Looking back and ahead — online travel agency power

Originally published at www.tnooz.com.

As we reach 2016, Tnooz is unveiling its customary series of reflections on the year behind us and what the travel, tourism, and hospitality industry might expect looking ahead.

And, as always, we’ve asked friends and family of Tnooz to help us out.

Here is part seven of our 12-section bonanza — online travel agency (OTA) power.

David Yuan, general partner at Technology Crossover Ventures, a venture capital firm in Palo Alto

David Yuan, General Partner, TCV

The incumbent OTA duopoly of Priceline and Expedia — the “Old Two” — dominated industry headlines in 2015, with M&A further concentrating their power in markets within the US and internationally.

I can see little reason why this consolidation will not continue in 2016 as competing regional and smaller players face stiffening competition for consumers and supply.

As the OTA market consolidates, however, the emergence of direct connect provides new opportunities for hotels. TripAdvisor and Google — the “New Two” — are blurring the lines between OTAs and metasearch sites by enabling direct hotel bookings.

These “New Two” represent two of the world’s largest consumer travel platforms.

Given the relatively attractive commission rates (generally in the 10–15% range), direct connect offers hotels cost efficient methods to a) establish direct relationships with travelers, b) personalize initial stays for customers, and c) maximize long term, profitable relationships.

TripAdvisor and Google made marked progress in 2015 on their direct connect strategies. 2015 ended with Booking.com’s partnership with TripAdvisor and Expedia’s Trivago opening to direct bookings.

These partnerships are an indication of both the progress these “New Two” made in 2015 and the momentum with which they enter 2016.

In my view, 2016 will again feature consolidation driven by the “Old Two”, but this will be offset to some extent by the continued emergence of the “New Two” and the accompanying fragmentation of online travel distribution (largely for the better).

Companies such as SiteMinder — a business that offers hotels an attractive alternative to the traditional global distribution system (GDS) model — play a unique and central role for hotels in that they enable connections with both the Old Two and the New Two.

More than ever, hoteliers are seeking greater control over the marketing and distribution of their rooms and are looking to independent, low-cost solutions as enablers of their success online.

SiteMinder and other like-minded companies will be crucial here as they will continue to provide hotels cost-effective opportunities to compete equally on the Internet (both with the Old Two and the New Two).These “New Two” represent two of the world’s largest consumer travel platforms.

This post is an excerpt. To read the entire article, please visit: http://www.tnooz.com/article/online-travel-agency-forward-back/


For a complete list of TCV investments, visit www.tcv.com/portfolio-list/.
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