By 2020, Online Travel Agencies (OTAs) are expected to capture 41 percent of the U.S. market share. However, this journey will not be without challenges. For starters, OTA commissions are causing a dent in hotel margins. This has resulted in hotels trying to circumvent rate parity agreements and tap into the customer base directly. Rate parity bars hotels from undercutting the OTA price. But hotels are allowed to tap into their loyalty customers. In this regard, some leading hotel chains have already found success in direct booking campaigns.

The other challenge is competition among OTAs themselves. A few new players are disrupting the landscape by offering an initial zero percent commission. In addition, Airbnb has already fragmented the market. It’s a no-brainer that analytics is a key tool for OTAs in dealing with these challenges as the travel distribution ecosystem continues to evolve.

Let’s explore some areas where analytics is already playing / will play a crucial role in enabling the growth momentum for OTAs.


The biggest challenge for an OTA is discovery, namely options to be presented to the customer. Predictive analytics enables OTAs to personalize recommendations in real time. Take the case of how a leading OTA leverages algorithms that use 105 billion combinations of factors and 10 million models to personalize recommendations.

Customers move across multiple stages in their online journey from thinking of a trip to making the bookings. The opportunity to influence is higher in the initial stages when customers are still exploring options rather than when they have already made their decisions. By leveraging analytics for predictive personalization, OTAs can lead the customer to make the desired decision and close the sale.

Demand & Cancellation Prediction

Big data analytics can help OTAs forecast the demand based on a variety of data such as customer behavior, price trends, season, upcoming events and inventory. For instance, more than 60,000 flights are canceled every year due to cold weather alone. With analytics, OTAs can predict inclement weather, the resultant flight delay and equip themselves to assist customers, airlines and hotels in managing re-booking. Customers cancel trips from their end as well. Analyzing the factors around such cancellations can help OTAs design better offers and policies around cancellations.

Offline Channel Management

Offline channels often get overlooked as a sales opportunity for OTAs given the obvious preferences by a majority of the population for apps. However, offline can be a powerful channel given that the OTA cart abandonment rate is a staggering 81 percent. Additionally, areas with difficult Internet reach and the senior citizens cohort are offline sales opportunities to tap into. In this context, analytics is an effective tool to up-sell and cross-sell by leveraging call center data.

For example, a leading OTA realized that it lacked a robust offline strategy resulting in a dip in revenues and market share. Among other interventions, the OTA deployed analytics to segment customers based on products and services, customer profitability and customer lifetime value models. The OTA increased its revenue by 16 percent and sales conversion rate to 21 percent.

By 2020, the travel industry will account for 44 percent of all online sales compared to other sectors. With 52 percent of millennials preferring to book through an OTA, the latter can hope to get a good share of that pie. However, without actionable analytics, this will be a difficult goal to achieve.

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