The evolution, or revolution to some pundits, of travel came in the mid 1990’s with the advent of Online Travel Agencies (OTAs). Rapid adoption of the internet and more accessible browser technology opened an entirely new frontier for travel marketing. As the online market place grew, travel brands have become dependent on search results and showing up in an OTAs return list to the user. This shift in ‘marketing power’ has given somewhat of an advantage to search engine providers as preference may be shown to in-house travel brands or travel providers that are within the corporate portfolio. Increasing scrutiny on major search engines has led to regionally based laws and rules that govern the digital marketplace. In response, large OTAs have allied together to address the growing regulation as profitability may be impacted while either side of the solution will have effects on the actual travel providers / operators.
The Hunt for Clicks
As the internet became more dominant in daily technology usage, clicks become much more important to businesses marketing their brand digitally. This especially holds true for travel providers who depend on OTAs for bookings and marketing. As customers search the platforms, travel brands are dependent on 2 elements:
- Showing up prominently on the first page of the search results
- The customer clicking the brand’s offering
Potential customers also research travel outside of the OTAs and may input terms directly into a search engine, such as Google, Bing and Yahoo. Brands could either purchase ads or sponsored links directly or rely on the search engines algorithm to appear prominently within those search results. Google, which controls almost 84% of the search engine marketplace, has also become a dominant player in the OTA industry and has driven competition to a new and even fiercer level. Governments have now put focus on the competitive landscape in these digital marketplaces and major legislations that are coming to pass are being scrutinized by newly created associations, aimed at protecting the travel industry. Can regulation improve ‘the hunt for clicks’ or will it actually hinder competition by reeling back investment in technology and resources?
Key Points from Key Regulations
The European Union has recently introduced its Digital Marketing Act with the goal of enhancing competition in the European digital travel marketplace. ‘Gatekeepers’, the search engines and digital platforms, are subject to new rules and regulations in the EU with the end goal to improve fairness and end user confidence in the digital marketplace. Some key points of the act are:
- Prohibiting anti-competitive actions by ‘gatekeepers’
- Encouraging new players to enter the market place, increasing competition
- Protect and define end users rights when engaging in business digitally
- Give users complete control of their personal data and how ‘gatekeepers’ use that data
Those on both sides of the issue have concerns regarding the DMA and how it will affect profitability for both the gatekeepers and travel providers / operators. While users should expect transparent and fair business transactions in the online travel industry, over regulation could end up hiking costs in the longer term. The EU is a major market for travel operators and any impact to costs or volume would be felt immediately within the industry.
High Stakes For a Rebounding Market
Travel volumes are now starting to surpass pre-pandemic levels as profitability returns to the market. The offset is that operating costs will continue to rise as inflationary and scarcity factors drive prices higher. Travel operators are major stakeholders in digital regulation as any impact on demand or supply could push the market in the wrong direction. Associations such as the recently formed Global Travel Tech have a mandate to address the growing regulations in the digital travel marketplace. GTT aims at building a fair marketplace for travel businesses and works closely with policymakers and industry leaders to push that mandate forward. Organized by large OTAs, such as Expedia, Booking.com and Skyscanner, GTT has a vested interest in leveling the playing field for the providers that power and provide inventory on their platforms. As the DMA comes into law, EU Travel Tech focuses its energies on the digital marketplace within the European Unions, pushing their mandate in addition to promoting innovation in the travel technology category.
Evolution of the Digital Marketplace
The rise of OTAs has opened up the travel marketplace and changed the way the business works and search engines may have gained an advantage when it comes to displaying offers and availability among all the different travel providers. Upcoming regulations in the EU and elsewhere are geared towards ensuring competitiveness and transparency in the digital marketplace where only a few key players control search results. Several large OTAs such as Expedia and Booking.com have allied together to address concerns and challenges to the travel business that these new digital regulations create. Increased taxation and search result interference may not be a good thing for anyone in the industry but ceding control of search results to only a few companies creates competitive disadvantages, especially for those engines that have their own travel business portfolios. Technology could offer controls or monitoring measures that track key indicators in real time that could level the playing field for all travel businesses.