Should your travel business partner up with an online travel agency (OTA)?
Simply put, working with OTAs is one of the best ways for travel businesses to increase sales because it helps to get your products in front of a larger market. The gross bookings for OTAs are expected to exceed the pre-pandemic levels, this is according to the U.S Online Travel Agency Market Report (2021 - 2025).
Although it is a highly effective method, you also need to consider all the variables and weigh up whether the OTA adds value and compliments your business, instead of cutting too deeply into your profits and taking over your booking operation.
In this guide, we’ll explore the most important steps and strategies when working with OTAs.
Online Travel Agencies (OTAs) are websites that sell tours, travel experiences, hotel stays, airline tickets, rental cars, and anything else that a travel agent would provide. These websites do not sell their own services. Instead, they act as a reseller.
OTAs are successful because they are well-known brands by travelers. Travelers, therefore, trust OTAs and use them as a first stop when making a booking.
Some of the most popular OTAs include companies like Expedia, Booking.com, Intrepid, Orbitz, Travelocity, and Priceline. Some OTAs specialize in selling tours and experiences, like Viator, GetYourGuide, Klook, and Tiqets.
Travel businesses can use OTAs to resell their tours and experiences. The advantage of doing so is that it provides a larger audience and more reach for the travel business, helping them increase brand awareness and sell more tours.
The downside is that OTAs take a commission, so tours and experiences sold through them are less profitable for the travel business.
The most popular online travel agencies are far more well-known than the average SME travel business. Think about brands like Airbnb, Booking.com, and Expedia - these are generally the first place that so many travelers go to discover and book travel experiences. If your travel business is not listed in these OTAs, you may be missing out on potential sales.
Travelers also put a great deal of trust into OTAs. These platforms are convenient and easy to use, so many travelers don't look beyond them when booking and planning their trips.
The way the tourism industry works these days, relying on your website only is usually not enough. In order to keep up with the competition and ensure you get as many sales as possible, your business should expand its reach through OTAs.
Before just diving in and partnering up with every OTA out there, it’s important to have a strategy that outlines your goals for working with them. It pays to figure out how to use these sites to increase bookings without becoming dependent on them. This comes down to striking the right balance.
Start by understanding all of the different agencies that exist in your niche and how they operate. Some agencies are more exclusive, and carefully select a few travel companies to work with within specific areas.
Others try to develop as large and broad of a network as possible, offering travel experiences across all markets. Some agencies are global, and some are area-specific.
Once you have made a list of all the relevant OTAs for your travel business, you will need to figure out whether they will be a good fit. To do this, establish the key issues or challenges that your business is facing, and ask yourself how the platform will be able to address this.
For example, you could consider the following questions:
Once you have reviewed the agencies that exist and have a better understanding of how you would like to approach them, it's time to find the right ones for your travel business.
Here are a few of the most important steps and considerations to take before working with OTAs.
Online travel agencies are not all made equal. You’ll need to have a clear picture of your travel business and what you want to achieve by working with the OTA. Then you can start to select the exact companies that would be the right fit for you.
Consider the kinds of experiences you provide, who these are targeted towards, and at what scale you want to sell them. If your ability to meet demand is very limited, then you might not want to get your travel experiences out on every OTA.
First, consider the geographic and demographic target audience of the agency. Ideally, working with an OTA should help you access a new market, and not just take over the market you’re currently serving. For example, if you sell tours in the US and are struggling to reach travelers planning their trips from Europe, you might want to work with a platform that targets the European market.
Establish what type of customer connection you want to create. OTAs generally take the personal experience out of customer connections, so establish how important direct contact with your customers is. Understanding what customer experiences on the different platforms looks like is important before choosing which ones to work with.
You’ll also need to make sure there is an operational fit. The OTAs booking and distribution process needs to support the way your business operates. Customers who book directly through your website should still have the same type of experience as customers who book through the OTA.
Finally, look into the other travel businesses who the OTAs work with. Will this impact your bookings? If the OTA focuses on major players and competitors within your niche, you might want to work with an OTA where there is less competition.
Once you have identified which OTAs best suit your travel business, you’ll need to know what you’re signing up for. Each OTA works differently, so you should gauge whether the specifics of working with the OTA match your business plan.
Look into the terms and conditions and make sure they are a good fit for your business. Does the OTA include some difficult conditions that might hold back your specific tours?
What does the OTAs cancellation policy look like, and how will this affect your tours? This should not be too risky for how your business prepares for tours. Some OTAs allow for very short cancellation timeframes that might not make sense for your business.
Consider the refund policy of the OTA. Look into how flexible this is and how it works for your business and your customers. If somebody books a tour and does not show up, how will you be compensated?
You should also understand how payouts will work. What currency does the OTA use for payouts and will this make sense for your business? There might be pricey conversion fees that you have to deduct, which could make a significant impact on the value of the tours that you sell through the OTA.
Once you know that the OTA makes operational sense, you’ll need to decide how much the OTA is worth to your business. This involves carefully considering the OTA commissions and financial specifics.
Start by establishing a commission cap. This is the maximum amount that you are willing to pay in OTA commissions. If the OTA charges beyond this, then it probably won’t be worth it.
If the OTA commissions are too high, consider whether there is room to negotiate. Having a clear understanding of what makes your business stand out and what kind of specific value it can add to the OTA. You might have some leverage to negotiate a better deal.
You’ll also need to know how much of your travel business availability you can set aside for the OTA. Ideally, the OTA should complement your direct bookings and it shouldn’t be what your business relies on. Establish how much availability you can set aside for the OTA and make this clear. Of course, you will need to make sure that can meet this demand.
Finally, your business will need to consider promotional pricing from the OTA. Often, OTAs will run special discounted offers. These can be a great way to attract more sales, but the price cut might not make it worth it. So if the OTA offers promotional offers and price amendments, understand whether this will be worthwhile for your business early on. Small price differences can make a big difference.
We’ve covered the most important steps and considerations for working with OTAs. However, there are other small details to think about when creating strategic OTA partnerships. Here are a few essential factors to consider.
Do you want to work with a bunch of different agencies or just focus on one? The advantage of working with multiple OTAs is that you can access more markets and a wider audience. Ultimately, this means more sales. And if you work with two different ones who compete with each other, you will always have a presence on the one that gets the most attention.
However, you will need to ensure your offers across all OTAs are consistent. It can be confusing for your customers if your travel business has multiple deals, pricing options, and booking terms spread out online.
You also need to ensure your business stays in control. If you work with too many agencies you might depend on these more than direct bookings.
Your travel business will lose a portion of profits to OTAs. Yes, you will still be able to operate profitably through OTAs, but this isn’t always the main reason to use them.
Travel businesses might want to work with OTA purely to increase their popularity and brand awareness - even if this means taking a hit in revenue. OTAs are there to be used as a sales tool, but they might also be used as a marketing tool. This depends on what your business is aiming to achieve.
There are many discount OTA sites that exist. This can be a great way to sell more tours, but it could also lead to people perceiving your brand as being discounted. If you rely too much on these OTAs, then people may start to expect discounted prices as the norm.
Working with OTAs is the norm for travel businesses as it helps to maximize sales and brand awareness in today's online world.
When contemplating venturing into the realm of OTAs, consider all the variables and make sure that they complement your business. Follow the steps and considerations above, and working with OTAs will open a dynamic range of benefits for your travel business.