It was hard to miss the agreement between Travelocity and Expedia last month. The Online Travel Agencies announced that Expedia will power the complete technology for its North American sites. For years in a row both OTAs have been big competitors in this market, but by signing the agreement Travelocity will be nothing more than a marketing brand for the Expedia business in the U.S. and Canada.
Only a virtual merger
Although it seems like Expedia is buying Travelocity, the latter, good for 16% of all OTA bookings in the US, will remain wholly-owned by Sabre Holdings. This could very well be the start of an overtake in the future though; Dutch BCD Travel bought Travelocity’s corporate travel division earlier this year. For now, it seems Travelocity is just giving in to the intense competition on technology needed to keep up with the demand of the online travel buyer. It chooses performance-based marketing fees powered by Expedia instead. Expedia, for their part, seems to have a perfect deal: it protects Travelocity from being taken over by a competitor (without making any major investments), it boosts its revenue from the North American market, and it increases its buying power in their negotiations with hotels. Important issues knowing that Priceline is heavily promoting Booking.com on the other side of the pond.
Similar deals for Booking.com
The attentive guys at Tnooz informed us a few days after the Expedia-Travelocity announcement that they have noticed that Booking.com has made similar deals with a number of European OTAs. No less than three OTAs (Opodo, GoVoyages and Edreams) are clearly making use of Booking’s technology.
The entire Booking.com hotel offer, interface and functionality has been copied straight into the three portals. Another sign of well-known brands that throw the towel and choose to buy technology from a competitor rather than building it themselves – a costly operation. Apparently, OTA margins are under pressure and to be on top of the game the cost of technology is getting too high for some. Ironically, the continuous rise of metasearch, originated to offer consumers more price transparency, also contributes to this slow, but clear consolidation of the OTA market.
What does this mean for hoteliers?
Last month we reported that many hoteliers are getting fed up with the high margins OTAs are asking. Unfortunately they have to fear even more buying power from Priceline and Expedia now they have even more channels to sell to. Especially the smaller hotels will suffer from this growing monopoly because they are not able to set up a successful direct online distribution channel on their own, like the bigger hotel chains are doing. For the smaller hotel it remains key to be available on as many channels as possible and be creative in trying to get your guests to book directly at your property.
Update: more acquisition news
Afbeelding cc: C Slack