August 28, 2013

U.S. OTA growth market appears at or near peak

As the online hotel booking landscape has broadened and thousands of sites are now vying for their piece of the pie, many of the traditional OTAs find themselves shelling out more of their budget than ever to stay on top.

In June, Expedia’s Hotwire brand was the most advertised online travel brand on television in the U.S., according to data. Hotwire’s spots aired 3,069 times at an estimated cost of $4.4 million.

Consequently, Expedia recently posted another quarter of weak results, citing increased competition. Aggressive advertising by drew away a significant amount of business and Expedia's profit fell 32% during the second quarter. Its marketing costs jumped 33%.

TripAdvisor, which was spun off from Expedia in December 2011, recently announced it would spend $30 million on TV advertising for its new hotel metasearch functionality.

Google's entrance into the travel distribution arena is throwing a wrench into the business models of OTAs and hotel supplier sites by increasing supplier-direct bookings but driving up search placement costs. Sites such as Travelocity, with limited search-engine optimization and marketing budgets compared to Expedia, Priceline and Orbitz, are being forced to consider their options.

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