Global Tourism Market: The Emergence of Online Travel Agencies

Thanks to the rise of online travel empires and mobile devices innovation, the tourism market has become the core industry across countries. The market has been dominated by top online travel agencies (OTAs), causing numerous M&A transactions over small and medium players. Thus, well-established and traditional agencies have been facing fierce competition.

Overview of the Online Travel Agency

The OTA market is expected to be valued at 1,091 billion USD by the end of 2022 (according to Allied Market Research – AMR). The core purpose of online platforms is to simplify the travel planning process for users. The driving force of the market includes flight bookings and accommodation and hotel reservation software, tour booking platform, which provide users with the highest level of convenience and time-saving features.

From the customer context, they are more open to online payment and appreciate the variety of potential choices. The main distribution channels of these online solutions are mobile applications and websites. Millennials leverage the online travel agency more than other generations so that it is the dominant tool they use for trip planning.

The target audience of OTAs refers to young professionals, who lie in the age group of 22 to 31year old. In comparison with the older population, they are more willing to spend generously on traveling for exploring and experiencing new countries and new cultures. Whereas, these youngsters are more tech-savvy and ready to spend time and effort in adopting new products and services.

Their usual behaviors relate to make arrangements on their mobile phones, browse influencers’ reviews on reliable social media sites, and conduct online research. The decision they made for the trips are massively influenced by their friends and key opinion leaders online.

On the other hand, according to AMR, the Asia-Pacific and the most crowded countries like India and China refer to the most lucrative market. As these countries are on the way to complete their technology facilities that their population has more disposable income, OTA tourism is going uphill.

Mobile travel applications serve as catalysts for the flourishing of the OTAs. With mobile apps, users enjoy the luxury of real-time support and instant satisfaction with numerous features created based on the customer’s journey. From the quick-check for room availability to on-site support that is directly integrated into hotel management software, tour booking platform, or travel ticketing systems. Companies who are working in the tourism industry can benefit from placing their promotion program, travel package, and other kinds of branded content to create a valuable touchpoint with the customers.

Online Travel Agency – Airbnb: Where Is the Empire Heading To?

As the big picture of the industry seems bright, after the tourism industry took a severe hit from the COVID-19 pandemic, OTAs are suffering. Some of the most well-known OTAs including Expedia, Airbnb, Priceline Group, Trivago, and TripAdvisor are struggling with holding on to their businesses. Not only travel business, several software outsourcing companies for those OTA have also faced with clients’ cancellation due to lack of affordability projects cost.

Let’s take Airbnb as an example of a successful OTA software. According to CNBC, in 2017, Airbnb is valued at 31 billion USD. By the end of April 2020, the value drops to 18 billion USD. In May 2020, the company was forced to lay off about 2,000 people to cut down on cost. Airbnb’s representative also stated that the revenue forecast for the company in 2020 decreases by 50% compared to 2019. With 7 million listings on its platform, Airbnb was going through the darkest phase since its establishment in 2008.

To deal with the massive cancellation of guests around the world, Airbnb released the Extenuating Circumstances Policy to allow a refund and free cancellation. As governments were taking social-distancing measures, especially removing short-term rental from the list of the essential services, Airbnb has gone into big troubles. Their hosts, who were relying on the income of listing their homes, are now in a tricky position. Their guests, who had paid for their accommodation long ago, cannot retrieve their money despite the fact that Airbnb has implemented proper policies for booking during COVID-19 time.

Airbnb continuously called for funding from giants in order to sustain the business and provide adequate support for its hosts and guests. The company has spent 250 million USD to support its hosts who were suffering from income loss, but the effectiveness of the action is still questionable. Some guests got their refund, and others did not. Airbnb is surrounded by both good and bad rumors and reviews because of these instances.

The empire is struggling to sustain its business. The company that has been built in 12 years was shaken in a matter of weeks. However, Airbnb still stands on its feet and finds its way back on track. Many experts have a positive outlook about the future of the company after the epidemic as its business model is concrete enough.

To sum up, in the last few years, as OTAs are showing they are the future of the tourism industry with the prominent advantages over traditional ones. But with the damages caused by the pandemic, they are facing the most prominent challenge. In the next 3-5 years, it is expected that they will grow again with their resilience and technology innovation.