Answered: Explain the reasons why OTAs are…

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Case 1. Why online travel agencies? While disintermediation loomed large over traditional intermediaries, spearheading a new trend of re-intermediation, OTAs began successful operations. Both suppliers and customers prefer OTAs due to a range of reasons. One of the major advantages of an OTA is its capacity for global reach and influence. Traditional travel agents have a limited coverage area of operation. For instance, Expedia has 150 travel booking sites in over 70 countries with websites localized in more than 30 languages. The number of people using smartphones and computers for online booking is steadily increasing. Moreover, inexperienced travellers, particularly the new generation of travellers, prefer online purchases, even if they are first-time overseas travellers. The rate of growth of OTAs is also faster, as they are expected to expand gross bookings twice as fast as the overall market, particularly in emerging regions in Latin America, Asia-Pacific and Eastern Europe. The expansion is augmented with investments in multilingual, culturally relevant displays as well as alternative payment systems. Organic growth and international acquisitions enable them to gain local knowledge. For example, Expedia and Priceline.com have over the last ten years made a series of significant international (non-US-based) acquisitions and partnerships, particularly in Europe and China. Mobile websites are a priority for OTAs now as more and more people prefer to transact over smartphones. Travellers, even when they are travelling, can check and change itineraries, read reviews, share experiences, undertake last-minute transactions and choose restaurant options, hotel accommodations, tours and activities. Mobile bookings may grow at a double-digit rate over the next two years. OTAs have increased customization and therefore consumers, especially younger travellers, typically prefer the depth and breadth of OTAs, compared to supplier direct channels. They can choose the most suitable options that fit their preferences and budgets and prefer to cross-shop. Online reviews, mapping services and overall comparative capabilities of OTAs help consumers in the process of decision-making and purchasing. OTAs are like one-stop shops because of their breadth of content across multiple travel segments, such as carriers (air, rail and bus), lodging (hotels, B&Bs and rental properties), cruises, rental cars, ground transportation and attractions/activities. OTAs also help to connect travellers who are not always brand-loyal, are searching for value as well as amenities, and who prefer deals. Although multinational hotel chains have their own websites, only a segment of the travelling population is actually faithful to a particular hotel brand. Also, some OTAs have their own loyalty programmes that reward bookings made with any supplier. OTAs have advantages beyond just distribution. They have some marketing influence, similar to search engines and meta search sites. They have even extended their influence through mobiles. OTAs in the US spent nearly $700 million on advertising in 2013, and that figure is expected to jump 8 per cent over the next two years. According to PhoCusWright research, consumers use OTAs to shop nearly as much as they use search engines. Leisure tourists are more likely to use OTAs. Business travellers may book through a travel management company (TMC) and/or GDS. The advantages of using OTAs is not just for consumers, but for suppliers as well. QUESTION: 1. Explain the reasons why OTAs are preferred by some customers.

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