What Are Some Of The Key Drivers For The Online Travel Industry In 2017?

by Trefis Team
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With the increasing ease of travel booking and the advancement of technology, the demand for online travel is growing and expected to rise further in the future. The share of online bookings in total travel bookings is increasing for hotels and airlines and with the rise of the millennials who are even more attached to technology, this trend will continue. Hence keeping these in mind, let us explore some of the important trends that can shape the online travel industry in 2017:

Demand For Local Authentic Experience And More Activities

The millennials love to experience the local culture and authentic living while traveling, such as teaching in a remote Himalayan village for a period while traveling or learning yoga while traveling in Thailand. Along with this is an increased demand for activities, for example: kayaking, snorkeling, or mountain climbing rather than just mere sight seeing. There is an increased aspiration to be a world traveler as opposed to a tourist, and this trend should encourage OTAs to include more homestays and vacation rentals on their platforms and strengthen their tours and attractions platform.  In fact, the biggest OTAs are fortifying their vacation rental inventories. Expedia’s acquisition of HomeAway, the world’s largest vacation rental website, is a case in point. TripAdvisor’s Marketplace (that includes its acquisition Viator) is currently the biggest online platform to book tours and activities. Google Trips also recently entered the tours and activities arena.

The Rise Of Travel Bots

In 2016, messaging bots from hotels, airlines, and ridesharing platforms were introduced in the travel arena and this trend is expected to become more popular this year. The travel bots, help answer travel related queries with the help of their artificial intelligence. We have recently witnessed Expedia introduce a voice search service with the help of Amazon Alexa. The feature enables Expedia customers to ask Alexa about the status of their existing flight reservations, it will help them rent cars and also answer queries about the customers’ loyalty program numbers. Global OTA leader, Priceline’s metasearch platform, Kayak, also employs Alexa to help its customers in checking flight, hotel, and car-rental prices. Though Kayak doesn’t allow bookings through Alexa, however, its Kayak Explore feature helps with suggestions on vacation destinations.

Mixing Leisure With Business Travel

With the work culture across industries becoming less formal, business travelers these days wedge in some leisure travel while visiting a foreign location for work. The trend will be further strengthened in the future as more and more millennials travel for business and the fun component become an important part in many professional setups. This might help companies like Expedia that have their own corporate travel segments (Egencia). In order to lure in more business travelers, such companies can tie in other services from their platform at attractive rates. This way, they can gain a competitive advantage over peers who are not focused on the business travel segment.

Hotels Will Continue Promoting Direct Bookings, However OTA Booking Demand Will Also Keep Rising

As we saw in 2016, bigger hotels are continuously luring hotel bookers to their own website for direct bookings. When travelers book through OTAs, hotels need to pay a commission to the latter. This is the reason why direct booking is a more profitable option for hotels. However, given the sheer size of inventories these OTAs carry and the option to choose from the most attractive prices from a host of available offers, OTAs are still ruling and might continue doing so even in the future. As a recent example, Hilton Worldwide recently joined TripAdvisor’s Instant Booking platform, despite its earlier reluctance. Hilton’s inclusion on TripAdvisor’s platform raises suspicions that maybe its “Stop Clicking Around” messaging to promote direct booking through its own website has not been quite successful, so far. Though hotel bookers will continue enjoying a lower rate if they join Hilton’s loyalty program, HiltonHonors, and book through Hilton.com, however, industry experts surmise the direct booking promotions by most hotel chains might not have been such a hit with users, after all.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Expedia

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