Online travel agencies losing out?

November 22, 2007

A PricewaterhouseCoopers report is confirming what I had surmised many months ago. Online travel agencies (the likes of Expedia and Opodo) are beginning to lose business in favour of the customers booking direct with suppliers.

They say that online travel agencies are losing their competitive edge and now that suppliers of travel products are maturing in their use of the internet it’s not all going their way anymore.

This has been coming for a while. The agencies have got so powerful that they’ve let their fingers off the pulse. Airlines and hotel chains are engaging online marketers themselves instead of purely relying on the distribution channels they used to use. They now control their own inventory and therefore their own destiny (and profits).

Loyalty schemes have a lot to do with this. Airline frequent flyer points are a massive draw and encourage direct booking, hotels now have similar schemes and the online travel agents can’t replicate these.

This trend is only going to continue unless the aggregators work out new ways to add value for customers.

The other issue which the report doesn’t mention is the impact tour operators may be having on the online travel agencies. Tour operators are getting more web savvy too, employing better quality people and better quality tactics to position their offering more effectively online. As tour operators websites improve and product offerings get more dynamic (through the introduction of new reservation systems, something that is going on at many tour ops) the online travel agencies are going to lose further ground.

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