Who is the largest OTA in the world?

Today’s Topics

Hello,

Today we have 3 charts for you, exploring Online Travel Agencies (OTAs)

  • Top OTAs: The three largest OTAs in the world, and their differences
  • Post COVID-19 Recovery: Expedia’s languishing recovery post-pandemic
  • AirBnB’s marketing: Breaking away from the pack

Online travel agencies (OTAs) have become ubiquitous over the last 25 years as the internet changed the way we saw the world.

Between them, the top 3 OTAs, did $196B of gross bookings in 2021 (gross bookings is the value of bookings made by travelers, e.g. price of their stay or flight ticket)

Both Booking and Expedia have followed a multi-brand strategy, acquiring many different travel agencies (sometimes, even competing services), across multiple categories like hotels, vacation rentals, flights, car rentals etc.

Booking’s acquisition by Priceline in 2005 is probably one of the best tech acquisition ever (right up there with the likes of YouTube, and Instagram).

What’s interesting to note is that unlike the other two, Airbnb has grown mainly as a place to book rooms in other’s homes / vacation rentals. However, it too, has started venturing into other categories like hotels by acquiring Hotel Tonight in 2019.

The 4th company on this list is Chinese Trip.com Group.

It did ~$68B in gross bookings in 2021 and has various brands like Trip.com, Skyscanner, Ctrip, Qunar and Travix. However, its average commission rate is much lower (4.6%), leading to only $3.1B in revenue in 2021.

2022 has been the year of revenge travel so far. After being under lockdown for 2 years, people have been eager to get out and travel again.

Many airports have seen record travelers and endless queues.

If we look at the gross bookings of the OTAs, both Booking and AirBnB have not only recovered fully from their COVID-19 slump in 2020 but have handsomely shot past their pre-pandemic (2019) figures.

Notably, Expedia haven’t seen as much success. Its Q2-22 gross bookings value is still 8% below Q2-19 figures.

While gross bookings haven’t been as good, revenue has, in fact, increased 6.4%, from $3B in Q2-19 to $3.2B in Q2-22.

This is largely explained by increase in revenue from its Accommodations business, a higher margin industry, changing its overall commission rate from 11% in Q2-21 to ~12% in Q2-22.


AirBnB has been one of the most popular tech companies in the last 10 years.

However, thing were looking grim for AirBnB at the height of the pandemic. It had to delay its IPO plans and layoff 25% of its employees.

However, the pandemic, also gave it a golden opportunity.

In 2019, AirBnB spent ~$1.6B (or 34% of its revenue in 2019) on marketing (Note: In AirBnB’s case this spend also includes personnel cost)

Its not unusual for OTAs to spend a ton of money on marketing.

Expedia and Booking, both spent ~$5B each on direct marketing expenses in 2019. This is money spent mainly on things like performance marketing (e.g. Google Ad Spends), affiliate commissions to buy traffic and send it to their websites and apps.

Marketing cost was ~34% of Booking’s revenue and 41% of Expedia’s revenue respectively in 2019.

While both Expedia and Booking, have since, returned to their old, expensive habits (increasingly so, see chart above), AirBnB had different ideas.

In 2020, when no one was traveling, AirBnB, understandably, pulled back most of its spent on marketing. However, even before it could resume spend, it noticed that most of its traffic came back on its own (such was its brand power). Read more here.

This has led to a permanent shift in its marketing strategy – moving from performance marketing (i.e. buying impressions/ clicks on digital channels) to more top-of-funnel brand / PR marketing.

“We are never going to go back to spending the same amount of money on marketing as a percentage of revenue as we did in 2019,” Chesky told CNBC in an interview following the annual results.

The results have been spectacular so far. In both 2021 and first half of 22, AirBnB’s revenue has grown to its highest levels, while marketing cost has declined to only 20% of revenue. This is less than half of its key competitors like Expedia and Booking!

That’s all for this week. Thanks for reading! 👋

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