The popularity and influence of online travel agencies (OTAs) among Europe’s consumers is skyrocketing. But their dominance has proved a mixed blessing for hotel operators and airline brands, which find themselves increasingly reliant on OTAs to acquire customers and paying escalating commission fees for the privilege. New marketing tactics, along with recent market developments in Europe, offer an opportunity for travel marketers to reset the relationship, according to a new eMarketer report, “Europe’s Online Travel Showdown: Providers Vie with Online Travel Agents over Digital Booking Business.”

OTAs have traditionally been a less important distribution partner for Europe’s airlines. The highly competitive European airline market, led by popular low-cost carriers Ryanair and easyJet, has headed a multiyear effort to encourage direct bookings, a campaign that is now being adopted by Europe’s “flag-carrier” national airlines as well.

Revenues from add-on purchases like baggage allowances are one factor contributing to direct booking on airline sites. Some of Europe’s flag-carriers, including Air France, KLM, British Airways and Swiss, are seeing a marked increase in ancillary revenues due to new bag fees introduced on intra-Europe flights last year. According to a report by airline marketing consultancy IdeaWorksCompany, European carriers earned $12.6 billion in ancillary revenues in 2013, accounting for more than 29% of revenues worldwide and the second-highest total of any region after the US market.

These airlines report ancillary services increase direct bookings simply because they are easier to promote and purchase on airline websites. Although efforts have been made to integrate these ancillaries into the reservation systems the OTAs rely on, the airlines wield considerable power over how and where they are sold. According to Atmosphere Research Group and International Air Transport Association’s “2012 Future of the Airline Industry Report,” at least one European airline executive believed that global distribution systems and travel agencies that can’t or won’t sell ancillary products in the way the airlines dictate will simply no longer be their partners.

In a February 2014 TTG Digital article, comments by Ian Heywood, head of global supplier strategy at global distribution firm Travelport, confirmed the majority of these ancillary sales happened on airline sites. Heywood noted that 87% of the $3.3 billion the airlines made from checked baggage fees in 2013 came from purchases made on the companies’ websites.

Source: http://www.emarketer.com/