In 2023, 72% of travelers preferred to make their travel arrangements online. As much as 80% of them relied on OTAs rather than Google, social media, and meta-travel websites.
Traveler habits and preferences indicate that OTAs are no passing trend. For those in the travel business, that means only one thing: OTAs are crucial for survival and success in the industry. Understanding what they are, how they work, and what benefits they offer is no longer optional.
Definition of Online Travel Agencies (OTAs)
Everyone uses OTAs, but most people outside the industry don’t know them under their acronym – or what it stands for – even when they have a broad idea of how they work.
What are OTAs?
OTA is short for Online Travel Agency, a website, platform, or marketplace that allows travelers to buy travel-related products and services. Using an OTA, anyone can book a flight, reserve a hotel room, rent a car, buy event tickets, or book a cruising trip.
Some of the most used and globally known online travel agencies are:
- Airbnb
- Booking.com
- Expedia
- TripAdvisor Rentals
- Hostelworld
- Lastminute.com
- Vrbo
OTAs are similar to metasearch engines like Google Hotels, but the two are not the same. The key difference is that travelers can book travel products and services directly from OTAs. These agencies serve as online reservation systems for researching and comparing travel options.
How do OTAs differ from traditional travel agencies?
As a direct link between travelers and travel suppliers, OTAs are a serious threat to traditional travel agencies. While they are completely online-based, many modern travel agencies offer a combination of online and offline services. All their differences stem from this main one.
In OTAs, travelers have dedicated self-service centers with more travel options than they can choose. As opposed to that, traditional agencies put an emphasis on human relations and personalized service. Both options have their pros and cons, as well as their loyal target audience.
Online travel agencies rose to prominence after the Great Financial Crisis, which marked the golden era for industry leaders like Expedia and Booking.com. Although the OTA market share is not as formidable as it once was, it still puts traditional travel agents at dire risk of irrelevance.
The role of OTAs as intermediaries between travelers and travel service providers
Although we call them “agencies,” OTAs don’t employ travel agents or do any agent work, at least not in a traditional sense. They simply provide space for rental and vacation managers, airlines, and other travel service providers to make their offers directly to potential customers.
Let’s say you want to go to Croatia for a summer vacation. If this is your first time visiting the Balkans and you want to travel the coast by boat and visit Dubrovnik, but you don’t speak the language, it’s probably easier (and safer) for you to outsource everything to a travel agent.
But if you’ve arranged your own trips before, why pay a travel agent when you can get everything you need on Airbnb? OTAs bookings cost less because the fee is charged to service providers. Are they more convenient? Well, that depends on the type of traveler and the trip.
Key Characteristics of OTAs
A typical OTA is like Google for travel – it’s comprehensive, convenient, and trustworthy. Aside from these industry-disrupting traits, some other key characteristics of OTAs are:
Online platforms for researching, comparing, and booking travel services
OTAs are online platforms that facilitate booking, but they do more than that. Like search engines, these agencies allow travelers to research desired locations before they pick a destination and book a room. Users can filter search results by budget, facilities, property type, review score, etc.
Search filters like these are incredibly helpful and contribute to OTAs’ great success. They allow travelers to find what they’ve pictured, no matter how specific their desires and requirements are. If you want a beachfront villa with a gym and a poker room, just tick the right boxes.
Another advantage of using OTAs is the ability to compare offers and prices from multiple travel service providers. So, in addition to finding just what they need, travelers can also get it for the most affordable price. It’s precisely that searchability that gives OTAs their disruptive power.
A wide range of travel products offered
Can OTAs really help you plan entire trips? Absolutely, yes. The wide range of travel-related products and services offered by online travel agencies typically include the following:
- Accommodation – Hotels, apartments, villas, holiday homes, resorts, and more.
- Flights – One-way and round trips, domestic and international flights, and more.
- Car rentals – Reliable rentals at affordable prices by popular car hire brands.
- Airport taxis – Standard or executive airport transfer per number of passengers.
- Attractions – Explore tours and activities, book priority tickets, and more.
- Vacation packages – Create your own travel bundles with stay, transport, tours, etc.
And it’s not only various product categories that can be found on OTA websites. Even more importantly, travelers can explore many different types of products and services, including property and room types, car brands, excursions, etc. There are also detailed descriptions and pictures.
Aggregation of prices and options from multiple travel service providers
If you type “New York” in the Airbnb search box, more than 1,000 results will pop up. That’s more than any travel agent can offer. OTAs are so popular because they showcase numerous options from multiple travel service providers, making travelers spoiled with choices.
User-generated content to inform traveler decisions
One of the major concerns travelers have about travel booking platforms is, “What if the place doesn’t match the description?” OTAs have come up with an elegant solution for this: social proof. Buyers are strongly encouraged to leave detailed reviews with descriptions and ratings.
To say that OTAs have turned user reviews into an art form would not be an overstatement. They, too, can be filtered based on topics such as cleanliness, location, or aesthetics. All guest impressions are dated (so you know what season they apply to) and accompanied by photos.
Secure payment processing and customer support
OTA payments are designed to be fast, secure, and flexible. For added convenience, customers have various payment options, including credit, debit, and prepaid cards; digital wallets like PayPal, Apple Pay, and Google Pay; and local payment options like WeChat and Alipay.
Are OTA payments safe? Sure. They are based on the same security protocols and standards as all other online payments. Encryption and 2-step verification are non-negotiable. Major OTAs like Airbnb, Expedia, and Booking.com guarantee secure transfers and financial data privacy.
On the off chance that a payment goes wrong, customer service is there to help. Online travel agencies don’t have agents, but they have dedicated customer support reps on multiple channels. That usually includes FAQs, live chat, email, and 24/7 phone support for emergencies.
Types of OTAs
Despite being accessible worldwide, online travel agencies sometimes choose to specialize in a single region or travel segment. Here are the different types of OTAs:
Full-service OTAs
The global market is vast and unpredictable. No single travel agent or tour operator can offer all types of products and services in all destinations in the world. But guess who can? That’s right: OTAs. Full-service OTAs provide an array of destinations and services.
The most prominent names in the industry belong to this wide bracket. Expedia, Airbnb, and Booking.com are good examples of successful full-service travel booking platforms. They offer everything you need to arrange a trip, including spa reservations, concert tickets, and local tips.
Specialized OTAs
Competing with full-service OTAs like Expedia or Airbnb is virtually impossible, so many online travel agencies are forced to quit or specialize. So-called specialized OTAs cater to travelers in need of specific products, like airplane tickets, hotels, or specific types of vacation rentals.
For example, CheapOair is an online travel agency specializing in discounted flights and hotel bookings. Hostelworld is one of the most famous agencies for budget-friendly accommodations like hostels and low-cost hotels, while Vrbo offers condos, cabins, and other vacation rentals.
Regional and global OTAs
OTAs can be regional or global, depending on their area of coverage. Similarly to local agents, regional online travel agencies are closer to the destinations you want to travel to, and not just geographically. They usually have local guides recommending tours and writing travel guides.
Some of the best regional OTAs are Indy Guide (Central Asia), Travello (Australia and New Zealand), Civitatis (Spain and Latin America), LinkParis (Paris), LovetoVisit (UK), Swiss Activities (Switzerland), TrueStory (Scandinavia), Tripster (US and Canada), and Almundo (Latin America).
How OTAs work
How do OTAs work? Most people assume that online travel agencies make money in a similar way travel agencies do. That’s not far from the truth, but it’s only one piece of the puzzle.
The OTA business model
Different OTAs make revenue in different ways based on their business model:
- Commission – Many OTAs (Airbnb, Booking.com, Expedia) employ a commission model, where they allow hosts and other travel service providers to list their offers for free. In return, OTAs receive a percentage of their money every time a booking is made.
- Subscription – Online travel agencies like Furnished Finder charge product and service providers a fixed rate for listings and promotions whether they make a booking or not.
- Advertising – This model is more common on meta-travel websites like Google Hotel Ads, where hosts pay for clicks that take potential customers to their official booking pages.
- Hybrid – A small number of OTAs have a hybrid approach to earning revenue, including commission, subscription, and advertising-based business models.
Relationships between OTAs and travel service providers
As mentioned before, OTAs serve as intermediaries between travelers and travel service providers. Both of them use online travel agencies as self-service platforms. There’s no direct communication with an agent except in rare emergencies when hosts need to contact OTA support.
Everything else is automatic, with a lot of customization options for hosts.
- Getting listed
While every OTA has its own set of guidelines, listing a travel product or service is generally a frictionless process navigated by the website. Hosts are instructed to leave contact information, write descriptions, tick boxes to assign categories to their listing, and add photos of rentals.
- Getting booked
What happens when a booking is made? That’s usually up to the host to decide. The “instant booking” option allows guests to automatically book without the host’s approval, but hosts can also choose to vet prospective customers. In any case, booking reveals the host’s contact info.
OTAs sometimes let guests send a message to potential hosts before they decide to book. After that, guests and hosts can continue communication via SMS, email, or phone.
- Getting paid
How do you get paid as an OTA-based host? Again, that varies from one agency to another. VCCs (Virtual Credit Cards) and independent payment are the two common methods. In the first case, an OTA collects and loads money onto a VCC that hosts use like regular credit cards.
Although independent payment processing is sometimes allowed by OTAs with subscription business models, commission-based payments are much more common. Hosts can set cancellation fees and choose a preferred payment system, such as a credit card or bank transfer.
The role of technology in OTA operations
Technology holds limitless possibilities in the travel industry, many of which are already being explored by online travel agencies. Some of the best OTA tech applications include:
- Search algorithms – Like all search engines, OTAs rely on algorithms to rank search results for specific queries. These algorithms are highly sophisticated and can be personalized based on customer data. They include conversion and average daily rate, guest review score (Booking), competitive prices, quality content, and cancellation rate (Vrbo).
- Pricing optimization – Online travel agencies like Expedia and Booking.com help hosts get more bookings by optimizing their prices. How? They employ data analytics and keep track of supply, demand, proximity, and seasonality. Based on these factors, OTAs recommend or automatically adjust prices to capture travelers’ attention and boost the average daily rate.
- Personalization – More than 71% of customers demand personalized experiences from product and service providers. The travel industry is no exception. Online travel agencies are in a perfect position to provide personalized service because of the amount of customer data they collect daily. Data feeds OTA’s algorithms, allowing them to create custom-tailored bundles and packages based on individual preferences, budgets, and special requirements.
Benefits of using OTAs for travelers
Why are online travel agencies so popular among modern-day travelers? There are several possible answers, but first in line are convenience, accessibility, and option comparison.
Convenience and ease of booking
According to the Trends Global Survey, 76% of global travelers look for apps that reduce the friction and stress of travel planning. Nobody does this better than OTAs. Online bookings are available 24/7 from all devices, but not only that. They are also convenient and easy to use.
The best OTAs have user-friendly interfaces and powerful search filters that allow travelers to research and book trips faster than ever before. Tips and guest reviews contribute to their ease of use and provide recommendations and social proof that further simplify the experience.
Access to a wide range of travel options and prices
OTAs are unmatched in the industry when it comes to the amount of travel products and services they provide. So much so that travelers can plan their trips on a whim, knowing they will never be out of exciting choices – no matter how demanding, frugal, or picky they become.
Here’s an example: not only are there over 28 million accommodation listings on Booking.com, but this online travel giant also allows you to browse based on your current “vibe” – like “romance,” “outdoors,” or “relax.” Expedia and Airbnb have similar options on top of standard filters.
Ability to compare prices and read user reviews
Ample options, searchability, and personalization are a powerful combination. With OTAs, travelers are empowered with choices and can contrast and compare offers and their prices. That is undoubtedly the most attractive characteristic of leading OTAs like Airbnb and Expedia.
Statistics prove that – in 2023, 53% of travelers who used online travel agencies cited it’s because of the speed at which they can plan their trip; 47% said it’s easier to compare prices, and 42% said it’s better to find cheaper deals. Price, location, and reviews are top considerations for OTA users.
Secure payment processing and customer support
Reputable OTAs have secure payment protocols that guarantee speed, convenience, and safety – all with a single click. Most offer a wide range of payment options, as well, allowing travelers to pay for trips using a preferred method, be that a credit card, digital wallet, or bank transfer.
Post-COVID travelers have increasing expectations when it comes to customer service. Premium service, multichannel support, and 24/7 availability are no longer considered a luxury – they are the new norm. Even though they are mostly digitized, most OTAs can afford to provide this level of service.
Conclusion
Online travel agencies are modern-day leviathans – they trump traditional travel agencies in size, impact, and resilience. More importantly, they are a perfect product of their time. Nothing in the travel industry (except for AI) can answer post-pandemic expectations and demands better than OTAs.
One thing is for sure – OTAs will change the industry forever. As technology evolves, human agents will specialize in personal relations and curated service. Online bookings could easily take over all the rest, so professionals, beware. Recognizing OTAs’ significance could be key to a prolific future.
FAQ
🔍 What are the main differences between OTAs and metasearch engines?
OTAs and metasearch engines both allow travelers to research and compare accommodations, flights, tours, rental car options, and other travel-related products and services. The main difference between them is that you can’t book a trip directly from a metasearch engine.
Websites like these only aggregate and promote offers. By clicking on a listing, you get directed to a provider’s official booking page. The engine usually gets a commission based on a pay-per-click model.
💸 How do OTAs make money?
Most online travel agencies don’t charge travel product and service providers for listing offers on their websites, but they take a commission from every booking. Other ways OTAs make money is from fixed subscriptions, ads, or a combination of all these elements.
🤨 Are there any drawbacks to booking through an OTA?
While OTAs have many advantages, some possible downsides of using online platforms for planning and booking a trip include a lack of personalized customer service and deep customization options. Compared to a travel agent, an online travel agency can never meet the expectations of luxury travelers.
OTAs also fall short in arranging complex group trips, such as destination weddings. In addition, OTA prices are sometimes higher than prices set by providers.
🧳 What should travelers consider when choosing an OTA to book with?
The most important factors to consider when choosing an OTA to book with are the selection of travel options, searchability, ease of use, price transparency and discount deals, cancellation fees and refund policies, payment options and security, and customer service and support.
Challenges in Room Mapping: discuss common difficulties such as inaccuracies, time consumption, and the need for constant updates.
Technological Advances: discuss new technologies like blockchain, NLP, or big data analytics that are influencing room mapping.
Case Studies: share real-world examples of companies that have successfully implemented the hotelmize room mapping solution and what improvements they achieved.
ROI of Room Mapping: explain how effective room mapping can lead to increased profits and customer satisfaction.
Compliance and Standards: discuss if there are any industry standards or regulations affecting room mapping.
Choosing a Room Mapping Service: criteria to consider when choosing a mapping service, perhaps including a comparison table of popular options.
