Online as well, it’s always the customer first!

The blockchain revolution?

Nowadays we hear a lot of talk about blockchain the new kid on the block. While it is not completely understood yet by a majority of people, this new technology is said to have the potential to be another major disruptor in our economies, and in the travel industry in particular. In short this technology is supposed to simplify the interactions and financial transactions between the supplier and the final customer while remaining safe and secure which would therefore eliminate the need of a middle man, that is to say the OTAs and the GDSs. Of course, travel suppliers see that at the same time enthusiastically as there is a potential to diminish the astronomical distribution costs they pay to these intermediaries, and skeptically as there is still not a complete understanding of the implications of this technology. For the consumer, it is also an opportunity to reduce his expenses even though it’s not as immediately obvious to him.

Towards the programmed death of OTAs?

Over the years, OTAs have earned a lot of bad press from the suppliers, in fact as much as their huge popularity with regards to their end users. The attempts at bringing them down through new technologies such as GNE and NDC were unsuccessful and it is now blockchain’s turn to have a go at them and make the suppliers dream come true. So far however, OTAs are holding on, stronger than ever. What suppliers forget is that those high distribution costs they pay are not just used to pay high dividends to the OTAs shareholders but invested in technology and development aimed at giving the users what they want which is: a user-friendly interface, a large choice of suppliers and efficiency, basically something simple and enjoyable. Consequently, if a new comer is not able to create a new business model and add value for the end user, it is unlikely to become a real threat to the OTAs domination. And blockchain does not escape this rule.

The law of the market will decide

It is not impossible that blockchain will indeed create a revolution, but there are other pretenders such as mobile applications like Hopper (which would remove Google SEO’s costs), Airbnb if they maintain their 3% commission fees while entering the hotel segment, and of course Google itself that is getting more and more active with its travel applications. All these options sound like reasonable ones to reduce the huge costs of customer acquisition that OTAs are bearing, but it is not thinkable that this cost will be brought down to nil. In the end, these project will all require some important investment in order to attract potential customers, and as for any market the customer is king, and will decide towards which trend we will evolve, for better or for worse.

Adrien Della Valle and Mamoun El Youssi

Original source: Quinby, D. (2018). Only One Thing Will Disrupt OTAs (and It Ain't Blockchain): Phocuswright. Phocuswright.com. Retrieved 28 March 2018, from https://www.phocuswright.com/Travel-Research/Research-Updates/2018/Only-One-Thing-Will-Disrupt-OTAs-and-It-Aint-Blockchain