Report Overview
This report offers an in-depth analysis of the evolving dynamics in the travel booking industry in the U.S., with a particular focus on the increasing preference for direct bookings over Online Travel Agencies (OTAs). It examines how the COVID-19 pandemic has accelerated this shift, highlighting key factors such as competitive pricing, trust in supplier websites, and flexible booking options that drive travelers towards direct bookings.
The report delves into sector-specific booking behaviors, providing a detailed view of how different travel sectors—such as accommodations, vacation rentals, and cruises—are affected by changing preferences. It includes data-driven insights on the rise of direct bookings and the "billboard effect," where travelers research on OTAs but ultimately book directly. This analysis is supported by comprehensive survey data and trends observed in the market.
In addition to exploring the current state of travel bookings, the report offers actionable recommendations for suppliers and online travel platforms. Suppliers will learn how to enhance their direct booking channels and leverage exclusive offers to attract customers. OTAs will find strategies to adapt to the increasing competition from direct bookings, including how to utilize their existing strengths in customer service and loyalty programs. The report also highlights opportunities in the connected trips market and the importance of understanding traveler preferences to stay competitive in a rapidly changing industry.
What You'll Learn From This Report
- The importance of balancing online and offline channels in travel marketing
- Variations in booking preferences across different travel sectors
- Reasons travelers are moving towards direct bookings instead of OTAs
- The "billboard effect," where travelers use OTAs for research but book directly
- How OTAs can leverage a high Net Promoter Scores to foster long-term loyalty
- Opportunities for OTAs to offer bundled services and connected trips
- The significance of pricing in travelers' booking decisions
- The role of social media in influencing travel bookings
Executive Summary
In today’s travel landscape, being online is crucial for suppliers, with digital channels playing a pivotal role at every stage of the travel journey—from research and planning to booking. Our data shows that a significant majority of travelers initiate their travel research online, yet offline channels cannot be ignored, particularly as the experience is paramount. The report underscores the importance of a multi-channel engagement strategy to hook customers early and maintain their interest.
When it comes to booking, the journey is far from one-size-fits-all. Our survey data reveals that the use of direct bookings versus OTAs varies significantly across travel sectors. For instance, 50% of vacationers opt to book their accommodations directly through supplier websites, while the majority book vacation rentals through OTAs. The booking process itself is complex and varies widely, with each traveler following a unique path shaped by factors such as group size, purpose of travel, and specific trip needs. The report includes a flowchart highlighting these variations, showing how different segments—whether solo travelers, families, or business groups—approach booking decisions in distinct ways.
Direct bookings are on the rise, posing a significant challenge for OTAs. According to our latest U.S. Travel Trends tracker, 59% of travelers book their flights and accommodations directly, while only 32% use OTAs. Our online travel survey shows that this preference for direct bookings is driven by factors such as better trust, convenience, direct communication, and more flexible cancellation policies, with better pricing being the top factor. The COVID-19 pandemic notably accelerated this trend, as concerns about health and safety pushed more travelers toward direct bookings. Our recent survey confirms this shift, with 51% of travelers reporting an increase in direct bookings since the pandemic, compared to 33% who saw a rise in bookings through online platforms.
While OTAs often cite the 'billboard effect' to attract suppliers, it also highlights significant demand leakage, as travelers use OTAs for initial research but often book directly with suppliers. For instance, for flights, although 26% of travelers start their search on an OTA, a significantly higher percentage (55%) book directly on airline websites. This shift is primarily driven by greater trust in the airline and more favorable loyalty programs. This trend presents both a challenge and an opportunity for OTAs. By enhancing customer satisfaction and loyalty programs, OTAs can better retain customers, as our report shows that those with higher Net Promoter Scores (NPS) are more likely to build lasting loyalty.
Connected trips present another significant opportunity for OTAs, though this area remains underpenetrated. Our survey shows that only 41% of travelers currently use bundled services, and many are not even aware of these offerings. This gap presents a growth opportunity for OTAs to market connected trips more effectively and educate travelers on the benefits of bundling services.
Pricing remains a critical factor, with the majority of travelers citing it as their top consideration when booking. Knowing your customer is more important than ever, particularly in understanding the key selection features for each travel sector. The report also notes that older travelers are less likely to use OTAs, suggesting that businesses need to tailor their strategies accordingly. Social media is another double-edged sword; while it can be a powerful tool for engagement, it also presents a challenge as travelers increasingly rely on it for recommendations, bypassing traditional OTAs.
The online travel landscape is evolving rapidly, and OTAs must adapt by leveraging these insights to stay relevant and competitive in the market.
Understanding Online Travel Behavior in the U.S.: From Inspiration to Booking
In this section, we explore the stages of the travel journey, from the initial spark of inspiration—like seeing a captivating Instagram post about Switzerland—to the final booking decision. Each stage, from researching destinations to evaluating booking options, is crucial to the process. The flowchart below explains each stage.
This section will provide a comprehensive overview, highlighting key insights and actionable strategies for travel businesses to better engage customers and enhance booking processes.
Let's start by discussing what happens in the first stage.
Stage 1: Inspiration
How Travelers Combine Online and Offline Inspirations to Make Travel Decisions
Online sources play a significant role in shaping travelers' ideas and choices. Leading the way, Google and other search engines influence 30% of travelers, closely followed by social media posts at 27%. For example, a single captivating Instagram post can spark the desire to visit a destination. Travel blogs and websites inspire 26% of travelers, while travel shows, documentaries, and podcasts influence 23%. Other notable online sources include travel review sites like TripAdvisor (18%), online advertisements (17%), and travel influencers (13%). Though less influential, e-newsletters still contribute to travel inspiration at 5%.
However, offline sources remain incredibly important and highlight that, in the end, it’s all about the experience. Recommendations from friends or family top the list of travel inspiration sources, with 54% of respondents indicating word-of-mouth as a major factor. Past travel experiences influence 49%, and the experiences offered by destinations inspire 30% of travelers. Traditional media like travel guidebooks, newspapers, and magazines still inspire 18% of respondents, while printed advertisements influence 8%.
While online sources are pivotal in providing inspiration, offline sources are crucial as they reflect real experiences and personal connections. The combination of both online and offline influences helps travelers make well-rounded decisions, enhancing their overall travel experience.
Understanding the sources of inspiration is helpful for identifying where to focus marketing efforts, and how to better cater to traveler preferences by connecting the dots between inspiration and decision-making.
Stage 2: First Steps of Research
Travelers’ Research Journey Highlights the Value of Multi-Channel Engagement
When researching a new destination, travelers move beyond initial inspiration and engage in a more focused search. This often starts with a Google search, seeking recommendations from friends or family, visiting travel websites or blogs, exploring booking platforms like Booking.com and Expedia, and browsing social media with a specific intent. These behaviors highlight the importance of having a strong online presence across multiple platforms to effectively engage potential travelers.
In this context, omnichannel marketing strategies are crucial. They ensure travelers experience a consistent and unified journey across all touchpoints, simplifying the planning process and enhancing overall satisfaction. By integrating various channels—search engines, social media, booking platforms, and travel blogs—brands can provide personalized recommendations and support throughout the customer journey.
The billboard effect further emphasizes the importance of this strategy. This phenomenon shows how online travel platforms can boost a hotel's visibility, often leading travelers to book directly with the hotel after discovering it on these sites. Research indicates that while travelers might start their search on these platforms, they frequently complete their bookings directly, motivated by special offers and direct engagement.
Combining omnichannel marketing with insights from the billboard effect helps travel and hospitality brands capture attention, guide travelers through their journey, and improve booking rates, ensuring a seamless and satisfying experience.
Following the research phase, the next step is to explore the key factors that influence travelers' final booking decisions.
Stage 3: Sources Used to Decide Where to Book
Optimizing Online Information Can Shape Booking Decisions
After the initial inspiration and research phases of travel planning, Online booking platforms such as Booking.com and Expedia become central to the decision-making process. They significantly influence travelers when it comes to booking airlines and hotels. These platforms blend convenience with comprehensive comparison features, meeting the demand for streamlined and user-friendly experiences. OTAs are essential for finalizing bookings, allowing travelers to compare options, prices, and reviews in one place, enabling efficient and informed decision-making.
We explored how travelers interact with various resources across different travel sectors, revealing distinct preferences for information and booking methods. This analysis shows that while travelers increasingly rely on digital platforms for booking decisions, the specifics of their preferences vary by sector. Overall, there is a strong demand for comprehensive online information and user-friendly experiences. However, the degree of reliance on online sources versus offline factors differs, with some sectors benefiting more from digital enhancements than others.
For cruise bookings, official websites are the primary resource for 32% of travelers seeking detailed information on complex variables like cabin types and itineraries. This preference highlights the importance of a robust online presence for cruise lines to provide comprehensive details and facilitate smoother bookings. Platforms like Cruise Critic exemplify how aggregating reviews and providing all the required information in one place can support informed decisions. OTAs should consider incorporating detailed comparisons, user reviews, and interactive tools to increase their booking conversion rates by offering a more complete and engaging experience.
In the vacation rental market, 51% of travelers use online platforms to make accommodation decisions, reflecting a shift towards platforms offering specialized and personalized lodging options. Sites like Airbnb excel in showcasing features such as Superhost status and self check-in, meeting travelers' preferences and building trust.
Conversely, online sources influence only 16% of activity bookings, suggesting a preference for personalized interactions or detailed guidance. This presents an opportunity for activity providers to enhance digital engagement and streamline online booking processes.
For car rentals, offline factors remain significant, with 23% of travelers relying on past experiences and 15% on recommendations from friends and family. This highlights the importance of personal experiences and referrals in car rental decisions, suggesting a need for companies to build strong reputations through quality service.
Social media and travel blogs are increasingly influential, impacting 21% of activity bookings and 13% of vacation rental decisions. These channels offer authentic insights and peer reviews, which can sway travelers' choices.
To capitalize on these insights, businesses should refine their online platforms to meet the growing demand for digital interactions. Investing in official websites for cruises, enhancing digital strategies for activities, and leveraging positive past experiences for car rentals are essential steps. By improving these aspects, companies can significantly increase their chances of converting research into actual bookings. Adapting to these trends will help businesses stay competitive and effectively engage with a digital-savvy audience.
The insights into booking decisions lead us to examine how preferences vary between direct bookings and online platforms across different travel categories.
Stage 4: Booking Method Used
Booking Preferences Highlight Shifts Between Direct and Online Channels Across Travel Categories
When looking at how travelers book across different categories, some clear patterns emerge. For flights, 36% of travelers used online booking platforms, while 55% booked directly through the provider’s website, and the rest used other methods. In the hotel sector, 43% chose online booking platforms, and 50% preferred direct bookings.
Vacation rentals saw a strong preference for online platforms, with 64% of travelers using them, compared to 23% who booked directly. Cruises showed a different trend, with only 16% using online platforms, while 55% booked directly with the cruise provider. For paid activities, 28% of travelers used online platforms, while 37% booked directly.
Packaged tours had a more even split, with 38% booking through online platforms and 39% going direct. For car rentals, 38% relied on online platforms, while 49% chose direct bookings.
Market concentration plays a significant role in determining the booking channels that customers use. As can be seen in the chart from our report “The Last Outpost of Travel A Deep Dive into Tours, Activities & Experiences 2023”, while the online penetration of vacation rentals and cruises is nearly the same, the commission rates charged by platforms in the STR sector are significantly higher. This difference is largely due to the fragmented nature of the STR market, where there are few dominant brands and a high volume of online platform bookings. In such a fragmented market, platforms like Airbnb and Vrbo serve as the primary trusted intermediaries driving most of the bookings, enabling them to command higher commission rates.
In contrast, the cruise industry is more concentrated, with a few large brands dominating the market. This concentration fosters greater direct engagement between customers and service providers, reducing the reliance on online booking platforms and, consequently, leading to lower commission rates for OTAs in this sector.
When comparing flights and hotels, there is a notable difference in online penetration and commission rates, even though most travelers prefer direct booking channels. Flights, with their higher online penetration, have much lower commission rates. This is due to the strong presence of major airlines that dominate the market and maintain robust direct booking channels, making customers more likely to book directly with them. Hotels, although also a concentrated sector, have higher commission rates than flights. This can be attributed to the fact that the hotel market, while concentrated at the brand level, remains more fragmented at the property level, particularly in regions where independent and boutique hotels are prevalent. This fragmentation at the property level allows OTAs to leverage their reach and command higher commission rates.
Based on this data, travel businesses should consider several strategic adjustments. Online booking platforms should continue to improve their features and user experience to maintain and grow their influence, particularly in the vacation rental sector, where 64% of travelers rely on these platforms. The high usage indicates a strong consumer preference for the variety and personalization these platforms offer.
Conversely, there is a notable preference among travelers for direct bookings in certain sectors, particularly for flights, cruises, and hotels. This suggests that businesses in these areas may benefit from strengthening their direct booking channels. Ensuring that detailed, reliable information is easily accessible and providing a seamless booking experience could be key factors in attracting more direct bookings. For instance, 55% of travelers book flights directly through the provider's website, indicating a level of trust in the information provided by airlines. A similar trend is observed in the cruise sector, where 55% of travelers opt for direct bookings, possibly due to the complexities involved in cruise arrangements.
For the cruise and activities sectors, where online influence is lower, there is a significant opportunity to improve digital engagement and streamline the online booking process to attract more travelers. By leveraging these insights, businesses can make informed decisions on where to focus their resources and how to refine their booking processes to better serve their customers. This strategic alignment with consumer preferences will help businesses enhance their market position and drive growth in an increasingly competitive travel landscape.
Considering these preferences helps us understand how different traveler groups and purposes impact their booking choices.
Insights by Group Size and Purpose
We examined our survey sample for various categories of travelers to identify the top sources used by different traveler groups and purposes. An Expedia report highlights that U.S. travelers view up to 277 pages of travel content in the 45 days prior to booking, with these views distributed throughout their path to purchase. This indicates that there is no one-size-fits-all approach in travel planning and booking.
Travelers draw inspiration from various sources based on their group size and purpose of visit. Families with children find past travel experiences most inspiring, while couples and leisure travelers rely on recommendations from friends or family. Solo travelers also value past experiences, and friends traveling together turn to their social circles. Luxury travelers share a preference for personal recommendations.
Google searches dominate the research phase across all groups, emphasizing the importance of comprehensive and accessible information.
In the planning stage, families and leisure travelers prefer online booking platforms for airline bookings, while couples and solo travelers use both OTAs and the airline’s official website. Friends and luxury travelers primarily book directly with airlines. For hotel bookings, online booking platforms are common for families, couples, solo travelers, and leisure travelers, while friends and luxury travelers often prefer the hotel’s official website.
For booking flights and hotels, families, couples, and solo travelers often book directly with airlines and hotels, while friends and leisure travelers frequently use OTAs. Luxury travelers prefer direct bookings for flights and hotels.
The strong dependence on past travel experiences and personal recommendations highlights the importance of word-of-mouth and trust in travel planning. Travel businesses should focus on enhancing customer satisfaction and encouraging reviews and referrals.
Google’s dominance in the research phase underscores the critical role of search engine optimization (SEO) and online visibility. The significant use of OTAs by families and leisure travelers suggests these platforms' convenience and comparative features are highly valued. However, the preference for direct bookings by luxury travelers for flights and friends for both flights and hotels indicates a trust factor and a desire for more tailored interactions.
Travel businesses should adopt a multifaceted approach: enhancing online presence and SEO, improving online booking platform features, and maintaining robust direct booking channels to build trust and cater to personalized needs.
Challenges for Online Travel Agents
The Rise of Direct Bookings: What It Means for OTAs and Suppliers
As per our U.S. Travel Trends survey, before the pandemic, direct and OTA bookings for hotels and flights were nearly equal. However, during the pandemic, there was a significant increase in trust towards direct bookings as travelers sought more control and reliability. Although the gap between direct and online booking platform bookings narrowed somewhat as the impact of COVID-19 lessened, direct bookings have consistently maintained a larger share compared to pre-pandemic levels. This shift reflects a clear and growing preference for direct booking channels, which has continued to widen over time.
Our recent survey confirms this trend. When asked how their booking methods have changed since the COVID-19 pandemic, 51% of respondents reported an increase in direct bookings. In contrast, 33% saw an increase in bookings through online booking platforms, while 17% remained neutral regarding changes in their booking methods.
These findings underscore the sustained preference for direct bookings, highlighting a shift that has become more pronounced over time. Direct bookings have continued to dominate, illustrating a clear and growing trend towards favoring direct channels over OTAs.
The shift toward direct bookings is driven by several compelling factors. Leading the way, 20% of travelers are enticed by better prices or exclusive deals available only through direct channels. Another 14% find it more convenient to manage their bookings directly with suppliers. Trust in the supplier’s website or app is a significant factor for 13%, while an equal percentage values the flexibility of cancellation or change policies. Direct communication with suppliers appeals to 13% of travelers, making issue resolution smoother. Supplier-specific promotions and loyalty rewards attract 12%, and 8% believe they receive superior customer service. Additionally, 6% seek special services or amenities.
For an online travel executive reading this report, this list effectively serves as a checklist of opportunities for booking platforms to enhance their offerings and better meet the needs of today's travelers.
The reasons for increasing preference for direct bookings differs by travel segment. Overall, better pricing is the most influential factor across the board, driving travelers to book directly to secure the best deals. However, the reasons behind this shift are nuanced and vary depending on the nature of the travel segment.
For both hotels and flights, the convenience of managing bookings and check-in (14%) and trust in the supplier’s website or app (14% for hotels, 16% for flights) are paramount. This indicates that beyond cost considerations, travelers place a high value on the ease of the booking process and the reliability of the platform.
Vacation rentals are distinct in their need for flexibility and personalized interaction. Travelers prioritize more flexible cancellation or change policies (18%) and direct communication with the supplier (15%), reflecting the complex and personalized nature of these bookings.
Cruises emphasize the importance of exceptional service and past positive experiences. Better customer service (16%) and previous positive interactions (18%) are crucial, highlighting the significance of high service quality in the intricate cruise booking process as mentioned before.
In paid activities, the need for detailed information (16%) and familiarity with the provider (16%) are significant, along with a strong focus on pricing (23%). This underscores the diverse and often customized nature of these activities, where comprehensive details are essential.
Packaged trips are marked by the importance of personalized service (17%) and special offers or discounts (19%). The tailored nature of these trips highlights the value of customization and exclusive deals, aligning with travelers' preferences for a more personalized experience.
For OTAs, the challenge is adapting to the increasing preference for direct bookings. To regain customers, online travel platforms should focus on enhancing their value propositions by offering more personalized experiences, improving customer service, and simplifying the booking process. Exploring partnerships with suppliers for exclusive deals or promotions can also help counteract the appeal of direct booking incentives.
Suppliers have a distinct opportunity to leverage the growing trend toward direct bookings. By improving booking management ease, building trust through their websites or apps, and offering flexible policies, suppliers can strengthen their direct booking channels. Enhancing customer service and providing personalized interactions will be key to attracting and retaining direct bookings.
Overall, the shift towards direct bookings represents a lasting change in traveler behavior. Both OTAs and suppliers need to adapt to this evolving landscape.
Navigating Demand Leakage
We discussed the Billboard effect in our report, The Past, Present, and Future of Online Travel and mentioned it earlier in this report. A 2008 study by the Cornell School of Hotel Administration showed that providing inventory to OTAs increased both reservation value and average daily rates for hotels. The theory goes that third-party booking sites effectively act as billboards for the different hotel and airline options available in a destination. But from the perspective of online travel platforms, the billboard effect is just a giant case of demand leakage. Demand leakage occurs when travelers use online booking sites for research and comparison shopping but ultimately book directly with suppliers.
Our research highlights a significant trend in the booking process across various travel segments. According to our survey data, a substantial portion of travelers first compare options on booking platforms before making their final reservation directly on supplier websites. Specifically, 71% of travelers who booked vacation rentals directly reported having compared options on OTAs like Booking.com or Expedia beforehand. Similarly, 63% of those who booked flights directly used online travel platforms for comparison, and 56% did the same for hotel bookings. This data underscores the prevalent pattern of comparing options online before committing to direct bookings.
To further understand this, we analyzed the sources used to decide where to book against the booking method used by travelers for each travel segment, except for vacation rentals where OTAs are the most used booking method. The analysis highlights how demand leakage varies by segment.
For flights, there is a clear demand leakage from OTAs to direct bookings. While 26% of travelers use such platforms for researching flight options, a significantly higher percentage (55%) book directly on airline websites. This 29 percentage point shift suggests that although online booking platforms are crucial for initial comparisons, travelers perceive more reliability, better deals, or additional benefits when booking directly with airlines.
In the hotel segment, the trend is similar but less pronounced. Both hotel websites and OTAs are used almost equally for research, with 25% and 26% of travelers using these sources respectively. However, when it comes to booking, 50% of travelers choose to book directly with hotels compared to 43% through online booking platforms. This 7 percentage point increase indicates that factors such as loyalty programs, better rates, and direct communication with hotels play a significant role in the decision to book directly.
Cruises show the most substantial demand leakage. While 32% of travelers use cruise line websites for research, only 9% use OTAs. When booking, the preference for direct bookings becomes even more evident, with 55% of travelers booking directly through cruise line websites, a 46 percentage point increase. The complexity and high cost of cruises likely drive travelers to book directly for more comprehensive support and detailed information.
Paid activities also exhibit demand leakage, albeit to a lesser extent. Initially, 10% of travelers use provider websites and 16% use OTAs for research. However, 37% end up booking directly through provider websites compared to 28% through online booking platforms. This 9 percentage point shift indicates a preference for the detailed descriptions and customization options available directly from activity providers.
For packaged trips, the demand leakage is significant as well. While only 11% of travelers use provider websites for research and 21% use OTAs, 39% eventually book directly with providers compared to 38% through online booking platforms. Although the difference is just one percentage point, it highlights a slight but meaningful preference among travelers for the assurances and exclusive package details offered directly by suppliers.
The demand leakage challenge to OTAs varies across travel segments, driven by reasons stated earlier. Enhancing the booking experience and offering competitive advantages are essential for OTAs to retain customers throughout the entire booking process.
But at the very least, this research proves that despite the growing preference for direct bookings, the “billboard effect” remains a significant driver of traveler behavior. For travel suppliers, listing on third-party sites is crucial even if they prioritize direct bookings. These platforms provide valuable exposure and attract potential customers during the initial research phase. By leveraging online booking platforms for visibility while focusing on enhancing their direct booking channels, suppliers can capture a larger share of bookings and drive increased traffic to their own websites. Maintaining a presence on these platforms allows suppliers to benefit from widespread comparison shopping and reinforces their brand's visibility, which can ultimately convert research into direct bookings.
In the coming sections, we will evaluate the challenges travelers face while booking through online travel platforms and explore the opportunities available for these platforms. We will discuss how OTAs can leverage customer satisfaction to enhance their services, develop effective loyalty schemes, and promote connected trips. Additionally, we will examine how OTAs can offer competitive pricing and target underserved demographics to capture a larger share of the market.
Hidden Fees, Cancellations, and Service Issues: Main Pain Points for OTA Users
While 44% of travelers who used OTAs to make bookings reported no issues, a significant portion of those who did face challenges highlighted several key concerns.
The most prominent issue was hidden fees or additional charges, which affected 15% of travelers. These unexpected costs, often not clearly communicated during the booking process, led to frustration and diminished overall satisfaction with the OTA experience.
Cancellations or refunds were also a major concern, affecting 13% of travelers who booked through OTAs. The complexities and delays in resolving these issues made them particularly frustrating, highlighting a critical area for improvement.
Additionally, 12% of travelers reported difficulties with special requests. These challenges often involved specific preferences or custom needs that were not adequately addressed, leading to dissatisfaction.
Misleading or inaccurate information was a concern for 9% of travelers. Discrepancies between the details provided on the OTA platform and the actual service received eroded trust and resulted in negative booking experiences.
Poor customer service was a challenge for 7% of travelers. Inadequate or unhelpful support often exacerbated other booking issues, significantly impacting the overall customer experience.
These insights into OTA-related challenges offer a crucial perspective that complements our understanding of why many travelers prefer to book directly. The data corroborates the reasons for direct booking—such as trust in the supplier's website or app, a preference for direct communication, and more flexible cancellation or change policies—by illustrating the specific issues that drive customers toward direct bookings.
To address these challenges, OTAs can focus on enhancing transparency by clearly communicating all fees upfront to avoid surprises. Improving the process for handling cancellations and refunds, with faster and more straightforward solutions, can also help restore trust. Additionally, OTAs should work on better managing special requests by providing more personalized options and ensuring these needs are met effectively. Ensuring that the information presented on their platforms is accurate and up-to-date will reduce the risk of misleading customers. Lastly, investing in more responsive and helpful customer service can greatly improve the overall experience, helping OTAs retain customers and reduce the shift towards direct bookings.
This dual perspective provides a comprehensive view of the booking landscape, highlighting both the benefits of direct bookings and the areas where OTAs can enhance their services
Opportunities for OTAs
Leveraging Trust and Net Promoter Score (NPS) Parity
There's a common stereotype that OTAs are less trustworthy compared to direct channels. However, our survey data challenges this perception. The net promoter score, a measure of customer loyalty and satisfaction, for both direct bookings and OTA bookings are nearly identical, indicating a significant opportunity in the market. In fact, 72% of travelers rate OTAs as trustworthy or very trustworthy when it comes to resolving issues, revealing a strong foundation of customer trust that counters the traditional narrative.
The American Customer Satisfaction Index shows satisfaction scores of 77 for airlines, hotels, and online travel agencies, aligning closely with our survey findings that NPS is nearly the same across these booking methods.
This high level of confidence, combined with competitive NPS scores—especially in segments like hotels, vacation rentals, and packaged trips—indicates that OTAs are not just meeting but often exceeding the satisfaction levels of direct bookings. Online travel booking platforms can capitalize on this by enhancing customer service, promoting transparency, leveraging data and technology, and strengthening loyalty programs. By doing so, they can build on the trust travelers already have in them, driving higher satisfaction and fostering long-term loyalty in a competitive market.
Enhancing Customer Retention
Loyalty Programs
Acquiring customers is just the first step; retaining them is equally crucial. To achieve this, OTAs need to delve deeper into understanding customer behavior and preferences. Our data reveals that 82% of users are repeat customers on their chosen online travel booking platforms, indicating strong familiarity or satisfaction. However, repeat usage doesn’t always translate to genuine loyalty, presenting an opportunity for OTAs to enhance their incentives and foster true loyalty. Additionally, the 18% of first-time users represent a significant chance for OTAs to engage and convert them into loyal customers through targeted strategies.
We analyzed the marketing channels used by Booking.com, Expedia, Accor, and Marriott via Similarweb. The data shows that Expedia (57%) and Booking.com (43%) have the highest percentage of direct traffic, suggesting strong user familiarity with their platforms. However, direct traffic alone does not equate to brand loyalty. In contrast, Accor (49%) and Marriott (34%) see a higher proportion of users arriving via organic search, which might indicate that these users are actively searching for specific hotel brands rather than navigating directly. This could reflect different user preferences or a more effective SEO strategy by these hotel chains in attracting returning customers.
Our survey shows that 50% of respondents either "Agree" or "Strongly Agree" that they prefer OTA loyalty programs over those offered by airlines or hotels. This indicates a notable preference for OTA loyalty programs among a significant portion of users. However, with 41% of respondents remaining "Neutral" and 9% opposing OTA loyalty programs, there is still a sizable group of users who are undecided or indifferent.
While there is clear familiarity with OTAs, their loyalty programs do not have a universal preference. OTAs invest heavily in marketing, which can shape perceptions of their loyalty programs. Our report, The Past, Present, and Future of Online Travel, shows that major hotel groups have significantly grown their loyalty programs since 2019, with brands like Hyatt doubling their membership over the past four years. In contrast, Expedia’s OneKey is still in its early stages and has faced challenges in its rollout. This suggests difficulties in translating user interest into effective program engagement and highlights the ongoing challenge for OTAs to convert marketing success into sustained, genuine loyalty.
Those who prefer hotel loyalty programs often cite tangible benefits like discounts, free nights, and personalized rewards, along with better customer service and more tailored experiences. Similarly, airline loyalty programs are valued for their flexibility, particularly in handling cancellations or changes quickly, and the ability to earn points across various services, which enhances the overall travel experience. However, given that half of the respondents prefer OTA loyalty programs, there may be aspects of these programs that hotels and airlines could learn from to broaden their appeal.
To better align with these preferences, OTAs could enhance their loyalty programs by incorporating some of the strengths seen in traditional hotel and airline programs. For example, adding more tangible rewards, personalized perks, and flexible benefits could make OTA programs more appealing. By drawing inspiration from successful elements of programs like Marriott’s Bonvoy, OTAs can create more compelling loyalty offerings that resonate with users and bridge the gap between marketing success and genuine, sustained loyalty.
Marriott Bonvoy is well-known for its focus on rewarding loyalty through a well-established points system, elite status recognition, and a variety of tangible in-hotel benefits such as room upgrades, late checkout, and lounge access. For instance, members can enjoy tangible perks like complimentary room upgrades to suites, extended check-out times, and access to exclusive lounges offering free breakfast and evening refreshments. This approach is particularly effective for frequent travelers who prioritize personalized service and luxury. However, its impact may be limited to Marriott properties and might not appeal as strongly to travelers who frequently use different brands or book through OTAs.
In contrast, Expedia’s OneKey program offers tiered benefits across multiple platforms, including Expedia, Hotels.com, and Vrbo. The flexibility of using OneKeyCash for redemption across these platforms is a significant advantage for travelers who prefer booking through various sites. The program’s focus on booking-related perks, such as price drop protection and upgrades at VIP Access properties, provides versatility. However, this approach may lack the personalized touch and experiential focus that traditional hotel loyalty programs offer.
For instance, Marriott Bonvoy’s program includes personalized benefits such as room upgrades based on elite status, access to exclusive lounges with curated amenities, and tailored experiences like local tours or cooking classes through its “Moments” platform. Similarly, Hilton Honors provides a range of personalized perks, including digital check-in with room selection, room upgrades, and access to the Executive Lounge, which offers complimentary breakfast and evening refreshments. These programs enhance the overall travel experience by offering unique and customized services that go beyond basic booking benefits.
To enhance their loyalty strategies, online travel booking platforms could focus on maximizing their existing cross-platform benefits. For instance, Expedia’s OneKey already allows users to earn and redeem rewards across Expedia, Hotels.com, and Vrbo, providing a seamless experience within the network. Enhancing these benefits with more personalized, service-oriented perks, such as guaranteed upgrades and dedicated support, could make the program even more appealing. Additionally, incorporating experiential rewards, like exclusive events and local experiences, and leveraging customer data for tailored offers could create a more engaging loyalty experience.
Conversely, hotels and airlines can learn from the flexibility seen in platforms like OneKey. By adopting multi-platform rewards and using data-driven insights to offer personalized benefits, traditional programs could enhance their appeal and broaden their reach. Emphasizing versatility in rewards and integrating recognition across various services can help create a more compelling loyalty experience for their customers.
Connected Trips
Connected trips present a significant opportunity for online travel booking platforms to enhance their offerings and drive greater customer satisfaction and loyalty. Our survey data reveals that 41% of travelers who used OTAs purchased bundled services, while 59% did not.
A significant 30% of travelers (18% of all travelers) who opted not to book bundled services chose to book each service separately to compare prices. OTAs can address this by offering competitive bundled pricing and clearly communicating the cost savings and convenience that connected trips can provide. Additionally, 29% of travelers who opted not to book bundled services (17% of all travelers) appreciate the flexibility of selecting different services from various providers. Online platforms can enhance their connected trip offerings by ensuring a wide range of options and allowing customizable bundles that cater to individual preferences.
Some travelers, 24% of non-bundlers (14% of all travelers), did not find the bundled services relevant to their needs. To counter this, OTAs should leverage customer data and insights to create more personalized and relevant bundle options that align with traveler preferences and behaviors. There is also a segment of travelers, 12% of non-bundlers (7% of all travelers), who are simply not aware of the bundled services offered. Online travel booking platforms can improve this by increasing the visibility of bundled services during the booking process and through targeted marketing campaigns.
Industry leaders like Booking and Expedia are making substantial investments in connected trips, reflecting their strategic importance in today’s travel market. Our recent report, Booking vs Expedia: A 50 Chart Factbook, reveals a trend of declining take rates over the past 15 years, with Booking's rate at 14% and Expedia's at 12%. This decline is partly attributed to the shift towards lower-margin services, such as increased flight bookings. Similarly, Skift Research’s The Past, Present, and Future of Online Travel report highlights that Booking’s recent 10-K SEC filing anticipates a decrease in overall operating margins as the company focuses on expanding lower-margin services like airline reservations. Despite this, the investment in connected trips reflects a strategic move to enhance customer experience and capture greater market share, illustrating the long-term value of integrated travel solutions in driving growth and innovation.
We are witnessing diverse strategies in response to the growing importance of connected trips. Booking Holdings is deeply invested in creating a seamless travel experience by addressing issues like missed flights and delays through its comprehensive connected trip approach. In contrast, Hopper focuses on financial flexibility by allowing travelers to lock in prices and cancel bookings, catering to concerns about price fluctuations. Both strategies reflect how leading companies are adapting to meet evolving traveler needs in different ways.
Mastering Competitive Pricing
Price remains a crucial factor in travel bookings, as highlighted by our data. A significant portion of travelers—64%—either strongly prioritize or prioritize price over customer service when booking through a platform. With only 8% of travelers focusing on customer service, it's clear that competitive pricing is key.
To capitalize on this, OTAs must ensure they offer the best possible prices to attract and retain customers, especially when competing with direct bookings and loyalty discounts offered by hotels and airlines. Our report, Booking vs Expedia: A 50 Chart Factbook highlights that both Booking.com and Expedia have shifted from the agency model to the merchant model to gain better control over pricing and bundling as shown in the charts below. By leveraging bulk purchasing power and offering exclusive discounts, OTAs can often match or beat prices available directly from hotels or airlines.
Additionally, the report shows that these leading OTAs are increasingly focusing on merchandising—such as price discounting, ancillary upsells, and bundling—as an alternative to direct marketing to further enhance their competitive edge. In 2023, Booking.com spent nearly $1.7 billion on merchandising (1.1% of total gross bookings), up from $337 million in 2019 (0.3% of gross bookings). This represents a nearly fivefold increase in merchandising expenditure since 2019. In comparison, marketing spend increased 1.4 times, from $5 billion in 2019 to $6.8 billion in 2023.
This strategy aligns with practices seen in Asia, where companies like Trip.com lower their take rates to provide better prices, even if it means sacrificing some revenue. By implementing a similar approach, OTAs can boost their price competitiveness and offer flexible loyalty rewards. This helps them counteract the advantages of direct bookings, such as exclusive deals, price guarantees, and personalized loyalty discounts offered by hotels and airlines. As a result, OTAs can better attract cost-conscious travelers and remain a preferred choice.
Targeting the Older Demographic
Older travelers present a significant opportunity for OTAs. Travelers aged 45 and above predominantly use direct channels for flights, hotels, paid and booked activities, and packaged trips. This demographic shows a clear preference for booking directly rather than through OTAs. For instance, in the 45-54 age group, 53% book flights and 57% book hotels directly. Meanwhile, in the 55-65 age group, 63% book flights and 47% book hotels directly.
Similarly, for paid and booked activities and packaged trips, older travelers also lean towards direct bookings.
In contrast, online platforms dominate in vacation rentals across all age groups, making it a less critical focus. However, direct bookings are prevalent for cruises and rental cars across various age groups. To address this, travel agencies should develop strategies to appeal to all age groups for cruises and car rentals, including competitive pricing, user-friendly interfaces, and targeted promotions.
Know Your Customers
Understanding customer preferences is crucial for OTAs to refine their offerings effectively. The chart below highlights key selection factors across different travel sectors, revealing a consistent trend: price competitiveness, convenience, and location are the primary drivers of booking decisions across all categories.
For flights, travelers primarily focus on flight schedules and times (27%) and ticket prices (23%). In-flight amenities, safety records, and customer reviews have less influence, affecting only 7-9% of decisions.
When it comes to hotel bookings, travelers consider room rates (22%), location and proximity to attractions (18%), and customer reviews and ratings (18%) as their top priorities. Loyalty program benefits and hotel safety and cleanliness are also considered but to a lesser extent (10-14%).
In the vacation rental market, location and accessibility (19%), rental prices (21%), and customer reviews and ratings (18%) are key factors, while safety features and host responsiveness play a smaller role (11-14%).
By emphasizing competitive pricing, scheduling, and location benefits in their marketing and booking platforms, OTAs can better meet customer expectations and strengthen their market position.
Below is how Booking.com effectively addresses the top traveler pain points of price competitiveness, convenience, and location. The site prominently displays competitive room rates and special deals, helping travelers make informed decisions and book directly. Detailed maps and location information highlight the proximity of hotels to attractions and transport links, enhancing convenience. Additionally, customer reviews and ratings provide transparency and build trust, addressing concerns about accommodation quality. By focusing on these key factors, Booking.com meets the core preferences of travelers and boosts booking likelihood.
Leveraging Social Media for Travel Bookings: A Growing Power in the Online Travel Market
Social media's growing influence on travel bookings highlights a significant opportunity for OTAs to engage with travelers where they are most active. Data shows that Facebook leads the way, influencing 22% of travelers, with YouTube and Instagram close behind at 21% and 20%, respectively. TikTok also plays a notable role, impacting 15% of travelers, while Pinterest and Twitter have a smaller reach.
Traveler comfort with booking through social media platforms is rising, with 37% of travelers feeling very comfortable and 26% somewhat comfortable making travel bookings this way. Despite 26% remaining neutral and 11% expressing discomfort, a clear majority is open to using social media for reservations.
The trend is even stronger for high-priced travel services. 28% of travelers strongly agree and 26% agree that they are comfortable booking flights and hotels through social media. While 23% are neutral and 11% feel some level of discomfort, the overall trend underscores a growing acceptance of social media as a viable channel for booking expensive travel services.
For OTAs, these insights highlight the importance of focusing their social media strategies on platforms like Facebook, Instagram, and YouTube, where influence is strongest. For example, Booking.com has effectively utilized Instagram by creating visually engaging content that showcases destinations and accommodations, while Expedia has leveraged YouTube with informative travel guides and customer testimonials that build trust and inspire bookings. Both OTAs are already advertising on these platforms, using targeted ads and influencer partnerships to reach potential travelers.
By integrating direct booking capabilities within these platforms—such as "Book Now" buttons on Instagram or interactive video ads on YouTube—online travel platforms can capitalize on the growing trend of social commerce. Additionally, emerging platforms like TikTok represent new opportunities. Expedia, for instance, has experimented with TikTok campaigns to engage younger audiences through short, catchy videos that promote travel deals and destinations.
While these strategies offer significant opportunities, they also pose a competitive challenge for major OTAs like Booking.com and Expedia. The threat lies in the potential for social platforms to become primary booking channels, bypassing traditional online platforms. However, this also presents an opportunity: by being early adopters of social commerce, OTAs can solidify their presence and capitalize on new revenue streams.
Customer segments most likely to book via social media include younger travelers, such as Millennials and Gen Z, who are highly active on platforms like Instagram and TikTok. These groups are particularly influenced by visual content and peer recommendations, making them more likely to engage with OTAs that offer seamless social-to-booking experiences.
Conclusion
The travel booking dynamics in the U.S. is rapidly evolving. As travelers increasingly favor direct bookings due to better trust, convenience, and flexibility, it’s clear that both suppliers and OTAs need to adapt their strategies to align with these evolving preferences.
The report highlights a critical insight into the performance of OTAs in terms of customer satisfaction and loyalty. While OTAs demonstrate strong overall performance with high Net Promoter Scores (NPS) and repeat user metrics, their loyalty programs have not fully resonated with all travelers. Only a segment of travelers shows a clear preference for OTA loyalty programs over those offered by hotels and airlines, with a substantial proportion remaining neutral. To address this, OTAs should enhance their loyalty offerings by creating more engaging and personalized programs that provide tangible benefits and exclusive rewards. This will be essential for converting the neutral and undecided travelers into dedicated advocates.
Moreover, the report emphasizes the importance of refining pricing strategies. As travelers increasingly prioritize cost-effective options, OTAs need to adjust their pricing models to remain competitive. This includes leveraging data analytics to optimize pricing and offering attractive promotions that clearly convey value. Addressing the "billboard effect"—where travelers use OTAs for research but book directly—will also be crucial. OTAs must highlight their unique strengths and the advantages of booking through their platforms to capture and retain customer interest.
Suppliers, on the other hand, must focus on strengthening their direct booking channels. The growing preference for direct bookings among travelers, particularly older demographics, necessitates a compelling direct booking experience. Suppliers should integrate exclusive offers, build trust, and provide flexible booking options to attract and retain customers. A balanced multi-channel strategy that combines both digital and offline touchpoints will be vital for engaging travelers throughout their journey.
Additionally, both OTAs and suppliers have untapped potential in promoting bundled services. With a significant portion of travelers not yet utilizing these options, there is an opportunity to market and educate consumers about the benefits of bundling. Understanding traveler preferences, including pricing sensitivity and social media influences, will be crucial in this effort.
Adapting to these insights will enable both suppliers and OTAs to better meet traveler expectations, enhance loyalty, and stay competitive in a rapidly evolving market.