Please feel free to get in touch

Please see our Website Privacy Policy for information

Point of View

Why online travel agents embrace
the January blues

By Louis Jamieson, Global Equity Analyst

January was once the month when we all beat a path to our local travel agent and emptied their shelves of brochures that depicted long, hot sunny days in far-flung places. It was the only way to survive the short days and seemingly relentless winter weather.
While it’s still the case that the largest percentage of holiday bookings are made in January every year, the dynamics of the travel industry, and how people book their holidays, has changed dramatically.
The rise of the online travel agent (OTA)
In 2011, 30% of travel bookings were made online, and this is set to grow to 51% by 2021 – a 20% increase in market share in 10 years.


Source: Barclays research
It’s not surprising then that the rise of the OTA has changed the face of the travel industry, and not just from a price perspective. Whereas holiday-makers once defaulted to well-known hotel chains as a means of ensuring a known quantity in an unknown country, OTAs have given customers the confidence to spread their wings. Websites give access to a wide range of accommodation, complete with up-to-date and honest reviews, meaning travellers can now book smaller, independent (and perhaps more interesting) hotels with confidence.
Who dominates the OTA market?
There are three dominant players in this market – Expedia, CTrip and Priceline. Priceline, who own Booking.com, plays an important part in Sanlam portfolios. Not only do they give their customers access to a wide range of hotels, apartments, and B&Bs around the world at the best price, but the make-up of their revenue is particularly attractive:

  • As much as 88% of their bookings are in accommodation, which offers higher commission than flights and package holidays. In contrast, around 50% of Expedia’s bookings are flight-only.
  • 75% of their revenues are from Europe, where most bookings are with smaller, independent establishments that are forced to pay the largest commissions. In the US there’s a larger percentage of hotel chains that have a stronger negotiating position with the OTAs.
  • They own 10% of CTrip – giving them a toe-hold in the Chinese travel market. CTrip currently dominates the Chinese travel market, with approximately 80% market share. It’s almost impossible for western companies to get a slice of this, yet the future growth of this market is expected to burgeon in years to come. 

Why OTAs make an attractive long-term investment
As far as hotels are concerned, OTAs are a necessary evil. They’re an essential conduit to filling rooms, but they’re having a negative impact on the bottom line thanks to the high commissions they charge.  The transparency offered by the websites has also eroded the value of big hotel brands, although this has benefitted the smaller, independent providers. Hotels can employ special offers and loyalty programmes to try and coax customers to come to them direct, but it’s hard to envisage a time when the OTAs won’t have something of a strangle-hold on global hotel rooms.
There also tends to be a flight to the OTAs (if you excuse the pun) in times of recession. Because they compete so effectively on price, customers tend to gravitate towards them in a downturn.
Finally, the key players in the market are so good at what they do, it’s almost impossible for new companies to steal market share. Even if they did, and managed to carve a niche, the larger players are likely to buy them before they become too great a threat.
At Sanlam we believe that OTAs present an attractive long-term investment opportunity. And who doesn’t want to be invested in holidays at this time of year?


Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.