OTAs' share of the U.S. travel market continued to rise last year. While that market share is dominated by Expedia Group and Booking Holdings brands, smaller OTAs are making inroads, thanks to strategies that include mobile-only approaches and an enhanced focus on customer service.

According to Phocuswright's U.S. Online Travel Overview 17th Edition Report published in February, OTAs' market share rose to 19% in 2017 from 17% in 2015. Booking Holdings brands Priceline and Booking.com accounted for 23% of the U.S. OTA market share last year, while Expedia brands (excluding Egencia and HomeAway) accounted for 69%.

That equates to a massive 92% of the OTA market share, leaving 8% for smaller players. Still, the non-Expedia and Booking market share did increase 1% in 2017.

"It's definitely difficult to compete with companies that are as large and as successful as many of the OTAs are," said Dakota Smith, head of growth and business at Hopper, an app that analyzes billions of flights to help users find the best deals. "Travel is a very interesting space, but it's also a very competitive space."

Large companies tend to dominate the digital advertising sector, making it difficult to acquire customers that way, Smith said. It's also a challenge to have positive supplier relationships when so much volume is being channeled through a few large OTAs. But Hopper, he said, has focused on a narrower subset of users.

"We're mobile only," Smith said. "How can we acquire customers on the web and compete with companies that have multi-thousand-person engineering teams? We do that by focusing only on our app, by creating a value [proposition] that's unique to the phone that can't be replicated on the web, and that allows us to successfully compete with them."

Hopper's app invites users to enter trip plans, then offers a prediction on when the flight or hotel will be the cheapest, recommending whether to book or wait. If the recommendation is to wait, Hopper monitors trip prices, then sends a notification when prices drop.

Many OTAs are looking for customers who want to book immediately, Smith said, an expensive proposition if they're advertising on Google. Hopper is instead acquiring customers on social media, asking them to just install an app, not book immediately.

HotelTonight is also a mobile-only company with a unique proposition. Initially, users could only book within a window of seven days; that was expanded to 100 days.

"We love being a challenger brand," said CEO Sam Shank. "The legacy OTAs have deeper pockets when it comes to marketing, to be sure, but they've forgotten how to innovate. HotelTonight offers a truly differentiated, innovative alternative, so we don't need to compete on the size of our marketing spend alone the way they do."

Shank said mobile bookers are looking for a different experience than web bookers: something "faster, simpler and better curated." Consumers' shift to mobile has put HotelTonight at an advantage, he said.

"Being mobile-first has enabled a level of focus that means we can outcompete the legacy OTAs in booking speed and simplicity, which keeps our bookers coming back," Shank said.

Sam S. Jain, CEO of Fareportal, said his company prefers "to focus not on our competition but on our customers."

"We are flight specialists," Jain said. "We have a team of hundreds of engineers who spend their days going deeper and wider, looking at flights from every angle. Our Product and Tech Group is hyperfocused on how to solve customer problems related to flights."

Jain also pointed to Fareportal's start 25 years ago as a full-service agency, leading to deep airline relationships. Today, Fareportal operates as a hybrid of an OTA and a full-service agency, which he called a "big differentiator." He attributed a high customer-retention rate to 24/7 support and to making contact numbers easily locatable.

"Providing these phone numbers across thousands of web pages is a massive undertaking," he said. "This takes a great deal of investment, but it is an investment that pays off."

Customer retention through solid customer service is also a focus at MyFlightSearch, said Abhishek Mago, vice president of product development and marketing. Mago said competing directly with larger OTAs would most likely be a losing venture.

"But if I'm trying to focus more on the retention of the customer that I acquire, supporting those customers ... that's when my customer base starts growing, and that's exactly what's happening," he said. "The primary focus has been not to compete but to gain the market share, and that's what we are doing right."

For MyFlightSearch, that means offering personalized results for customers after tracking their searches as well as working to resolve any issues that come up.

"That is the reason that my customers actually tend to come back to me a lot," Mago said, "rather than just moving away and writing me off."


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