Online Travel Agencies Losing Ground to Direct Booking via Hotels & Airlines
The online travel market is experiencing an evolution with the balance of power shifting over the past 12 months from online agencies to the suppliers, according to PricewaterhouseCoopers LLP. High speed broadband Internet connections, combined with the ability for suppliers to take control of their own inventory, have lessened the competitive advantage that online travel agents once enjoyed.
Price and convenience are still the crucial differentiators in online travel purchasing, which places airlines and hotel owners in a strong position. As content owners, they control their underlying assets, either planes or hotels, and the subsequent pricing. Online aggregators own little.
The Internet has also had a significant impact on the cost of customer acquisition with customer loyalty in the online world traditionally being very low. Some companies have seen marketing costs increase almost every quarter over the last five quarters, while for others it represents 35 percent of the net margin.
Loyalty schemes for hoteliers and reward points for airlines are proving to be very successful and provide the online supplier with another advantage over aggregators. "These schemes are very persuasive at ensuring customer loyalty and they are also extremely cost-effective," indicates PricewaterhouseCoopers partner and travel sector leader Malcolm Preston. "After all, they are giving away something that would not otherwise be taken. The cost to an airline, for example, is minimal but the benefit to the customer is enormous."
Price and convenience are still the crucial differentiators in online travel purchasing, which places airlines and hotel owners in a strong position. As content owners, they control their underlying assets, either planes or hotels, and the subsequent pricing. Online aggregators own little.
The Internet has also had a significant impact on the cost of customer acquisition with customer loyalty in the online world traditionally being very low. Some companies have seen marketing costs increase almost every quarter over the last five quarters, while for others it represents 35 percent of the net margin.
Loyalty schemes for hoteliers and reward points for airlines are proving to be very successful and provide the online supplier with another advantage over aggregators. "These schemes are very persuasive at ensuring customer loyalty and they are also extremely cost-effective," indicates PricewaterhouseCoopers partner and travel sector leader Malcolm Preston. "After all, they are giving away something that would not otherwise be taken. The cost to an airline, for example, is minimal but the benefit to the customer is enormous."