March 11, 2020

Online Channel Split Varies Widely Depending on the Segment

Online travel agencies have faced their share of hurdles across the globe but remain resilient in the U.S. market. According to Phocuswright’s latest travel research report U.S. Online Travel Agencies 2019: Market Sizing and Landscape, OTAs delivered US$78 billion in gross bookings in 2019, a 7% increase from $72 billion in 2018. One fifth of U.S. travel is now booked through OTAs, and most of that is lodging.

The online channel split varies widely depending on the segment. Hotel chains like Marriott, IHG and Hilton Worldwide have tried to leverage loyalty member perks to incentivize direct bookings. Furthermore, despite the presence of branded hotels, the hotel segment is still more fragmented than other segments like air or car rental. The convenience of viewing several lodging options in one location is still attractive to many travelers, especially those who are younger, tech-savvy, price-sensitive and brand-agnostic. The split of online hotel bookings between OTAs and supplier-direct continues to be nearly equally divided.

OTA vs. Direct Supplier

The supplier-direct channel accounts for nearly four fifths of air online gross bookings. The majority of the U.S. air market is controlled by just three major carriers. Furthermore, available carrier routes out of a traveler's home base already restrict airline choice for travelers. The common practice of branded fares and amplified focus on ancillaries have also made ticket purchases more complicated. However, OTAs are adapting to the changing air business. Branded fare options have largely been incorporated by most OTAs, and more, including CheapOair and Expedia, now support basic add-ons like seat selection on some flights.

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