Endless Fight For Retention: Why OTAs Work Hard On Their Digital Marketing
Recent years have been full of harsh circumstances to survive in the tourism market. However, it seems that it didn't stop or even ease the competition between online traveling agencies (OTAs). On the contrary, rivalry for a better position on Google’s first page, Facebook, or other social media platforms is getting more demanding and challenging. Why is it so?
The Internet is full of blogs on how to book a cheap hotel, how to travel on a budget, and how to save money while traveling. It isn’t difficult to find accommodation for the holidays. However, every time searching for a hotel, people see tons of ads from leading OTAs in the travel market. Why are they putting so much effort into bombing the market with their ads?
People love traveling. It’s hardly imaginable that it might change. Booking a flight, searching for a cheap hotel, looking for tours - everything is important. It’s unimaginable that people will stop booking hotels. If you are going somewhere, you will definitely need a place to stay. Yes, there are many factors to consider when choosing a hotel: location, services, reviews, and price. The majority of people tend to book hotels via OTA.
Undeniable convenience of using an OTA
The majority of travelers prefer using smartphones to plan their trips. According to this trend, OTAs work on customer experience. Smartphones made around 51% of OTA gross bookings in 2021, 10% more than in previous years. Apart from the convenience of searching for flights, booking accommodation, and other services, some apps and sites provide a personalized experience and search. Also, planning a trip online provides opportunities to compare prices, and read reviews about interesting hotels.
The battle between OTAs
Fighting doesn’t mean that companies are destroying each other buildings. OTAs have been constantly fighting for customers' attention and loyalty. It looks way easier and calmer than you might imagine. For example, Expedia gives 2 points for every $1 you spend on eligible bookings for having free breakfast or spa. Booking offers guests one or more free nights when they book a specific number of nights. Other OTAs provide discounts or cashback for their loyal customers.
Private accommodation is becoming popular
Travelers often book private accommodation when there aren’t any hotels in their location, they are traveling in groups or they prefer having some privacy. Living in private accommodation gives a completely different experience compared to staying at a hotel. Recent years showed that private accommodations becomes popular. Last year Airbnb generated $2.1 billion in revenue, growing 58% year-over-year. This means that some OTAs customers might have shifted from hotels to private accommodation providers. For the usual OTAs, which promote booking hotels, it is a tough spot. The easiest way is to invest in marketing and try to win back customers.
Investing on marketing
On the 21st of September, Skift Global Forum 2022 Google head of Travel Richard Holden shared his ideas for marketing on Google. It is possible to be seen on the internet without any ads but not broadly. As he mentioned, “there's certainly an incentive for a partner who wants to always appear in that booking module to buy the ad”. What do the leading OTAs do? In 2022 Q2 Booking Holdings spend nearly 51.3% of its revenue on marketing, resulting in marketing spend of $2.2 billion. Airbnb contributed 80% of its revenue to marketing. Looking at these amounts of money, promoting an independent hotel might feel like fighting with titans if you are a small business. A few hundred dollars monthly for performance marketing is less than a drop in the ocean against OTAs.
Why do OTAs spend so much money on marketing?
Due to the popularity of private accommodation platforms, OTAs are fighting for users because it is 5 to 25 times more expensive to acquire a customer than to keep one. Increasing the marketing budget is one of the most important factors in taking them back. Every penny is spent in order to turn one-timers into loyal ones and to build trust between the brand and customers. Having a loyalty program for customers assures repeat business.
Importance of having loyal customers
Loyal consumers buy more often, spend 60% more per transaction, and are five times more likely to choose that brand for future purchases. Let’s not forget that satisfied customers recommend the product to their friends and share their positive experiences with the brand in reviews. Increasing customer retention rates by 5% can increase profits by 25% to 95%. It is insanely huge money for OTAs.
Is money really the key factor to reach the audience? Well, it sure speeds up brand awareness and eases competition with OTAs. On the other hand, let’s not forget the hard work. Continuously creating excellent and useful content, building traffic, and always analyzing and improving customer experience with products consume much time but help to stabilize the brand image on the market.
Every successful company wants to be the best. The same goes for OTAs. There are some leading companies who want to stay in business, leave the travel market in a conservative phase, and most importantly, skyrocket their revenues.
Tip before booking a hotel:
As you have read before, OTAs have loyalty programs. However, if you want to be sure that you are getting a good deal, use Ratepunk. It is a free browser extension that scans hotel booking sites to ensure you always pay the fairest and cheapest price.