Biz Travel Rebound Means Slower Growth for OTAs

As the recession recedes, rising airfares promise to lift the Q2 fortunes for airlines and the mega-online agencies alike. But as high-yield corporate flyers return to the skies, airlines will likely be the bigger beneficiaries, UBS investment analyst Kevin Crissey said.

Online travel agencies saw a 25 percent spike in Q2 air booking as of May 16, Crissey said in a recent note to investors. But as corporate travel returns, airlines are replacing low-yield leisure passengers with higher-paying business travelers, often at the expense of the OTA business, Crissey said.

“Airlines relied heavily on OTAs to fill planes while corporations took a travel hiatus,” he said. “With corporates reengaging and capacity still tight, yields are rising and OTA volume growth is suffering.”

Data from ARC tends to confirm the trend. ARC reported a sharp drop in the level of growth for OTA air transactions last month, falling from 13.6 percent in March to a 12-month low of 2.5 percent in April.

Although OTAs have been taking market share from brick-and-mortar agencies for a long time, he said, during the recession they took share at a faster rate and also took share from airline websites. One of the reasons for their recent success was the elimination of booking fees starting in late 2007.