Online Travel Agents

What are Online Travel Agents (OTAs)?

An Online Travel Agent provides similar services to a traditional travel agent, only the customer uses a website to find product they are interested in, check availability, book and pay for the product or service. Just like traditional travel agents, OTAs charge the product supplier a commission when they make a sale. There are countless online travel distribution sites available with more popping up all the time, but few of them are Online Travel Agents. They generally fall into one of three categories:

Online Travel Agent Sites

OTA sites allow consumers to check live availability and pricing then book travel products in real time through the OTA site.

Examples include Agoda, Booking.com and Expedia.

Tutorial39A-Bookingcom_498x200-1

The financial transaction on these sites is generally between the customer and the OTA. The OTA is acting as the merchant who takes the money and forwards the net amount (i.e. payment less commission) to the tourism operator/supplier (usually after travel). There are plenty of variations so it is important businesses review all the terms and conditions of the OTA in relation to commission payable and the process involved.

  • Some OTAs forward the funds to the operator/supplier prior to travel
  • In some cases the customer’s credit card is used to secure the booking and the guest pays directly upon checking out of the hotel (with commission invoiced after departure)
  • The terms and conditions agreed to by the customer are those of the OTA
  • If customers need to amend or cancel the booking they need to contact the OTA. They basically act as a traditional travel agent does, but with the booking taken online.

Sites that facilitate search then redirect to a third party site for bookings

These sites allow the customer to search for travel products and then redirect them to a third party site where the booking is made between the customer and a third party (this could be directly with the operator/supplier or an OTA).

Examples include www.tripadvisor.com, Google Hotel Finder, www.skyscanner.com.au and www.kayak.com

In some cases the website includes indicative pricing only and customers are directed to a third party site to check availability/pricing and make (or request) the booking (e.g. Total Travel, Stayz).

In other cases customers can check availability and pricing but are still redirected to a third party site to make the booking. For example, About-Australia.com and hotelscombined.com.au allow customers to search lots of other booking sites through their site and once the customer has decided what they want to book they are redirected to a third party site to make the transaction (i.e. an OTA site).

Tutorial39A-Hotels_Combined_001_500x200-2

Sites that aggregate (collate) search results from lots of other sites are known as aggregators or metasearch engines and generally receive payment (commission) if a booking is made as a result of the redirection from their site (i.e. for the referral).

Sites that take bookings but don’t act as merchant (i.e. don’t process payment)

These sites allow the customer to stay on the original website to make the booking so it appears seamless (i.e. they do not redirect to another site). However, the booking is still actually between the customer and a third party (the operator/supplier or OTA) so the site does not act as the merchant.

Examples include some of the state/territory government tourism sites such as visitvictoria.com and southaustralia.com.

Their terms and conditions clearly state they are a booking facility or intermediary only, even though they process the payment on their site.

  • Often with these online reservation services the financial transaction is between the customer and the tourism operator. The tourism operator generally receives payment at the time of booking (less commission payable to the online distributor) directly into their nominated bank account. This would mean the merchant listed on the customer’s credit card statement would be the name of the tourism operator.
  • The customer agrees to the terms and conditions of the tourism operator / supplier (as well as the booking site).
  • Amendments and cancellations usually need to be made directly with the tourism operator/supplier.
  • These sites are known by many names including online reservation or booking service, travel portal and online distributor.

It is important to keep in mind that there are no hard and fast rules and the above points are indicative only. For example, there are some sites that aren’t strictly online travel agents but do facilitate both search and booking, and in some cases act as the merchant for payment. Always read the terms and conditions of a distributor to check the payment process and policies.

A Different Approach – Airbnb

One very different distribution site with an interesting business model is www.airbnb.com which allows private individuals to rent out properties (could be just a room or whole apartment/house) directly to travellers. The site allows potential guests to see the accommodation and hosts, check pricing and availability, communicate with the hosts, and make a booking/payment (which the hosts can reject if they are not comfortable with the guests). It’s free to list, with a 3% commission charged by the site. They transfer the payment (less commission) to the ‘host’ 24 hours after guests check in. Typical accommodation is an apartment, house or B&B – it’s not designed for hotels, motels etc … but if you have a cave, igloo, castle or yurt available for guests then it could be perfect for you!

Summary

Not all distributor sites are Online Travel Agents – the table below shows how they differ from other distribution sites.

Online Travel Agent SiteOther Distributor Site(Online Reservation Service, Travel Portal, Travel Metasearch Engine etc.)
Contracted partiesConsumer is entering into a contract with the agent and agrees to their terms and conditions.Consumer is often entering into a contract with the supplier (operator) and agrees to their terms and conditions.
Cancellations / AmendmentsCancellations and amendments are made through the agent.Cancellations and amendments must generally be made directly with the supplier/operator.
PaymentThe OTA is the merchant (i.e. the website name appears on the customer’s credit card statement). Payment is generally on account meaning funds are held by the agent and forwarded to supplier/operator just prior to or after travel (as stipulated in the contract) just as an operator would normally deal with a traditional travel agent.The supplier/operator is often the merchant (i.e. their accommodation or tour company name appears on the customer’s credit card statement). Payment (less commission) is often paid upon booking to the supplier/operator (i.e. up-front). To act as an online merchant (i.e. process payments for online bookings) the operator needs to have an online merchant service facility (OMSF) established with their bank. An OMSF enables consumers who book product to pay securely online, with the booking revenue deposited directly into the operator’s nominated bank account. The bank takes a fee of around 1%.

How do OTAs source their product?

OTAs can source their product using different methods such as wholesalers, channel managers and direct contracting:

Channel managers

Channel managers (such as SiteMinder, Resonline and Levart) allow tourism operators to manage inventory which is distributed across multiple sites and only have to update the information in one place (refer to Understanding Online Distribution). Through these sites operators can choose to opt in to various distributors, many of which are OTAs. Opting in involves agreeing to the terms and conditions (including commission) of the distributor.

Direct contracting

This is a more traditional approach where either the OTA or the operator initiates a relationship (many OTAs have online forms on their website operators can use to register their interest) and a contract is agreed to. Some OTAs provide an extranet service that allows operators to set room rates, manage inventory, upload content, create promotions and view performance reports. Extranet means a computer network to which outsiders have controlled access (i.e. through a site requiring a password).

How much commission do OTAs charge?

You can expect to pay OTAs 10-15% commission.

A frequently asked question is about commission charged by OTAs that also have inbound or wholesale divisions. Inbound Tour Operators (ITOs) work in the international marketplace and generally charge suppliers/operators around 30% commission, much of which is then passed along the distribution chain to international wholesalers and travel agents. Likewise, operators/suppliers are used to paying around 20% commission to wholesalers, who then have to pass about half of that to a travel agent. Some ITOs and wholesalers have a consumer-facing website (i.e. customers can book directly with them, cutting out the middle-man) and operators have asked whether they would be paying the higher commission rate for products sold in this way. It would certainly pay to clarify this with the distributor upon signing a contract with them, but their online content should be contracted separately and tourism operators would expect to pay 10-15% commission for product sold through this method.

Do all OTAs sell exclusively to consumers?

Not all OTAs sell exclusively to consumers; some OTAs concentrate on making their online travel product available through other distributors such as travel agents (traditional and online) and wholesalers.

Instead of a Business-to-Consumer (B2C) business model, they have a Business-to-Business-to Customer (B2B2C) model. This means the product they have contracted does get sold to individual consumers but only after it has passed through another link in the distribution chain.

Other OTAs prefer to focus on corporate travel so this would be a Business-to-Business (B2B) model.

GTA (www.gta-travel.com/en/home) and HotelClub’s agent site (www.hotelclubforagents.com/sp/HotelClubforAgents/HomePage) are good examples of organisations/sites that focus on distributing to the travel trade.

Just like the traditional distribution system (i.e. Inbound Tour Operators, wholesalers and actual shop-front travel agents), the commission payable to an online distributor will be higher if they in turn need to pay commission to a travel wholesaler or agent. In return they can generally offer you a larger distribution network.

Why do I get bookings from a site I have never even heard of?

Operators often comment that they are receiving bookings from online distributors they have never heard of, let alone signed an agreement with.

One reason for this is because many companies have multiple brands (websites with different names) and automatically make the product available across these brands. This should however be stipulated in the contact between the operator and the distributor.

Also, there are a lot of relationships between OTAs and other distribution points. Some OTAs have thousands of affiliate resellers which means their content (all or just some, for example a particular region) is available on thousands of sites anything from a dedicated travel site through to a completely unrelated site.

An example might be a sporting group or school undertaking a tour. On their web page about the upcoming trip they might include a link to an OTA search engine (for the cities they are going to) so parents and friends can book their trip. Any bookings made as a result of clicking the link will earn the affiliate (in this case the sporting group or school) a commission.

Let’s look at another example:

An accommodation provider using SiteMinder as its channel manager opts in to booking.com as a distributor (i.e. agrees to their terms and conditions including commission level). This means that they would not only be available to be booked through the booking.com site (in 41 languages) but also on other sites that draw on the site for their content (such as About-Australia.com.au).

Will OTAs bring me domestic or international business?

The answer is potentially both, depending on which OTA tourism operators select. Some focus just on the Australian domestic market but there are many OTAs with a global audience that have a huge range of Australian product. Where available, this information is included in the company profiles contained in the advanced tutorial.

7. Do all OTAs focus on distressed inventory?

Not all OTAs focus on distressed inventory. Distressed inventory refers to excess capacity (generally accommodation) that operators are prepared to sell at a reduced rate rather than have it empty. There are certainly OTAs that target travellers who are prepared to book at the last minute to get a cheaper rate (obviously at the risk of missing out on their choice of accommodation). Typically these sites have a short booking window (only showing availability for the coming weeks) resulting in a short lead time (i.e. the time between when the booking is made and when travel will be undertaken). However ,many OTAs have booking windows of 365 days (i.e. bookings can be made up to a year in advance), some of which also offer last minute deals. Where available, this information is included in the company profiles contained in the advanced tutorial.

Key Players

This table provides an overview of some key retail (i.e. consumer-facing) OTAs in the Australian marketplace. Generally they have a business model that is how we have described it in this tutorial, but some have the dual role of reservation service (contract between the consumer and the tourism operator/supplier) as well as the capacity to act an OTA (where they are the merchant).

If you are an online travel agent and would like to update information or be included in this tutorial, please contact fabienne@digitalcoachinginternational.com. The Tourism Tribe reserves the right to include companies and sites at its discretion.

OTA NameWebsite(s)OwnershipProductNotes
Agodawww.agoda.com plus local sites in other languagesPricelineAccommodation onlyAccommodation provider for Jetstar packages (not stand-alone accommodation bookings, which are provided by Hooroo).
Need It Nowwww.needitnow.com.auAustralian Online Travel (The AOT Group)Accommodation and car hireAs well as its online division (which has other brands in addition to needitnow.com.au), AOT is also a domestic travel wholesaler and inbound tour operator.
Booking.comwww.booking.comPricelineAccommodation onlyAll bookings are guaranteed with a credit card and guests pay directly upon checking out of the hotel (commission invoiced after departure).
Ctrip.com (Chinese)www.ctrip.comCtrip.com International Ltd. (CTRP)Flights, accommodation packages, car hireCtrip.com is the largest online travel agency in China.
Discover Australiawww.discoveraustralia.comDiscover AustraliaAccommodation, car hire, tours, flights, packagesDiscover Australia is a major Domestic Wholesaler and Inbound Tour Operator.
eDreamswww.edreams.comOdigeo The Online Travel GroupFlights, packages, accommodation, car hireOther affiliated brands include opodo.comand govoyages.com.
Expediawww.expedia.comExpedia, Inc. (also have other sites including www.hotels.comand www.elong.com, China’s second largest booking site)Flights, hotels, rail, car hire, cruises, holiday packages, activitiesProvide all operations (product and customer service) for Travelocity.
Flight Centrewww.flightcentre.com.auFlight Centre Ltd.Flights, packages, accommodation, rail, tours,  cruises, car hireFlight Centre Travel Group have other sites including www.escapetravel.com.au (full-service online and traditional travel agency) and quickbeds.com.au.
Helloworldwww.helloworld.com.auHelloworld Limited (formerly Jetset Travelworld  Limited)Flights, accommodation, packages, car hire, cruisesHelloworld Limited has many other brands including Qantas Holidays for details see www.helloworldlimited.com.au/AboutUs/Ourstory.aspxÂ
Hostelworldwww.hostelworld.comWeb Reservations International (WRI)Accommodation (hostels, campsites, self-catering  accommodation, B&Bs, budget hotels)Budget, independent and youth travel market.
Hooroowww.hooroo.comQantas GroupAccommodationProvide stand-alone hotels for Jetstar and Qantas.Readyrooms.com, a site for travel agents, is also operated by Qantas Holidays Limited, a wholly owned subsidiary of Helloworld Limited (formerly Jetset Travelworld Limited).
Orbitzwww.orbitz.comTravelportFlights, hotels, rail, car hire, cruises, holiday packages, activitiesOther Orbitz sites include hotelclub.comratestogo.com, asiahotels.com, ebookers.com
Quickbedswww.quickbeds.com.auA division of Flight Centre Ltd.Accommodation onlyFlight Centre Travel Group have other sites including www.flightcentre.com.au and www.escapetravel.com.au(full-service online and traditional travel agencies).
Roamfreewww.roamfree.com.auAccommodationIn some cases Roamfree acts as a distributor site where they are an intermediary (i.e. transactions are between the accommodation supplier and the customer). In some cases Roamfree acts as an online travel agent, with Roamfree processing the payment they are a licensed travel agent.
Travelocitywww.travelocity.comPackages, hotels, car hire, flights, cruises, attractions, eventsExpedia will be providing operations (product and customer services) for Travelocity from 2014. This means Travelocity will become a distributor of Expedia-contracted product and not an OTA in its own right. Lastminute.com is also a Travelocity site.
Viatorwww.viator.comViator was recently acquired by TripAdvisorTours and activitiesAs well as having its own consumer site, Viator provides tours and activities to many other OTAs. They contracts wholesale rates directly from local operators.
Webjetwww.webjet.com.au + other local sitesPublic company listed on the Australian Stock Exchange since 2002.Flights, accommodation, holiday packages, car hire, insuranceWebjet also has the Zuji.com.au brand.
Wotifwww.wotif.comRecently acquired by Expedia.Accommodation, flights, packagesWotif Group also has the Lastminute.com.au site.