Hotels vs OTAs: The Battle For Millennial Travellers

The rise of the Internet has overhauled the travel booking industry, giving travellers unprecedented options when it comes to booking their next trip. Before the mid-1990s, if you wanted to book some accommodation, you’d have to speak to a travel agent or call up a hotel and ask them directly about their prices and availability.

When OTAs came onto the scene, they changed the online hotel reservation system landscape forever. Since then, there’s been an ongoing battle between hotels and OTAs for domination of the industry. Just a few months ago, the American Hotel and Lodging Association launched a campaign warning people about the ‘dangers’ of booking through third-party websites – a move that was seen as a direct swipe at OTAs. This is one industry spat that is not dying down.

If we’re trying to figure out who has the upper-hand in this industry battle, it’s important to look at demographics – millennials, in particular. Millennials are a key battleground for both hotels and OTAs. The United Nations estimates that 200m millennials currently generate around $180bn in tourism revenue – up a massive 30% from ten years ago. That’s great news for accommodation providers who can get the younger generation through to their booking engine for hotels.

This age group accounts for 20% of all international tourists, and many of them seek adventure rather than traditional materials goods. Where an expensive watch or a fancy car might have signalled affluence for previous generations, millennials are all about travel and experiences. This means they are more likely to seek out an online hotel reservation system than other travellers.

Millennials are cost-conscious, but they don’t want to miss out on an amazing experience because they can’t afford to splurge. This generation is coming up with new ways to manipulate the resources they have at hand to find great deals on everything travel-related. This naturally leads them towards OTAs, which gives them powerful search capability and the greater flexibility they tend to want.

Unlike boomers, millennials aren’t lured in by loyalty programs – in fact, just 55% of millennials have more than one travel loyalty membership, the lowest of all age groups. 70% of boomers will always choose the provider of their loyalty scheme when it comes to selecting travel – they are less likely to shop around, and more likely to go directly to the hotel, as they have done for most of their lives.

Members of Generation X straddle the two other generations carefully. They still want great value, and they’re willing to shop around for it – but they can still be drawn in by loyalty schemes and incentives offered by individual hotels or chains.

If we follow the generational trends, it looks as though OTAs will emerge victorious. Millennials want flexibility and the ability to research and book amazing experiences separately – and they still want the power to be able to compare deals and book with the provider that offers them the best price. Hotels can still have some success in this market, but the advantages involved with booking directly don’t always align with the millennials’ demands.

However, a new competitor has joined the field in recent years, and its presence is certainly having an impact on this ongoing battle. The rise of the sharing economy is best showcased by Airbnb, which now gives millennials exactly what they’re looking for: flexibility, great deals and an authentic experience. How will the sharing economy affect the fight for millennial travellers? That remains to be seen.