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The Best OTA Innovations

From time to time I go back and have a look at the amazing thread of quotes and comments from a bevy of travel industry thought-leaders on Dennis Schaal’s blog (Dennis now writes for Tnooz). The discussion is about the “legacy” OTAs, or online travel agencies, and their lack of innovation around the online travel planning and shopping experiece.

I agree with much of what’s written here. The core shopping funnel has not changed much in recent years though it has been refined and optimized for conversion. The shopping and booking path is great if you know where you want to go, when and for how long (more or less). But it is not so good if you are more focused on interests or activities. Shopping across destinations by theme, interest or other criteria has failed to materialize meaningfully within the mainstream online travel world, nor has the personalization of search results. (Travelocity’s ExperienceFinder, is perhaps the sole, albeit timid, exception).

The thread on Dennis’ blog addresses this topic far better than I could here. But I did recently undertake an exercise to review key OTA innovations over the past decade or so for a recent paper I completed on the GDSs. (The full GDS report can be downloaded here for free). As I compiled the list of innovations by the OTAs, I was quite struck by how much they have changed – for the better – the shopping experience for travelers.

So as a piece of modest counterpoint to Dennis’ still impressive thread, below are some of the most important innovations from OTAs that I have identified.

  • Matrix display: First introduced by Orbitz (based upon technology from ITA Software) and now standard throughout online travel, the matrix display allows consumers to click on any cell within the matrix to sort airfare search results by price, airline and number of stops.
  • Opaque fares: Initially made famous by Priceline’s Name Your Own Price airfare bidding model, opaque fares allow travelers to get deeply discounted plane tickets. In return, the airline and exact departure times are hidden until the flight is purchased, and travelers do not receive loyalty credits.
  • Dynamic packaging: Debuted by Expedia and now standard throughout online travel, this “book together and save” option allows travelers to shop for multiple components in a single search, such as “Flight + Hotel.” This feature generally provides a lower overall price than if the two components are purchased independently. It also allows suppliers, particularly hotels, to hide their discounted rates within packages to avoid alienating premium customer segments, such as business travelers. This category has grown dramatically, from basically zero in 2000 to a $6 billion segment today, stealing a lot of business from traditional tour operators in the process.
  • Flexible and alternative date search: This feature allows travelers to compare flight options across multiple departure and return dates to find the lowest possible fare. Some have also expanded this concept to calendar-based search, enabling travelers to compare product prices over a range of dates in a calendar window.
  • Alternative airport search: Travelers can search across multiple departure and arrival airports within an acceptable distance to find the lowest possible fare or most convenient schedule.
  • Low-fare notifications: OTAs introduced a feature that would email customers when there were specific deals on particular O&D (origin and destination) pairs.
  • Hotel search, results display and sorting: OTAs have made significant contributions to hotel search result displays and sorting options to make it easier for travelers to compare options from hundreds of possible results. Compelling additions include:
    • Searching and sorting by proximity to a specific address or landmark
    • Map-based search results display
    • Traveler reviews integrated with the results
    • Multiple sorting options, including price, star rating, brand, guest rating and amenities

This is not an exhaustive list. Please share your comments on other OTA innovations I may have overlooked.

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Date: January 18th, 2010 @ 12:05

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  • http://www.rockcheetah.com/blog RobertKCole

    A few footnotes on the OTA innovations:

    The matrix display, flexible dates and alternative airports were all ITA innovations created for the QPX platform prior to being adopted by the OTAs (and the launch of Orbitz.) As a result, ITA provided fundamental innovation that enabled the success of Orbitz, Kayak, Hotwire, and Farecast. True, those organizations each creatively developed and implemented variations on the underlying technology, but the core intellectual property that drove the innovation was ITA.

    Priceline was truly innovative – perhaps not in the way described by founder Jay Walker as the reverse auction model has not replaced all other shopping processes across all other verticals, but certainly for travel. Priceline when founded was not really an OTA – it solely used the “name your price” functionality, so its target market was only about 3% of the traveling public (still a pretty big number.) After nearly dying in late 2000/early 2001, Jeff Boyd reinvented the company by turning it into an OTA by adopting both the agency and merchant models to provide a much greater array of travel options.

    Finally, Neat Group beat Expedia to market with dynamic packaging and also secured the US patent for the dynamic travel packaging process. Expedia has certainly done a terrific job expanding the dynamic packaging market, but many of Neat Group's innovations – the incorporation of integrated supplier and distributors based rule sets, single use credit card settlement for hotels, and remitting travel agent commission payments through ARC IAR reporting.

    I still maintain that the OTA's are not inherently innovative, but they have acquired or adopted a great number of innovative products and have provided scale to introduce those innovations to a much larger community than the original developers. The OTAs are successfully transacting and monetizing these innovations.

    This is not a slap at the OTA's – Google certainly has not developed all of their innovative technologies in house (although I would argue there are many more home-grown Google innovations than OTA innovations,) many were acquired by rolling up smaller firms.

  • http://twitter.com/Douglas_Quinby Douglas Quinby

    Thanks for the feedback Robert,

    Good emphasis on ITA. I did not mean at all to minimize their contribution. Although as you point out, OTAs' commercial implementation was key. There have been other retail implementations of ITA that did not fare well.

    Are you sure about Neat Group? Expedia was first to market with “book together and save” proposition. Although Neat introduced some innovations, the market impact was relatively contained, compared to Expedia, whose approach has been mimicked ad nauseum.

    OTAs may or may not be inherently innovative as you suggest, but their market impact has been transformational.

  • http://twitter.com/douglas_quinby Douglas Quinby

    Thanks for the feedback Robert,

    Good emphasis on ITA. I did not mean at all to minimize their contribution. Although as you point out, OTAs' commercial implementation was key. There have been other retail implementations of ITA that did not fare well.

    Are you sure about Neat Group? Expedia was first to market with “book together and save” proposition. Although Neat introduced some innovations, the market impact was relatively contained, compared to Expedia, whose approach has been mimicked ad nauseum.

    OTAs may or may not be inherently innovative as you suggest, but their market impact has been transformational.