Barclays Travel Forum: OTAs face spiralling marketing costs online

By Travolution
By Travolution
May 21, 2014 10:56 AM GMT

The cost of advertising online is now so prohibitively expensive that selling through third party travel agents is relatively cost-effective, the ninth Barclays Travel Forum heard this week.

Andrew Botterill, chief executive of Stella Travel Services UK, said: “Some OTAs are spending up to 40% of their commission on CPC; if you don’t have credible SEO sat behind it that’s not sustainable.

“A few years ago that figure would be in the mid teens to low twenties. It’s a very, very competitive space for OTAs spending on online marketing.”

Stella UK is the parent of travel agent group Global Travel Group, trade supplier Travel2 and high street retailer Travelbag.

Botterill’s view was backed up by Expedia UK managing director Andy Washington, who said metasearch is now often about who is prepared to pay most to buy visibility.

He said the Priceline group uses its various brands, including Booking.com and Agoda, to block competitors out.

“Our business in Q1 has grown by 29% but revenues only grown 19%; that’s because the whole market has become more and more expensive.”

Washington added: “Google will do what they can to push SEO down because it does not make any money from natural listings.”

He said mobile web was growing in importance as channels proliferate and doubted small players could afford to be everywhere. “SEM is going to be more expensive,” he said.

Although transactions driven directly through the Expedia brand are growing, Washington noted how competitive this area was becoming.

“There were 20 travel company television advertising campaigns in the UK in January versus 12 the year before. It will be interesting to see if they are just one-offs,” he said.

Brands which have made their UK TV debuts this year include Skyscanner, Booking.com and HouseTrip.

Washington said Expedia’s strategy was to be everywhere consistently where there was consumer demand, and this included selling via third party affiliates and travel agents.

Botterill said long-haul specialist Travel2 has invested “an awful lot of funds” in supporting travel agents and this had “proved to be very cost-effective”.

This strategy was paying off with sales through the major consortia up between 16% and 25%, he said.

Botterill added agents that have developed partnerships with suppliers and relationships with their customers have a vibrant future, and that although hard copy brochures may be falling by the wayside for traditional fly and flop-type holidays, there was a role for more lifestyle, coffee table publications.

“It’s midway between a brochure and a lifestyle magazine. To have that sat on the coffee table it’s aspirational in terms of what people want to do with their leisure time.”

But Botterill said agents needed to be multi-channel. “Are people walking into shops and then booking online?

“The answer is yes, potentially. That's why if you have a retail presence you need a multi-channel approach for that relationship with the customer.”

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