and academic studies to support these per-
spectives.
The OTA Proposition

OTAs provide a trusted and effective platform for consumers to dream, shop and
buy travel, and share information about their experiences. Their reach includes
websites, mobile sites and apps, and call centers. In some cases they also own
metasearch companies (Expedia-Trivago, Priceline-Kayak, Odigeo-Liligo).
Online travel agencies play a pivotal role in travel distribution. With gross book-
ings exceeding $150 billion in 2013, OTAs now represent 38% of the global online
market and 13% of the total market. In the U.S., OTAs have a 15% market share
and gross bookings are expected to jump 5-6% annually over the next two years,
rates that exceed overall travel market growth. Their influence in accommodations

continues to spread. OTAs were responsible for nearly $19 billion in hotel gross
bookings in the U.S. in 2013, representing 15% of total hotel sales.
A variety of OTA brands serve multiple customer segments – leisure, business and
group. They are global in reach and innovative in functionality. They are marketing
engines, search engines, booking engines and execution platforms for consumers.
OTAs also hold a prominent place in travel information search and multi-device
(mobile) applications.
And, while OTAs compete for marketing spend with other search, metasearch and
content sites (e.g., Google, Kayak, TripAdvisor, Trivago), these services also act as
partners, providing additional reach and distribution.
Hoteliers operate in a highly competitive environment. To optimize their asset
values they must make effective use of OTAs and other marketing channels. For
hoteliers to underestimate the marketing reach of OTAs as both distribution and
marketing platforms is a mistake. To be overly reliant on any one channel is also
flawed. Hoteliers must strive to strike the right balance to reach multiple segments
of the marketplace and optimize the mix of transactions to achieve occupancy and
profit targets.
From Perception to Reality

Consumer options have exploded. Armed with laptops, smartphones and tablets,
travelers are using multiple devices and searching myriad sites to plan their trips.
In burgeoning travel markets like China and Russia, young, adventurous and newly
minted “middle class” consumers will grab their handhelds to book their getaways
this year, many though OTAs.
While OTAs are indeed intermediaries, they do more than shift share among hotel
competitors. They can be an effective tool to: preserve market position, extend
search marketing, meet consumer demand for packaged and spontaneous travel,
support yield management, and execute integrated marketing strategies. Hotels
can and should manage OTAs to optimize revenues versus costs.
The paper utilizes existing PhoCusWright and published academic research to
make the following points.
7 Ad spend for managed corporate travel
7 B2B travel industry advertising
7 Costs associated with content creation, social media management and compa-
ny-owned assets
1. OTAs Have Global Reach and Influence

The travel industry continues to expand globally. Over the next two years, worldwide
online travel is expected to jump 11% as more and more vacationers use their desk-
tops/laptops, smartphones and tablets to make purchases. A new generation of travel-
ers will book their first trip online – not through a travel agency or call center or walking
up to a desk. OTA gross bookings are growing at two to three times the pace of the
total market in emerging regions.
Keeping up with new market demand globally – including unique cultures, preferenc-
es, payment trends, inventory and languages – is a complex and costly undertaking.
Expedia, for example, has 150 travel booking sites in over 70 countries with websites lo-
calized in more than 30 languages. As well, the global travel industry continues to book
travel online, with some regions still growing in double-digit percentages. The percent-
age of all travel booked online continues to rise around the world (see Figure 1).
FIGURE 1: Online Travel Penetration by Region, 2011-2015
50%
40%
30%
20%
10%
0%
2011 2012 2013 2014 2015
Europe U.S. APAC Eastern Europe Middle East Latin America
Note: 2013-2015 projected.
Source: Global Online Travel Overview Third Edition
© 2014 PhoCusWright Inc. All Rights Reserved.
Major OTAs are accelerating ahead of the overall industry on a worldwide basis. Glob-
ally they are expected to expand gross bookings twice as fast as the overall market as
emerging regions in Latin America, Asia Pacific and Eastern Europe take off (see Figure
2). In the U.S., where OTAs have existed for more than 16 years, their gains are more
commensurate with the market as a whole.
Global growth is fueled by investments in multi-lingual, culturally relevant displays
as well as alternative payment systems. Local knowledge is attained by both organic
growth and international acquisitions. Over the past 10 years, Expedia and Priceline
have made a series of significant international (non-U.S. based) acquisitions and part-
nerships, particularly in Europe and China.
Europe is the largest region in the world in terms of OTA gross bookings, followed by
the U.S. and Asia Pacific (see Figure 3).

FIGURE 2: OTA and Total Market Growth
12%
10%
8%
6%
4%
2%
0%
2012 2013 2014 2015
U.S. OTAs Total U.S. Market Global OTAs Total Global Market

FIGURE 3: OTA Market vs. Total Travel Market (US$B) by Region, 2013
350 333.2 322.6

304.6
300
250
200
150
100 83.6
50
44.9
28.5
0
U.S. Europe Asia Pacific
OTA Market Total Market
In a shifting landscape where mobile usage is overtaking PCs, OTAs play an even more
crucial role (see Figure 4). They are investing heavily in mobile websites and apps and can
service consumers via multiple devices throughout all phases of the travel process. This
allows OTAs to be present not just in the dreaming, planning and booking stages, but
also as travelers are in transit, checking and changing itineraries, reading reviews, sharing
experiences, and choosing restaurant options, hotel accommodations, tours and activi-
ties. This mobile presence allows OTAs to capture much of the last-minute hotel market,
a significantly growing portion of all hotel sales. According to PhoCusWright, 72% of OTA
mobile web bookings are made within 24 hours of the stay.1 .
1) Parsing Shop and Book: How Airlines, Hotels and OTAs Compete on the Desktop and Mobile Web,
PhoCusWright (July 2014).

FIGURE 4: How we Access the Internet is Rapidly Changing
3% Wearables
12% Smart TVs
40% 10% Tablets
Smartphones
52%
60%
Personal
23% Computers
2009 2013E
Source: Expedia, Business Insider
Mobile is the fastest-growing method for travel booking. The percentage of travel
booked via mobile devices is expected to at least double in the U.S. and Europe over the
next two years (see Figure 5).
FIGURE 5: Mobile Bookings as a Share of Online Bookings by Region, 2013 vs. 2015
30 30
27%
U.S. Europe APAC*
20% 20%
11% 12%
10%
0 0
2013 2015
Note: *Mobile bookings calculation for APAC includes China, India and Japan only. 2013-2015 projected.
Sources: U.S. Online Travel Overview Thirteenth Edition, European Online Travel Overview Ninth Edition, Asia Pacific Online
Travel Overview Seventh Edition
Because of their brand reach and investment in mobile-optimized sites and apps, OTAs will
represent one fifth of all smartphone and tablet bookings in the U.S. by the end of 2014 (see
Figure 6). Much of that will be hotel rooms: Nearly 60% of the $13 billion projected in hotel
mobile sales will be transacted via OTAs in 2014.

FIGURE 6: U.S. OTA Mobile Bookings, 2012-2015 (USB)
OTA Mobile Bookings 2012 2013 2014 2015

2,691 5,480 10,004 14,618
Percent Change 150% 104% 83% 46%
Share of OTA Gross Bookings 6% 12% 21% 29%
Source: U.S. Online Travel Overview Thirteenth Edition

As mobile grows in global prominence, OTAs offer the scale and expertise to assist ho-
tels in expanding their mobile (and multi-device) footprints. By leveraging their techno-
logical innovation, multiple brands, and localization and marketing capabilities, OTAs can
effectively drive mobile demand on a global scale to hoteliers in a cost-effective manner.
2. OTAs Provide the Services that Consumers Want

OTAs are a preferred shopping and booking channel for hotel accommodations in the
U.S., Europe and other parts of the world. They are the leading online shopping and
purchase method in the U.S., outpacing supplier websites, phone and other methods
(see Figures 7 and 8).
FIGURE 7: Websites/Apps Used to View Traveler-Submitted Ratings/Reviews, 2013
Online travel agency websites,

such as Expedia or Priceline 54%
General search engines,
such as Yahoo or Google 47%
Traveler review websites,

such as TripAdvisor 36%
Travel search engines,
such as Kayak 33%
Travel provider websites, such as

United Airlines or Marriott
30%
Deals newsletters/websites, such as

Travelzoo or TravelTicker
18%
Destination websites, such as

VisitNewYork.com or LasVegas.com 16%
Online social media, such as

13%
Facebook or Twitter
Travel guide websites, such as
Lonely Planet or Frommer’s
12%
Magazine/newspaper websites, such as

Travel+Leisure or The New York Times 9%
Home/apartment rental websites,

such as Airbnb
8%
Question: On what types(s) of websites did you read traveler-submitted ratings/reviews? Select all that apply.
Base: U.S. travelers who read reviews online (2011 N=1,564; 2012 N=1,989; 2013 N=1,082)
Source: U.S. Consumer Travel Report Sixth Edition

FIGURE 8: Typical Purchase Method for Lodging, U.S.
Online travel agency 31%
Supplier website 25%
Metasearch 8%
Retail agency website 2%
Calling travel providers 18%
Calling/visiting retail travel agents 4%
Walk-in/at property 6%
Other 6%
Question: Please indicate which method you typically use to book each type of travel component. Select one response per row.
Base: U.S. travelers who purchased lodging (2011N=1,687; 2012 N=1,997; 2013 N=1,716)
Note: Totals may not add to 100% due to rounding.
FIGURE 9: Websites/Apps Used to View Traveler-Submitted Ratings

and Reviews for the U.S.
Travel review websites 52%
Online travel agency websites 45%
General search engines 42%
Hotel websites 33%
Travel search engines 23%
General user review websites 23%
Social networking websites 21%
Blogs/online forums 15%
Question: On what types(s) of websites did you read traveler-submitted ratings/reviews? Select all that apply.
Base: U.S. travelers who read reviews online (2011 N=1,564; 2012 N=1,989; 2013 N=1,082)

Consumers, especially younger travelers, typically prefer the depth and breadth of OTAs vs.
supplier direct channels. These savvy consumers are looking for the best accommodations
that fit their preferences and budgets and prefer to cross-shop. They rely on reviews and
mapping services and overall comparative capabilities of OTAs to find what’s best for them.
User reviews rank among the most important features for travel decision-making, and it’s
not all TripAdvisor. Next to travel review websites, OTAs rank as the second most popu-
lar source for ratings and reviews in the U.S. (see Figure 9), ahead of search engines and
hotel websites. As a differentiator from TripAdvisor, some OTAs offer the advantage of
authenticated reviews (associated with guest stays at the property).
When customers book via an OTA and other intermediaries, these third-parties can also
be personal travel assistants, supporting the consumer throughout the travel experience
(see Figure 10). OTAs are available 24/7 and accessible via any device the consumer
wants to use in a multi-lingual display.
FIGURE 10: OTA Real Time Traveler Assistance
See http://www.expedia.com/app
Source: www.priceline.com
OTAs provide one-stop shopping via breadth of content across multiple travel segments:
(i) carriers: air, rail and bus; (ii) lodging: hotels, B&Bs and rental properties; (iii) cruises; (iv)
rental cars; (v) ground transportation; (vi) attractions/activities. Shoppers get a compara-
tive information view across properties, ranked by authentic user reviews, type of proper-
ty, star classification, facilities, location and other criteria, all within selected destinations.
In many cases, price and inventory availability are real time. And, perhaps most important
to the consumer, this information is provided with comparison prices.
The depth and breadth of inventory allow OTAs to offer packages at lower prices to
the consumer than if purchased separately. For travelers willing to take some risk by not
knowing the name of the hotel (only its general location, star rating and possibly price),

opaque (name your price: Priceline) and semi-opaque services (e.g., Travelocity Top Se-
cret Hotels, Expedia Unpublished Rate Hotels) are welcome resources.
3. OTAs Fill The Gaps

Hotels rely on OTAs to reach this important and growing segment of the population:
travelers who are not always brand loyal are searching for value as well as amenities, and
who prefer deals – whether a single-night hotel stay or weeklong dream vacation.
OTAs can help suppliers…
7 Reach non-brand loyal travelers
7 Reach a younger demographic
7 Reach a higher-yielding packaged traveler
Major hotel chains continue to build their direct website business, investing heavily in
marketing and functionality. They also covet and support their customer relationships
(particularly among loyalty club members). Yet only a segment of the traveling popula-
tion is actually faithful to a particular hotel brand (see Figures 11 and 12). And nearly half
of those who are members of a hotel loyalty program book outside that program some
or all of the time. In addition, some OTAs have their own loyalty programs that reward
bookings made with any supplier, not just one, and capacity to use those rewards for
multiple products.
FIGURE 11: Hotel Loyalty Incidence
U.S. Adult Leisure

Travelers
127 million
Hotel Stayers
118 million (93%)
Hotel Loyalty
Members
54 million (43%)3
Questions: Are you a member of a loyalty or frequent flyer program for any of the following types of travel companies? Select all that
apply. Which of the following, if any, have you done while traveling for leisure in the past 12 months? Check all that apply. Which of
the following, if any, have you done while traveling for leisure in the past 12 months? Check all that apply. What type(s) of internet
websites/apps do you typically use when comparing and choosing leisure travel products? Select all that apply.
Base: U.S. Leisure travelers (N=1,850)

FIGURE 12: Influence of Hotel Loyalty Membership on Supplier Selection
“When staying in hotels for leisure, how often do you typically

book with the hotel(s) where you are a member of a loyalty program
(versus other options)?
Never Sometimes Half the time Most of the time All of the time
Hotel loyalty
members 3% 25% 20% 41% 12%
Questions: When flying for leisure, how often do you typically book with an airline(s) where you are a member of a loyalty pro-
gram (versus other options)?When staying in hotels during leisure travel, how often do you typically book with a hotel(s) where
you are a member of a loyalty program (versus other options)?
Base: Hotel Loyalty Members (N=804)
PhoCusWright and academic research indicate that a leading factor in leisure hotel
choice is price, followed by location (see Figure 13). Other leading factors are related to
satisfaction, such as previous experience, brand, amenities, star classification and positive
FIGURE 13: Factors Influencing Last Hotel Decision
Price
Location of hotel/property
Previous experience
Hotel brand
Amenities (e.g., pool, gym, spa)
Special offer/discount
Positive hotel reviews
by previous guests
Pictures/photos of hotel
Class/star rating of hotel
Loyalty membership
On-property dining, restaurants

Personal recommendations
from friends and family
Size of hotel
Hotel was part of an
attractive travel package
Hotel had a recent renovation
0 10 20 30 40 50 60 70
Question: What factors influenced your last hotel decision? Select all that apply.
Base: U.S travelers who stayed in paid lodging (2013 N=1,471)

reviews. Therefore, when consumers are making hotel choices related to their own leisure
hotel stays, they are often more influenced by price and other service qualities than loyal-
ty programs.
For these same reasons, a coveted segment of the traveling population – millennials – is
also less likely to be loyal to a particular travel brand versus older travelers. Use of OTAs
for lodging purchases is highest among those 18-34 years of age (see Figure 14), indicat-
ing the preferences of a new generation of travelers.
FIGURE 14: Typical Purchase Methods for Lodging, by Age

2013
19%
27%
13%
30%
6%
37% 6%
32%
18%
18-34 35-54 55+

OTA website Metasearch Supplier website
Question: Please indicate which method you TYPICALLY use to book each type of travel component. Select one response per row.
Base: U.S. travelers who purchased lodging (2011 N=1,687; 2012 N=1,997; 2013=1,851)
Note: Totals may not add to 100% due to rounding.
Packages and opaque/semi-opaque services allow hotels to offer deals without com-
promising on the retail rate. Packages are not only a valuable option for revenue man-
agement, they also attract travelers who are likely to book earlier, stay twice as long, and
cancel half as often as standalone hotel bookers2.
4. OTAs Go Beyond Distribution

For hotels, OTAs are more than a distribution channel. They have marketing influence
similar to search engines and metasearch sites, and they can engage customers globally
through all the stages of the travel experience – with whatever devices their customers
choose to use. OTAs have extended their influence through mobile (multi-device) usage
and metasearch, and that influence will continue to escalate.
In 2013, U.S. OTAs spent nearly $700 million on advertising, and that figure is expected
to jump 8% over the next two years.3 Of that amount, nearly eight in 10 dollars was spent
online, mostly on search, metasearch and display.
2) Expedia Worldwide data from 7/1/2013 – 6/30/2014.

3) U.S. Travel Advertising Marketplace: Industry Sizing and Trends 2015, PhoCusWright (June 2014).

Hotels should not consider OTA usage as merely a distribution cost. OTAs rank higher
than search engines in terms of travel decision-making (see Figure 10), and a portion
of the cost of OTA use goes beyond commissions or merchant rates and falls into the
marketing budget. Hotels generally spend about 6-9% of their revenue on sales and mar-
keting4 – and some of that should be allocated to OTAs. (On the contrary, major OTAs
spend 35-40% of their revenue on sales and marketing).
The key to successfully managing OTA use is for hotels to assess their full value as a
distribution channel and as a marketing platform versus the benefits of other channels
and media outlets. Hotels should integrate OTA participation within an overall marketing
strategy and with effective revenue and channel management. Only by considering both
the distribution and marketing costs can hotels fully measure return on investment (ROI).
Some hoteliers and industry experts undervalue the net cost of participation in OTAs by
considering only their merchant markup – the net rate paid to the hotel versus the OTAs’
price to the consumer.5 For example, the OTA collects $160 per day from the consumer
and remits $120 to the hotel, which then mistakenly compares this cost to booking the
same transaction as if made through the hotels’ brand website at the same price, $160.
Erroneous assumptions include:
(i) The hotel could have gotten this (and other) booking(s) from consumers without
OTA participation, and
(ii) There is no marketing value of OTA participation that produces future bookings.
Instead, PhoCusWright research shows that consumers use OTAs to shop nearly as much
as they use search engines, and leisure guests are more likely to use OTAs – as opposed
to business travelers who probably would book through a travel management company
(TMC) and/or global distribution system (GDS). This increases the likelihood that the OTA
booking would be incremental. There’s also an impact from merely being featured on an
OTA site. Therefore, hotels should ascribe some media value to being displayed in an
OTA. How much is not clear; ascribing no value is an error.
A 2012 PhoCusWright article illustrates the net operating income effect of share-shift
gain (or loss) from OTA participation versus cost.6 It counters the argument put forth in
“Distribution Channel Analysis: A Guide for Hotels” that there is no “billboard effect,”
recommends that hoteliers effectively manage the participation of OTAs, and provides a
set of suggestions for hoteliers to follow in evaluating OTA participation. Its conclusions:
1. A “billboard effect”7 – the increase in direct bookings a property or brand experienc-
es when it is featured on an online booking site – is probable for a hotel operating
within a competitive set, though the specific impact could vary depending on market
circumstances.
4) PKF Consulting.
5) Cindy Estes Green and Mark Lomanno, “Distribution Channel Analysis: A Guide for Hotels,”
Hospitality Sales and Marketing Association (HSMAI) (July 2012).
6) William Carroll, “Sage Advice for Hotels: Another Point of View on a Popular Industry Report,”
PhoCusWright (June 2012).
7) Chris Anderson, “The Billboard Effect: Online Travel Agent Impact on Non-OTA Reservation Volume,”
Cornell University School of Hotel Administration, The Center for Hospitality Research, 9, no.16 (2009),
and Chris Anderson, “Search, OTAs, and Online Booking: An Expanded Analysis of the Billboard Effect,”
Cornell University School of Hotel Administration, The Center for Hospitality Research, 11, no. 8 (2011).

2. Hoteliers should consider the full “marketing effect” of OTA participation – e.g.,
the impact on sales through all channels generated from OTAs – not simply the net
markup cost versus a direct booking.
3. Hoteliers should use an analytical approach to evaluate the ROI for both participa-
tion in distribution channels and marketing activities. (See Appendix A.)
4. Hotels and OTAs would both be better served if there was more research and
(shared) robust information available about the media effects of OTAs versus their
distribution costs.
The most authoritative and well-known statistical study to date on OTA marketing impact
was produced by Chris Anderson of the Cornell University School of Hotel Administra-
tion. Using clickstream analysis, Anderson found extensive consumer use of OTAs and a
positive statistical correlation between hotel reservation activity and Expedia appearanc-
es in the path.8 His research found:
- a lift in reservations from appearance on an Expedia page-one display of 7.6% to
26% in months where the hotel was displayed versus months when it was not
(2009)
- a ratio lift of 3.1-to-1 to 8.75-to-1 when Expedia appeared in the clickstream
compared to when it did not (2011)
Although correlation does not necessarily imply causation, and results may differ under
other circumstances, the statistical results are significant. They indicate a very high proba-
bility of a relationship between participation in Expedia and incremental bookings. While
there have been critics of this research, no one has refuted the measured results.
Other studies have focused on the type of information consumers use when choosing
hotels. Those findings show that consumers want amenities that add value (e.g., free
Wi-Fi, fitness center, etc.), and that OTAs are an information source.9 Recent studies by
Breffni M. Noone and Kelly A. McGuire suggest that user-generated content (reviews) has
a significant effect on perceived value when evaluating price-versus-benefit tradeoffs.10
The studies also found that brand name as well as TripAdvisor rankings and ratings im-
pact consumer choice.
Not surprisingly, price is a prominent factor. Other important considerations that impact a
consumer’s expected hotel experience: images, descriptions, ratings and reviews. Studies
8) Ibid.
9) Manus Ward and Mathew Shafaghi, “A Literature Framework Analysis of Online Hotel Accommoda-
tion Process Factors,” Information and Communication Technologies in Tourism 2014, Springer (2013):
481-494.; Peter Jones and Meng-Mei Chen, “Factors Determining Hotel Selection: Online Behaviour by
Leisure Travelers,” Tourism and Hospitality Research 10, no. 1 (January 2011): 83-95; and Ugur Yavas and
Emin Babakus, “Dimensions of hotel choice criteria: congruence between business and leisure travel-
ers,” International Journal of Hospitality Management 24, no. 3 (September 2005): 359-367.
10) Dohee Kim and Richard R. Perdue “The effects of cognitive, affective, and sensory attributes on hotel
choice,” International Journal of Hospitality Management 35 (December 2013): 246-257; Breffni M.
Noone and Kelly A. McGuire, “Effects of Price and User-Generated Content on Consumers’ Prepur-
chase Evaluations of Variably Priced Services,” Journal of Hospitality & Tourism Research (Feb. 27, 2013):
1096348012461551; and Breffni M. Noone and Kelly A. McGuire, “Pricing in a social world: The influence
of non-price information on hotel choice,” Journal of Revenue and Pricing Management 12, no. 5 (July
5, 2013): 385-401.

also show that OTAs represent a significant share of the sites consumers review – namely
because major OTAs have all the key information that consumers use when making travel
choices.
Recent (2014) academic studies summarize the most influential factors for hotel purchase
intention across multiple countries.11 These confirm results found in several U.S.-based
studies (see Appendix B). The major OTAs – Expedia, Priceline and Ctrip – effectively
address these factors and continue to invest in functionality that enhances the user expe-
rience.
Conclusion
OTAs provide a platform to market and sell inventory. Attempts by hotel suppliers to
completely bypass OTAs have successively failed.12 Hoteliers have simply acknowledged
their significance and made studied and optimized use of OTAs as part of their marketing
and distribution strategies.
OTAs are in a position to charge for the value they add in the market. They do provide
suppliers, particularly hoteliers, with analytics and tools that they can use to optimize
OTAs’ marketing and booking services:
7 Real-time price and inventory access
7 Market intelligence and performance tools
7 Knowledgeable supplier services managers
7 Promotional opportunities
Suppliers that effectively manage their overall price, inventory and marketing activities,
and use of OTAs as marketing, search and distribution engines can improve profitabil-
ity. The challenge for hotels is to do so in the context of the other options they have to
optimize marketing.13 In large part, the onus is on hotels, chains and marketing services
vendors to use that other information to make informed marketing and channel distribu-
tion decisions in an integrated fashion for both the near and long term. m
11) James N.K. Liu and Elaine Yulan Zhang, “An investigation of factors affecting consumer selection of
online booking channels,” International Journal of Hospitality Management 39 (May 2014): 71-83.
12) Hee “Andy” Lee, Basak Denizci Guillet and Rob Law, “An Examination of the Relationship between
Online Travel Agents and Hotels: A Case Study of Choice Hotels International and Expedia.com,” Cor-
nell Hospitality Quarterly (Dec. 18, 2012)
13) For a comprehensive discussion of the approach hotels should take in evaluating the use of OTAs in
a competitive environment, see PhoCusWright’s “Sage Advice for Hotels: Another Point of View on a
Popular Industry Report,” (June 2012).

Appendix A
Hotelier Decision Matrix for OTAs and Intermediaries

Considerations for Channel Choice
• How responsive (price elastic) are the consumers that use

this channel?
• How effectively can the hotel communicate value rather
CONSIDERATION TYPE
than just price?
• How effectively can competitors match price/promotion
offers capable of shifting share?
• Does the channel have the capacity to generate business
the hotel would not have gotten otherwise; share shift or
NEAR-TERM
new (to the whole comp set) demand?
INCREMENTAL DEMAND
• Can the additional current and future business volume be
GENERATION increased?
• Can specific attribution of value to the channel be measured?
• To what extent will price and promotional offers lead to
prospective and existing transient, event, and/or corporate
bookings price reductions?
PRICE (STRUCTURE)
• What impact will discounting have on reference prices con-
DILUTION sumers expect or expectation of future price reductions?
• To what extent can the hotel restrict dilution of higher
rates?
• To what extent does the channel affect consumer loyalty
and advocacy?
CUSTOMER VALUATION, • To what extent do offers and prices enhance service expe-
LOYALTY AND ADVOCACY rience and value?
• To what extent can brand trust be enhanced (or diluted) via
the channel through value representations and guarantees?
Source: PhoCusWright Inc.


Appendix B
Summary of Reviewed Literature on Lodging Purchase Intention

Author Sample country
(year of publication) (number of samples) Influential factors
In the context of hotel booking
Wong and Law (2005) Hong Kong (638) Information Quality, Sensitivity Content, Time
Kim et al. (2006) China (206) Information Needs, Online Security
Chiang and Jang (2007) US (404) Perceived Price, Brand Image
Bai et al. (2008) China (180) Website Quality (Functionality & Usability)
Kuan et al. (200*) A university (111) Website Quality, Information Quality, Service
Quality
Sparks and Browning (2010) Australia (554) Online Review
Wen (2012) US (559) Website Quality, Travelers’ Attitudes, Customers’

Satisfaction
In other contexts
Van der Heijden et al. (2003) Holland (228) Perceived Risk, Perceived Ease-of-Use
Chu and Lu (2007) Taiwan (302) Perceived Usefulness, Playfulness, Perceived Price
Moon et al. (2007) New Zealand (116) Price National Culture
Chang and Chen (2008) Taiwan (628) Website Quality, Website Brand
Hahn and Kim (2009) US (261) Perceived Confidence Online
Hausman and Siekpe (2009) US (420) Computer Factors, Funcitonality, Human Factors
Ganguly et al. (2009) India (260) Information Design, Communication, Privacy and
Security
Lu et al. (2010) China (376) Trust in Vendor/Website
Source: Liu & Zhang, “An Investigation of Factors Affecting Customer Selection of Online
Booking Channel,” International Journal of Hospitality Management, 2014.

About Expedia Lodging Partner Services
Expedia Lodging Partner Services (LPS) is the group within Expedia respon-
sible for sourcing hotel supply that reaches travelers in more than 70 coun-
tries through all of the Expedia group brands, which include Expedia.com®,
Hotels.com®, Hotwire®, Venere.com®, corporate travel management
company Egencia®, and the Expedia® Affiliate Network. The Expedia group
offers hotels international reach; access to multiple channels in a single mar-
ketplace; exposure that positively influences direct bookings on the hotel’s
own website; and a dedicated team of market managers in cities around the
world, who provide deep market insight and are committed to helping hotels
increase their profitability.

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PhoCusWright White Paper

Online Travel Agencies: More

Written and Researched by

This research made possible by Expedia Lodging Partner Services.

©2014 PhoCusWright Inc. All Rights Reserved. Page 2

PhoCusWright delivers qualitative and quantitative research on the evolv-

PhoCusWright is a wholly owned subsidiary of Northstar Travel Media, LLC.

©2014 PhoCusWright Inc. All Rights Reserved. Page 3

©2014 PhoCusWright Inc. All Rights Reserved. Page 4

Online Travel Agencies:

Written and Researched by Bill Carroll and Lorraine Sileo

Purpose of White Paper

The OTA Proposition

©2014 PhoCusWright Inc. All Rights Reserved. Page 5

From Perception to Reality

1. OTAs Have Global Reach and Influence

FIGURE 1: Online Travel Penetration by Region, 2011-2015

©2014 PhoCusWright Inc. All Rights Reserved. Page 7

FIGURE 2: OTA and Total Market Growth

Note: 2013-2015 projected.

350 333.2 322.6

©2014 PhoCusWright Inc. All Rights Reserved. Page 8

FIGURE 4: How we Access the Internet is Rapidly Changing

40% 10% Tablets

©2014 PhoCusWright Inc. All Rights Reserved. Page 9

FIGURE 6: U.S. OTA Mobile Bookings, 2012-2015 (USB)

OTA Mobile Bookings 2012 2013 2014 2015

Source: U.S. Online Travel Overview Thirteenth Edition

2. OTAs Provide the Services that Consumers Want

FIGURE 7: Websites/Apps Used to View Traveler-Submitted Ratings/Reviews, 2013

Online travel agency websites,

Traveler review websites,

Travel provider websites, such as

Deals newsletters/websites, such as

Destination websites, such as

Online social media, such as

Magazine/newspaper websites, such as

Home/apartment rental websites,

©2014 PhoCusWright Inc. All Rights Reserved. Page 10

FIGURE 8: Typical Purchase Method for Lodging, U.S.

Online travel agency 31%

Supplier website 25%

Retail agency website 2%

Calling travel providers 18%

Calling/visiting retail travel agents 4%

FIGURE 9: Websites/Apps Used to View Traveler-Submitted Ratings

Travel review websites 52%

Online travel agency websites 45%

General search engines 42%

Hotel websites 33%

Travel search engines 23%

General user review websites 23%

Social networking websites 21%

Blogs/online forums 15%

©2014 PhoCusWright Inc. All Rights Reserved. Page 11

FIGURE 10: OTA Real Time Traveler Assistance

©2014 PhoCusWright Inc. All Rights Reserved. Page 12

3. OTAs Fill The Gaps

FIGURE 11: Hotel Loyalty Incidence

U.S. Adult Leisure

©2014 PhoCusWright Inc. All Rights Reserved. Page 13

FIGURE 12: Influence of Hotel Loyalty Membership on Supplier Selection

“When staying in hotels for leisure, how often do you typically