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Online Travel Companies Choose Their Targets

Booking methods depend on travelers' needs

December 30, 2008

Suppliers seem to have won the battle for online leisure and unmanaged business travel market share in the US, according to December 2008 PhoCusWright data.

Fully 61% of online travel sales are now made directly at supplier sites, compared with 39% for online travel agencies (OTAs) in 2008. This balance is projected to hold steady through 2010.

US Online Leisure/Unmanaged Business Travel Sales by Suppliers vs. Travel Agencies, 2008-2010 (% share)

Online travelers have learned to book their reservations on travel suppliers’ Websites to avoid intermediaries’ service fees and collect loyalty points. Suppliers save money from direct bookings and thus encourage this behavior with aggressive, lowest-price guarantees.

Yet market share does not tell the whole online travel story, PhoCusWright said.

OTAs and travel service suppliers appeal to different types of travelers. Infrequent leisure travelers, who may take just a few trips a year and are more price-sensitive, prefer OTAs. Those companies are therefore concentrating on unconverted lookers.

Frequent, loyal leisure and unmanaged business travelers, who focus on schedules, convenience and specific suppliers head straight to those sites. Suppliers are catering to this audience with more personalization, loyalty and community.

Jeffrey Grau, senior analyst at eMarketer, said that fewer travelers are booking their trips online overall.

“This is not due to personal financial concerns—online travel bookers are an affluent demographic,” Mr. Grau said. “Rather, it is caused by frustrations related to the planning and booking capabilities of OTAs. This, in turn, is spurring a renewed appreciation for the expertise and personalized services offered by traditional travel agents.”

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