Online Travel Agencies Pumping More Resources into Advertising

Online travel agencies (OTAs) have spent more than a decade bidding to become the travel agents of the future. In the process of aggregating millions of transactions every day, they’ve grown into multinational corporations that take in billions of dollars in revenue each year and set the pace for Internet bookings, new online marketing tools, rich inventory content and innovative online services for travelers.

But just as the growing strength of the OTAs has often portended gloom and doom for brick-and-mortar agencies, giving rise to speculation that OTAs would kill off traditional travel agents, the profitable walk in the park for these online behemoths could be turning into a walk in the dark, insiders say.

Increasingly the online giants seem to be looking over their shoulders as if they were being pursued, and not by each other. In many cases, the footsteps these companies are hearing are coming from airline and hotel company Web sites as well as from the small but growing business of metasearch providers such as Kayak-Sidestep and Mobissimo.

Each of these growing sources of competition is making the OTAs take a harder look at their transaction-based business models and consider potential revenue streams they have been missing, or ignoring, for a long time. Chief among these is advertising, though it is an opportunity that entails shifting their business models from pure retail to a mix of retail and media coverage.

While actual transactions remain strong today, the big four –Expedia, Orbitz, Travelocity and, to a lesser degree, Priceline- are probing the idea of pegging their future growth on becoming media companies, sellers of advertising and marketing opportunities to travel partners and even to non-travel-related businesses.

Suppliers, especially airlines and hotels, make no secret of the fact that they are making an ever bigger push to persuade consumers to come directly to their own sites, not to OTA intermediaries. For some, it’s a matter of cutting out the cost of the middle man.