Phy-gital Roundtable: Breakfast Roundup from Germany and Netherlands

02 May '15 | Debjyoti Paul

German Shoppers: Meet Them in the Fast Lane to Phy-gital

15 January '15 | Ralf Reich

Shoppers Will Share Personal Information (But They Don’t Want to be “Friends”)

15 January '15 | Anil Venkat

Modernize or Perish: Property and Casualty Insurers and IT Solutions

14 January '15 | Manesh Rajendran

Benelux Reaches the Phy-gital Tipping Point: Omnichannel Readiness is Crucial

13 January '15 | Anil Gandharve

The New Omnichannel Dynamic: Finding Core Principles Across Industries

13 January '15 | Debjyoti Paul

Technology does not disrupt business – CIO day 2014 Roundup

02 December '14 | Anshuman Singh

Apple Pay – The Best Is Yet To Come

02 December '14 | Indy Sawhney

Digital transformation is a business transformation enabled by technology

01 December '14 | Amit Varma

3 Stages of FATCA Testing and Quality Assurance

06 October '14 | Raman Suprajarama

3 Reasons why Apple Pay could dominate the payments space

18 September '14 | Gaurav Johri

Beacon of Hope: Serving Growth and Customer Satisfaction

05 August '14 | Debjyoti Paul

The Dos and Don’ts of Emerging Technologies Like iBeacon

30 July '14 | Debjyoti Paul

What You Sold Us On – eCommerce Award Finalist Selections

17 July '14 | Anshuman Singh

3 Steps to Getting Started with Microsoft Azure Cloud Services

04 June '14 | Koushik Ramani

8 Steps to Building a Successful Self Service Portal

03 June '14 | Giridhar LV

Innovation outsourced – a myth or a mirage or a truth staring at us?

13 January '14 | Ramesh Hosahalli

What does a mobile user want?

03 January '14 | Gopikrishna Aravindan

Bill Board Effect in the Next Digital Era

Posted on: 20 April '11

It was interesting to read Joe King’s blog on the marketing mental challenge that CMOs will face in the next digital decade. It reminded me of the article by Chris Anderson from the Cornell School of Hotel Administration where he mentions an experiment he conducted to figure out the impact on online booking of a hotel’s own website on listing through online travel agency (OTA) sites like Expedia.

The outcome of the experiment had indicated that online booking on the hotel’s own website (eg. SomeHotel.com) had increased by 7% to 26%, according to conservative estimates, on listing the hotel in the OTAs. The increased percentage does not include the OTA bookings, where the hotel would have incurred a commission expense. He calls this the Billboard Effect in the digital world. He indicates that the listing/commission expense in the OTA site should be considered as marketing expense by the hotel.

In one sense, it indicates the consumer behavior of most of the online booking user segment in the travel industry. They search for availability, price, etc. of a good hotel in a consolidated portal(s) which has content from multiple providers, double check directly at the provider’s website and then book at the provider’s web site. For simple travel itineraries, it would work for the cost conscious traveler and make him/her save some money.

This is similar to the experience I went through once while buying a small bicycle for my son, couple of years back. I went to a big toy shop in Bangalore which housed all the brands of bicycles, but with a higher price tag. After choosing the brand that we liked, I went to a small shop in KR Market and bought the same chosen brand. The price at the shop in KR market was lesser by almost 40% and it was worth the drive to buy the same brand from a smaller shop.

I guess this is where the OTAs are insisting on complete content to be available at their site.

Another interesting point to note is that, when a traveler books a hotel after booking the air ticket, normally the time window available would be around 1 to 2 weeks between these two transactions. In the meantime, the OTAs have an opportunity to position some packages including hotels at the destination city depending on the air itinerary.

On looking at the above, depending on the provider’s size/profile from a marketing perspective, they cannot ignore being present with OTAs, at the least during this digital decade. But, we need to wait and see Google’s strategy with their acquisition of ITA, having conditionally been approved by the U.S. Department of Justice. Is it going to change the game of search and meta search in the travel industry? Is it going to change the way mobile transactions are being done?

Mindtree Blog Archives

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  • Bala

    Hi Jas
    Stopped by after your FB status message. Very well written.
    There is one segment these free for all OTAs completely miss on. The Business traveler. These OTAs conveniently forget the corporate negotiated rates. The last I read around 45% load factor contribution comes from this segment.
    Do you have any data points on this segment and any thoughts on how to take this into account?

  • Saiganesh

    Jas
    Interesting! I had never really digged into the travel market this much. I will get more tips from you before booking my next Hotel stay.

  • Naresh

    @Jas:Industry wide standards for look to book ratio is 7% and anything above is good.Most of the OTAs give best guarantee price. Hotels try to have rate parity agreements. Only in India where online room inventory has just picked up, these kind of issues exist. In case of US or Europe Markets,most of the time the contracts are negotiated with the consolidators and OTAs. Consolidators cannot sell the inventory in retail segment. Rate parity will be maintained as much as possible by the hotel chain/hotel.So consumer cannot get better deal with hotel directly in good hotels.They have better deals with OTA and consolidators. They also allocate inventory at good rates with the OTAs. Meta search works little differently.
    @Bala: There are lot of corporate specific sites by OTAs. Expedia,Travelocity target corporate customers in their specific sites other than travel management companies like BCDs and Reardon who focus only on corporate/business travel.