Travel Search is more ‘Green’ [Than the OTA Model]January 12, 2011 2011-01-12 19:05
Travel Search is more ‘Green’ [Than the OTA Model]
Travel Search is more ‘Green’ [Than the OTA Model]
[Editorial Notes: Guest article contributed by Khushnood Naqvi, founder of 90di, a travel search engine. Though ‘Green’ is used as a metaphor, the article gives a good insight into the difference between search and OTA model.]
‘Green’ is the word in vogue, along with other phrases like ‘Carbon footprint’, and rightly so, whenever there is talk about eco-friendliness or lack of it.
So here is one simple thought to ponder. Travel Search is more ‘green’ …!
To complete the phrase:
‘Travel Search’ model is more ‘green’ than the Online Travel Agent (OTA) model.
First lets define what ‘green’ means in this context. Green means being eco-friendly, which means doing things in a way, which is light on the environment. That is, in simple terms we can define it as: ‘Consume less and produce more’.
For the uninitiated: Travel Search Engines allow the users to search on their sites and for booking take them to the Airline site (or Railways/IRCTC). Whereas OTA sites give a search option to the user, and also make the users book with them.
Now lets go on and explore why Travel Search is more ‘green’.
People who want to travel need to compare flight (or train) options before buying – i.e. search the cheapest and the best flight (or train). So some kind of search on top of the Airlines sites and Railway sites is required. Else the user will have to do the comparison on various sites themselves. Both the Travel Search model and the OTA model fulfill that need.
One thing which OTA also additionally provide to the user is booking. I contest, it is this aspect which makes it less eco-friendly to the entire flight booking eco-system. It creates an extra (larglely redundant) middle layer of providing the booking itself. Which the Airlines themselves do, very nicely.
In doing so, it adds a thick layer of actions, which are largely duplicated and can easily be performed by the Airline itself (Or by the Railways/IRCTC).
To meet this extra cost, it has to charge heavy commissions. So it adds significant cost to Air travel, by charging commissions often as high as 7-8%.
In addition, the OTAs charge their own cancellation fee (or a change fee), in case of cancellation or a change in itinerary. It also has to run call centers, since it does booking. Also it can come in the way of loyalty programs between the customer and the Airline (Some of them make it workable, but its not straight forward).
Now compare this with what ‘Travel Search’ does. It serves an essential function, of allowing travellers to compare flight options (or train options or both) and choose the best flight (or train or a bus). And doesn’t duplicate the function of booking, which the Airlines do equally well.
It costs less to the eco-system. The referrals paid to travel search players are typically just about 1/10th of the hefty commissions which the Airlines pay to the OTAs. (For this reason its less attractive to VCs, but that’s another story)
It costs less to build. Just a small team of may be around 10/20 people, who sit in a garage (and largely survive on Maggie noodles!) to build a nice and strong search engine. Which allows the users to search the best flight and book directly at the Airline.
Compare this with typically hundreds of employees employed by an OTA, largely to fulfill the additional function of booking.
But don’t the OTAs offer lots of deals and discounts? Yes they do. But in simple terms, it adds further to your average travel cost, as the discount and deals on may be less than 5% of all the bookings/routes, increase the cost of overall bookings. As they have to earn money, and somebody has got to pay for it. The deals and discounts, serve mainly a marketing purpose.
So Travel Search, costs less to build. And gives more value to the user – in terms of providing just what the user wants and then getting out of the user’s way. Less is indeed More – and Travel Search model is yet another example of that!
This is our honest opinion, and would love to debate this, and learn more about it. If you agree to this, then please spread the word about us and this model, to your family and friends (we don’t have the budgets for a TV advertising you see!)
1. Travel Agents: We believe all the field travel agents (i.e. the ones having a physical presence in form a store, you can walk-in to), serve a very important need, and the above argument does not apply there. Majority of the folks in India, still purchase their travel offline.
2. OTA evolution: It will be unfair to not even mention a bit on the history of this Industry. In the pre-internet days, when travel agents in US had to do bookings for their customers, they relied on Global distribution systems (GDS) – like Sabre, Amadeus etc. to do the booking. So in a way, the GDSes, used to manage the entire Airline seat inventory. The first generation of online booking sites, didn’t sort of look at the system, from a clean slate view, and just moved everything online –> Online Travel Agent (OTA). Travel Search is a clean-slate perspective, of looking at things overall. It has established itself in US, firmly, with the likes of Kayak. Now, in India, its in the process of establishing itself.
3. Disclosure: We allow users of our site, to compare flight results from Airlines with OTAs. Also we get a commission from the OTA if a booking is done there. So in a sense, you may detect a shade of hypocrisy, in what I say, above.
But I have an explanation for that. We do see that the majority of the bookings happen through the Airlines itself. Something like more than 95% of the bookings, we see, happen on the Airlines’ site. We give an option to the user, to catch any deals, which may happen at that point in time, which the OTAs do as part of their marketing.
So this blog post is about our world view, but we do accept the reality (of OTAs commanding a large mind share) and we try to make the best use of it. But we totally stand by what we say above, and believe that, it will serve the people better, when ‘Travel Search’ is the dominant model, rather that the ‘OTA’. Since Internet is also about removing redundancies, we believe ‘Travel Search’ is the model, which is going to survive and do well in the long run. Only time will tell…