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Online Travel Agencies: The Good, The Bad, and The Ugly
Online travel agencies, or OTAs, have populated the internet since Internet Travel Network popped up in June 1995 with the goal to transact airline bookings for a small number of routes. Since then, dozens more have popped up, including Expedia, Kayak, Orbitz, and numerous others.
Priceline.com is currently the largest, with a market cap of just over $80 billion as of mid-day Tuesday.
Each year, millions of people book their travel on OTAs, thinking those sites will allow them to compare every airline to find the cheapest fare, except for a few airlines, like Southwest, for example, that do not allow their fares to be published on these sites.
Despite the apparent simplicity of using OTAs to find the cheapest fare, a quick search can yield numerous stories about the troubles of booking through the sites or how customers may not be getting the cheapest fares. Some of these articles place the blame on the OTAs, and others on the airlines that withhold their fares from the site. But who is really the culprit when it comes to issues faced with OTAs?
Who Deserves the Blame?
Dallas-based Southwest is the airline with the greatest voice against OTAs. Except for a period in the 1980s and ‘90s, the airline has never shown their fares anywhere other than Southwest.com. This can pose some issues when it comes to finding the cheapest flights, especially in a few select markets.
In an article for USA Today, George Hobica, founder of airfarewatchdog.com and acclaimed OTA expert, detailed a time where he was looking for flights between Austin and Newark. He said that, after looking at Google Flights, his option would be a $763 United ticket, but when he checked Southwest.com, he found a comparable ticket for a mere $216.
The less informed customer might have simply purchased the ticket on United, essentially wasting the $500 dollars they could have spent elsewhere.
Recently, Atlanta-based Delta Air Lines began withholding some of their supply from various OTAs, citing improper use of their data. Now, customers are forced to use other OTAs or Delta’s website to find the flights they want on many of the routes Delta serves.
This can become quite the inconvenience for travelers who have a few favorite sites to check for availability. On top of that, Fort Worth-based American Airlines has kept their fare data intermittently for a multitude of reasons from a few sites, Orbitz being the largest. Most airlines, however, are unable to stay off the sites for long.
Why Don’t Airlines Leave OTAs?
In the ideal world for the airlines, all passengers would book directly through their site. This would keep customers from looking at their fares side-by-side with competitors, which can often lead to a loss of business. This last point is especially problematic for legacy carriers compared to carriers like Spirit or Frontier, who on the surface have very cheap fares, but tack on numerous fees. By the time the fees are added, the customer will often not go back to see that they have the best deal.
Airlines also need the business generated by OTAs. Millions of passengers book flights through OTAs across the globe each year, and airlines need that revenue. The few who can afford to stay off the sites, like Southwest, are considered in the industry to be lucky that they have a customer base that allows for that.
The biggest worry among experts is that airlines will engage in a mass exodus from OTAs, leaving the only plausible places to book on their own websites. Customers and airlines do not yet know whether the government will get involved or if the OTAs and airlines will be left to fend for themselves. The future of online travel agencies is full of uncertainty. But for now, customers will be able to book their flights just as they always have, both on OTAs and directly from the airlines.
- American Airlines, Southwest Airlines Report $2.1 Billion, $915 Million Losses - July 23, 2020
- United Reports $1.6 Billion Second Quarter Loss - July 21, 2020
- Delta Reports Massive $7 Billion Loss in Second Quarter - July 14, 2020
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