Online Travel Agency Retention: Why OTAs Spend to Keep You (2027)

The Internet is full of blogs on how to book a cheap hotel, how to travel on a budget, and how to save money while traveling. It isn’t difficult to find accommodation for the holidays. However, every time searching for a hotel, people see tons of ads from leading OTAs in the travel market. Why are they putting so much effort into bombing the market with their ads?

People love traveling. It’s hardly imaginable that it might change. Booking a flight, searching for a cheap hotel, looking for tours - everything is important. It’s unimaginable that people will stop booking hotels. If you are going somewhere, you will definitely need a place to stay. Yes, there are many factors to consider when choosing a hotel: location, services, reviews, and price. The majority of people tend to book hotels via OTA.

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Undeniable convenience of using an OTA

The majority of travelers prefer using smartphones to plan their trips. According to this trend, OTAs work on customer experience. Smartphones made around 51% of OTA gross bookings in 2021, 10% more than in previous years.  Apart from the convenience of searching for flights, booking accommodation, and other services, some apps and sites provide a personalized experience and search. Also, planning a trip online provides opportunities to compare prices, and read reviews about interesting hotels. 

The battle between OTAs

Fighting doesn’t mean that companies are destroying each other’s buildings. OTAs have been constantly fighting for customers' attention and loyalty. It looks way easier and calmer than you might imagine. For example, members of Expedia’s One Key program earn OneKeyCash on eligible bookings other than flights and can spend it on a later trip. Booking.com’s Genius program gives members discounts on stays. Members who reach its second level also get breakfast and room upgrades at no extra cost. Other OTAs provide discounts or cashback for their loyal customers.

Private accommodation is becoming popular

Travelers often book private accommodation when there aren’t any hotels in their location, they are traveling in groups or they prefer having some privacy. Living in private accommodation gives a completely different experience compared to staying at a hotel. Recent years showed that private accommodations have become popular. In the second quarter of 2022, Airbnb generated $2.1 billion in revenue, up 58% year over year. This means that some OTA customers might have shifted from hotels to private accommodation providers. For the usual OTAs, which promote booking hotels, it is a tough spot. The easiest way is to invest in marketing and try to win back customers.

Investing in marketing

On September 21, at Skift Global Forum 2022, Google’s head of travel, Richard Holden, shared his ideas for marketing on Google. It is possible to be seen on the internet without any ads but not broadly. As he mentioned, “there's certainly an incentive for a partner who wants to always appear in that booking module to buy the ad”. What do the leading OTAs do? In the second quarter of 2022, Booking Holdings spent about $1.7 billion on marketing, around 40% of its revenue. Airbnb put about 18% of its revenue into sales and marketing over the same three months. Looking at these amounts of money, promoting an independent hotel might feel like fighting with titans if you are a small business. A few hundred dollars monthly for performance marketing is less than a drop in the ocean against OTAs.

Why do OTAs spend so much money on marketing? 

Due to the popularity of private accommodation platforms, OTAs are fighting for users because it is 5 to 25 times more expensive to acquire a customer than to keep one. Increasing the marketing budget is one of the most important factors in taking them back. Every penny is spent in order to turn one-timers into loyal ones and to build trust between the brand and customers. Having a loyalty program for customers assures repeat business.

Importance of having loyal customers

Loyal consumers buy more often, spend 60% more per transaction, and are five times more likely to choose that brand for future purchases. Let’s not forget that satisfied customers recommend the product to their friends and share their positive experiences with the brand in reviews. Increasing customer retention rates by 5% can increase profits by 25% to 95%. It is insanely huge money for OTAs. 

Is money really the key factor to reach the audience? Well, it sure speeds up brand awareness and eases competition with OTAs. On the other hand, let’s not forget the hard work. Continuously creating excellent and useful content, building traffic, and always analyzing and improving customer experience with products consume much time but help to stabilize the brand image on the market. 

Every successful company wants to be the best. The same goes for OTAs. There are some leading companies who want to stay in business, leave the travel market in a conservative phase, and most importantly, skyrocket their revenues. 

Why OTAs Work So Hard to Keep Their Customers

OTAs put money into marketing and loyalty programs for these reasons:

• Keeping is cheaper — winning a new customer costs 5 to 25 times more than keeping an existing one.
• Loyal guests spend more — they book more often and are five times more likely to pick the same brand again.
• Rentals took a share — Airbnb’s growth may have moved some hotel guests to private accommodation.
• Ads keep a brand in view — a site can show up on Google without ads, but not widely.

OTA loyalty rewards pay you back for booking with the same site, but they don’t tell you whether a flight’s price is low. RatePunk keeps track of what flights from your home airport usually cost, and we alert you when one drops below that price.