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Why Asia continues to represent a significant growth opportunity for OTAs


Marco Saio Interview with priceline.com’s Head of Worldwide Strategy and EVP Glenn Fogel

Around this time last year, it was being mentioned that Asia is going to lead the recovery as far as the travel industry is concerned.

A company of priceline.com’s stature believes that Asia will continue to represent a significant growth opportunity for travel due to both strong economic activity in the region and rising personal income which greatly influences the level of travel.

“Research indicates that the offline to online booking transition has a long way to go in most of Asia. These two factors: rising overall travel and continued transition to online means that there is still substantial growth ahead for online travel players,” reports Glenn Fogel.

Fogel added, “And we are pleased to have two hotel-centric online brands operating in the Asia region: Agoda (which operates under the merchant model) and Booking.com (which operates under the agency model).  Both are working hard to add more supplier/partners in the Asia-Pacific region.  And it is our opinion that global entities such as Agoda and Booking.com are well positioned to assist hotels in Asia-Pacific by bringing customers from both local regions and from distant areas like Europe, North America, etc.”

Fogel, who is scheduled to speak at the forthcoming Travel Distribution Summit Asia 2011, to be held in Singapore (May 18-19, 2011), spoke about the current sentiments for this region, the role of intermediaries going forward and lot more. Excerpts:

Marco Saio: According to Abacus, from the rapid growth of online, ancillary services, mobile bookings and the resurgence of corporate travel, Asia is well poised to continue its strong growth of 2010 into 2011. How do you assess the current sentiments? What according to you are going to be the emerging trends as far as travel distribution is concerned?

Glenn Fogel: We believe that mobile is an important trend to watch. As mobile devices proliferate, it will spur travel companies to develop more apps. We can expect well thought-out apps to be received favourably by mobile-enabled consumers. We’re already seeing a positive reception among users ofour apps and mobile sites. And just as bookings have migrated from offline to online, you can expect to see migration of a certain percentage of online travel bookings to move from desktop to mobile. Also, it would not surprise me if many travellers who currently use offline channels go directly to using primarily mobile devices to make their bookings. We think these trends will favour larger companies such as ours who have the resources, expertise and ability to spread fixed costs over a large number of transactions since building and maintaining a new distribution method - call this the mobile ecosystem - is not a trivial thing to do if you want to do it in a best-in-class manner.

M. S.: It is highlighted that a distributor’s role of managing complexity will be enhanced as consumers struggle to distinguish between the myriad of available and constantly changing offers. How do you think intermediaries, be it online or offline, have made progress in the distribution chain?

Glenn Fogel: Before the Internet, a person went to a travel agent to get advice and then the agent booked the chosen travel option. Only the travel agent had the information and expertise to sift through the tremendous number of travel options. And only the agent had the connectivity to book the trip whether through a GDS, by fax or, way back, by telex. This distribution system worked well at the time because it was helpful to consumers and most of the suppliers also benefitted since they did not usually have large direct selling capabilities.

Of course, this “system” was only available during business hours, the system did not give a great deal of freedom for travellers to explore possibilities on their own, and was relatively expensive (though the cost of this system was hidden to travellers in the form of commissions or mark-ups to the agent). More importantly, most travel agents were limited in the amount of information they could access and the time they could spend researching for any individual client.

Now, though, the very large online travel sites such as Agoda, Booking.com, and priceline.com can provide huge amounts of easily searchable and filterable information (meaning descriptions, traveller reviews, prices, availability, etc.), in many different languages, any day of the week, at any time, and through the use of mobile devices from any location. And we are able to do this at significantly lower cost per transaction than the offline system, which is good for both suppliers and travellers.

M. S.: Top OTAs believe that success of international demonstrates that Internet penetration and usage is growing in regions outside the US and offers opportunity. How do you expect the distribution battle in the Asia Pacific region as far as organic growth and strategic alliances are concerned?

Glenn Fogel: We all know that the US is just one market in the world of travel and there is a lot more travel outside the US than inside the US. Furthermore, growth rates in most places outside the US are much higher. At priceline, we don’t think of ourselves as a US company with international subsidiaries. Rather, we think of ourselves as an international company with offices throughout the world operating under different brands with different business models.  Whether there will be consolidations, alliances, partnerships, etc. in Asia-Pacific or anywhere else, we won’t speculate. We will simply continue doing what we have always strived to do: provide good value to our travel customers and suppliers around the world.

M. S.: Around this time last year, considering the arrival of iPhone and iPhone lookalikes in Asia, the industry expected mobile devices to develop a growing role in the traveller’s journey. Initially supporting supplementary and information services, the mobile device was expected to increasingly become acceptable for bookings and payments, especially for low value items and domestic journeys. How do you think this emerging channel has shaped in this region?

Glenn Fogel: We read the same research material everyone else does and agree that mobile devices and the software associated with them (such as applications) will continue to become more important over time for all areas of travel.  The more interesting question is will the companies that have been successful in desktop online travel be as successful in mobile online travel?  Are the skill-sets the same? Does converting well on a desktop site transfer to converting well on a mobile site?

We’ll find out over the next few years but I do think that bigger companies have an advantage as they can afford to make the needed investments in these new areas.

M. S.: What do you think are some of the biggest challenges when it comes to the growth of mobile for travel planning and booking? Would you agree that the biggest obstacle today is international roaming charges, which make Mobile use overseas prohibitive in the short term except for business use?

Glenn Fogel: Costs for using mobile devices are definitely an issue for many travellersthough we suspect costs will come down (as technology usage costs have historically declined over time). Another cost issue though is for creators of mobile programmes (apps, mobile sites, etc.) as proliferation of different standards makes development more expensive. Hence, large companies such as ours are better positioned because small players may not be able to afford the development and maintenance of apps for multiple platforms.

Scale in the world of technology still matters and a small or medium sized hotel might want to think carefully about spending money developing and maintaining multiple versions of its own apps in multiple languages versus simply working with an OTA that has cutting edge technology to book its customers.

When I was a Teaching Fellow in the Economics department at Harvard University more than two decades ago, I would stress to students the concept of specialisation. Agoda and Booking.com specialise in bringing customers from around the world to hotels.  And because of our size, our learned skills that are specific to the hotel world, our technology expertise, etc., for many suppliers we are a better (meaning cheaper and more effective) way to bring customers to hotels through our mobile distribution system than the hotels could do on their own mobile platform.

For hotels to spend money creating and maintaining multiple mobile platforms that we can already offer to them at a fair distribution cost is probably not a good use of their capital. And this was echoed to me by a hotel manager who stated that he expected to have a higher return investing in his hotel - meaning, I believe, improving the guest experience - than building multiple apps which would need to be constantly changed to fit rapidly evolving technology.


Glenn Fogel is one of 60 industry leaders scheduled to speak at the forthcoming Travel Distribution Summit APAC 2011, to be held in Singapore (May 18-19).

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