A year in review: Top trends
influencing the OTA industry
To ensure you’re able to strategize and build the best distribution mix for your property, it’s a good idea to keep up to date with the latest news and opportunities. Here, we share some of the major OTA trends from 2023 that we expect to impact the distribution landscape into 2024.
1. OTAs are back and stronger than ever
After a brief lull during the pandemic, OTAs are once again reporting strong growth and a remarkable pace of recovery. In 2022, OTA business represented almost one quarter or 22% of the total U.S. travel market.
OTA market share is dominated by two behemoths, Expedia Group and Booking Holdings, which collectively generated over $250 billion USD in travel bookings in the twelve months leading into Q1 2023.
For Booking Holdings, which owns and operates Priceline.com, KAYAK, and Agoda, as well as Booking.com and other travel sites, 2022 was its biggest year ever. The company generated almost 900 million room nights globally, a 6% increase over 2019. In 2023, the company generated $39.7 billion USD in gross bookings in the second quarter alone, the highest quarterly figure in the company’s history.
As for Expedia Group, which owns and operates Hotels.com, Vrbo, Travelocity, Hotwire.com, and Orbitz, among other travel sites, the numbers are lower but still formidable. In Q2 2023, the value of the company’s gross bookings was $19.2 billion USD, a record level for any second quarter in the company’s history.
Regional OTAs have been performing well, too. In Latin America, for example, Despegar reported $1.3 billion USD in gross bookings in the second quarter of 2023, a 16% increase over the same quarter the previous year. As for Trip.com, a leading OTA for Chinese travelers, our data shows a huge jump in revenue generated in 2023 across several countries, indicating the return of this segment to international travel.
“Many booking sites have fully recovered, or even grown, from pre-Covid levels,” Skift reported in July 2023. “Airbnb leads the online travel agency recovery, powered by the surge in demand for short-term rentals during the pandemic.” Skift also noted that, now that pandemic concerns have subsided, U.S. travelers have shifted away from direct hotel booking channels and returned to third-party booking sites.
2. Mobile bookings are a top priority for OTAs
To encourage travelers to book more hotel rooms from mobile devices, OTAs have been channeling their resources into promoting their mobile apps. The strategy seems to be working. Data from Booking.com shows that almost half of room nights (48 percent) were booked on its mobile app in the second quarter of this year, an all-time high.
Last year, Booking.com was the most downloaded OTA app in the world, with 80 million downloads. In second place was Airbnb, with 52 million downloads, followed by Expedia, with 27 million downloads. Also ranked within the top ten were Agoda, Vrbo, Skyscanner, Hotels.com, Trip.com, and Trivago.
Meanwhile, relative newcomer Hopper is taking the travel world by storm. Ranked in the sixth position on apptopia’s list, with 19.8 million downloads, the app-only OTA is especially popular among Gen Z travelers. And the big OTAs are taking notice. Earlier this year, Expedia ended its supply relationship with Hopper, and in October, Hopper ended its hotel partnership with Booking Holdings, perhaps as a preemptive move.
3. Leisure travel is softening, but other segments are poised for growth
There are signs that leisure travel is slowing down, and the pent-up demand that has fueled travel since the pandemic may have run its course. Fortunately, group and corporate travel are primed to pick up the slack.
“With less chance to bump into coworkers in the office, companies are focused on retaining their culture with more team trips and conferences,” says Booking.com.
Lodging operators who wish to take advantage of the upswing in corporate travel need to be active on the channels where business travelers go to book rooms. And that includes the GDS and OTAs.
“[Hotels] need to widen OTA distribution into a question of third-party distribution,” said Matt Varabkanich, Sr. Research Analyst at Cleveland Research, during Cloudbeds’ 2023 Passport User Conference in October. “I would break it down into four buckets: global OTAs like Booking.com, Expedia, Hotels.com, and Airbnb; regional direct-to-consumer OTAs like Agoda, Traveloka, Makemytrip, and Vrbo; wholesale B2B distribution; and closed user groups.
“Closed user groups is where we’re seeing the most emergence of new channels. In North America, that takes shape through the form of banks, credit card companies, retailers, or phone service providers creating travel portals that their customers can exclusively book through, a lot of times supplied by the OTAs, but we’re seeing an emergence of that taking place more here in North America and Asia Pacific. My guess is that would be more skewed towards super apps.”
Other expected growth drivers include international travel and events. In a survey of travel managers in the U.S. and Europe from Deloitte, more than half of respondents said they expect industry events to spur travel growth this year. The popularity of remote and hybrid work may act as an impetus, with meetings, conferences, and events providing an opportunity for coworkers, clients, and prospects to connect in person, Deloitte speculates.
4. OTAs and fintech companies unite forces
Across the travel industry, there has been a steady rise in investment in fintech products and services to boost revenue and enhance the traveler experience. Fintech, which stands for financial technology, refers to the new wave of finance services companies that employ innovative technology to compete with traditional financial methods and institutions.
Booking.com, which has traditionally operated on an agency model, has recently been shifting toward the merchant model, taking payments for hotel rooms from guests rather than requiring guests to pay the hotel directly.
Agoda has partnered with Sunrate, a global payment platform based in Singapore, and Airwallex, a fintech company that reduces fees charged for processing overseas transactions.
And the buy now, pay later (BNPL) craze has also taken root in OTAs. Airbnb has partnered with Klarna to allow customers to pay for bookings in four payments over a six-week period. Expedia has partnered with Affirm to allow guests to pay for flights and hotels in installments over three, six, or twelve months.
At the same time, financial institutions are partnering with OTAs to sell travel. For example, Nubank formed a partnership with Hopper to provide a comprehensive travel portal for its customers, and Citi launched Citi Travel in collaboration with Booking.com and Rocket Travel to allow Citi ThankYou card members to access inventory on the bank’s website and app.
5. OTAs embrace a future of AI-powered travel planning
Another big shift in 2023 was the widespread adoption of ChatGPT, the generative chatbot built by OpenAI. More than one million users signed up to the service within just five days following the launch, and that number has since grown to over 100 million users.
OTAs have been quick to jump on the bandwagon. Trip.com was the first OTA to partner with ChatGPT, introducing TripGen in March, a ChatGPT-powered chatbot. Soon after, Expedia Group announced an Expedia plug-in for ChatGPT. The following month, Expedia released a ChatGPT-powered AI chatbot on its mobile app, allowing users to ask the chatbot for help and get trip ideas while planning travel.
Since then, KAYAK has also formed an integration with ChatGPT. And in June, Booking.com added conversational chat capabilities to its mobile app.
While the adoption of AI by OTAs has come rapidly, the usefulness of these tools has yet to be proven. Rathi Murthy, Chief Technology Officer for Expedia Group, said in March 2023, “honestly, the travel industry as a whole has a lot of legacy technology, and it’s not super easy to move in and adopt some of this. But I do see players like us — players that have core technology in the background, large OTAs — start jumping in to experiment and try things out.”
Moving into 2024, OTAs will further develop these technologies to deliver more personalized experiences that will significantly impact how travelers research and book accommodations.
6. Loyalty and retention are also top priorities for OTAs
If there’s a downturn in the economy and inflation remains high, travelers are expected to take fewer trips and will be more price-sensitive when choosing destinations and hotels. This will make it more challenging for hotels to attract repeat guests and build guest loyalty.
To combat this challenge, OTAs have made significant efforts to secure traveler loyalty. Booking.com’s Genius loyalty program is wildly popular, with first-tier members receiving a 10% discount on accommodation at participating hotels – and even bigger discounts for higher tiers. Those discounts come at the expense of hotels in the form of lower rates and higher commissions.
Earlier this year, Expedia Group launched the One Key loyalty program, which consolidates its previous programs, allowing members to earn points and use rewards on Expedia, Hotels.com, and Vrbo. Already, the program has an estimated 168 million members worldwide. While Expedia claims the program will help hoteliers accelerate demand and attract high-value travelers across its brands, hotels can expect to carry some of the costs of the perks.
“Uber has expanded into rides and food delivery and travel services in the UK, and I imagine those super apps are looking into more ways to sell travel services,” said Varabkanich during Passport. “On the global OTA side, the biggest two have taken different avenues, with Booking Holdings on the consolidation side, having acquired wholesaler Getaroom and is currently battling the European Commission to buy the number two flight OTA in Europe.
“Whereas Expedia has put its eggs in the baskets of Hotels.com, Expedia.com, and Vrbo and is pushing to drive more customer loyalty to the group of those brands. So, there’s different forms taking place of emergences vs. consolidation, something I think would be interesting to keep an eye on in terms of the emergence of new channels.”
7. OTAs are finding new ways to entice travelers
OTAs are also making it easier for travelers to discover new destinations and properties that might not otherwise be on the radar. In 2022, Airbnb introduced Categories, a new way for guests to discover unique places to stay. The site now lists over 60 categories based on the accommodation style, location, and proximity to activities, including tiny homes, luxe locations, and beachfront spots.
On Vrbo, visitors can visit the “Get inspired” section and browse categories such as family trips, the beach, pet-friendly accommodations, and places with swimming pools. Booking.com has a “pick a vibe” section with options like relax, outdoors, romance, city, beach, food, and skiing.
In May 2023, Airbnb also introduced Rooms, a product that takes the company back to its roots as a platform for finding shared accommodation. With Rooms, travelers can browse ‘Host Passports,’ an expanded profile with photos and fun facts to choose the host they’ll connect with best.
