Is consolidation in US’ OTA segment round the corner?

As travel suppliers continue to target consumers with a “direct” approach in the distribution chain, the pressure is mounting on online travel agents to differentiate themselves.

Published: 06 Jun 2007

As travel suppliers continue to target consumers with a “direct” approach in the distribution chain, the pressure is mounting on online travel agents to differentiate themselves.

According to, CIBC analyst Paul Keung said, “What we’re seeing is the US online travel market maturing with consumers wondering where they find value.”

The report highlighted that in terms of total customer awareness, Prophis eResearch, a Toronto-based travel research firm, reports 97 percent awareness for Expedia and Travelocity, 96 percent for Orbitz, and 92 percent for Priceline, with no other company above 86 percent.

For 2007, Thomas Weisel analyst Jake Fuller estimates $18 billion to $19 billion in total US business booked both domestically and abroad for Expedia, $12 billion for Orbitz, $11 billion for Sabre and $4 billion for Priceline. The figures include Fuller’s prediction of an almost 25 percent bump for US bookings growth to $47 billion for the year, as per the same media report.

Last year, speaking to’s Ritesh Gupta, Tracey Weber, chief operating officer, Travelocity had said, “Undoubtedly, consumer expectations are increasing. The traveling public has made it clear to us that they want:

· Access to tools that help them find the best price;

· Accurate and visually-rich hotel content throughout the shopping experience;

· A low price guarantee;

· Strong customer service to help them when they need it.

These increasing expectations have created a white-hot competitive environment within online travel. It is essential for OTAs to have strong execution on these foundational elements. Another key trend is the increasing use of Internet-based tools to plan trips as well as usage of community sites for sharing travel information. Customers see the benefits and feel the excitement that user-generated content, travel-based community environments, and trip planning tools bring to their trip planning. Travelocity is redefining the meaning of “full-service” travel by combining traditional, personalised service and dependability with the latest online tools.”

To maintain their independence and stave off competition, online travel agencies in Expedia’s shadow must differentiate their products and brands, analysts say, according to “To do this, Orbitz has focused on its TLC programme, which includes alerts for late flights and coordination between each of the companies in a packaged travel deal, while Travelocity, on the other hand, is trying to offset an increase in customers booking directly with airlines and hotels by striving to become liable for every part of a customer’s trip, according to Chief Executive Michelle Peluso.”

As per the information available, Expedia has earmarked more than $300 million for capital expenditures over the next three years, with its target possibly set on any of its three largest competitors.

According to the report, Fuller felt that Orbitz might be the most likely choice.

“Analysts say another area where online travel agencies can distinguish their products and offerings is by going overseas. In Europe, for example, three of the four chose to buy into the market, prompted by Orbitz's decision to buy UK online travel giant Ebookers,” pointed out the report. “Priceline, however, didn’t buy an already established European agency. Instead, the company focused on becoming the most prevalent US-based agency in developing areas. In places like Hungary and the Czech Republic, which have hotels unaffiliated with big chains, Priceline enables consumers to search for the best deals online, and has become the easiest way for many mom-and-pop hotels to find guests. So far, Priceline’s decision has paid huge dividends, with earnings for the most recent fourth quarter more than tripling and pro forma earnings five cents a share above analysts’ estimates in the third quarter. Following both earnings releases, the company's stock shot up more than five percent.”

Related Reads

comments powered by Disqus