Direct bookings are the future…

Online travel booking got going in the mid-1990s. Fuelled by an unprecedented economic boom and an explosion in cheap consumer credit, it flourished at an incredible rate for the next 10 – 12 years. In recent times, however, the combination of a huge banking crisis, a sovereign debt crisis and economic slowdown in China has resulted in significantly more sluggish growth. None the less, it still accounts for a third of the global travel market.

As far as online travel agents are concerned, two main winners have emerged in the post-crisis world (or perhaps, more accurately, the next-phase-of-the-crisis world). They are Priceline (which owns and Expedia. CNN Money describes their rise and current situation well:

“For most of that [boom] time, sites like Priceline, Expedia and privately held Travelocity stole market share away from offline travel agencies as well as airlines and hotel chains. During and after the recession of the late 2000s, that trend has continued with travel sites like Priceline growing faster than travel-industry suppliers. […] A look at the stock performance of several online-travel companies shows their fates diverging. On the happier side, Expedia’s (EXPE) stock is up 94% this year, while Priceline’s (PCLN) is up 31%. Among the less fortunate: Orbitz’s (OWW) stock is down 46% and Travelzoo’s (TZOO) is down 32%.”

So, with their competitors struggling, Priceline and Expedia have the field to themselves, right? Not necessarily. Their main challenge, going forward, is the fact that the biggest growth area in online travel seems to be direct bookings, with hotels and airlines: “Over the next two years… online-travel growth will is expected to slow to 7% a year, thanks to fiscal and economic uncertainty in the U.S. and slowdowns in Europe and Asia. Even worse for booking sites like Expedia and Priceline, most of that online growth is coming from online bookings made through airlines and hotels directly, a segment that is expected to grow 14%, versus 6% growth for online travel hubs.”

As far as accommodation booking is concerned, the days when it was still quite difficult for hotels and B&Bs to create good websites and offer online booking are now behind us. More and more of them are feeling confident about doing so and the technology is readily available (sometimes it’s even free.) A larger proportion of online customers also seem to be researching properties on OTA sites then booking direct. So, in spite of Priceline and Expedia’s success in eclipsing their rivals, the main challenge to their dominance in the future may come from accommodation providers themselves.

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