Trends in OTA Evolution: Building Customer Trust

Mr. Brett Henry, Vice President of Commerce at Abacus Travel Solutions, a seasoned veteran with over 12 years of experience in online travel in Asia, shared insights with Ms. Yeoh Siew Hoon, Editor and Co-founder of Web In Travel, on the trends shaping OTA (Online Travel Agent) development, one of the 10 topics to be discussed at the 2014 Web in Travel conference.

'This is a long-term race, both in terms of scale, investment capacity, and brand building.' Photo: iStock

'What does he think are the biggest changes over the past 10 years?'

Consider the markets of India and China. If someone said 10 years ago that India would go from zero to achieving 48% of online transactions, no one would believe it. This is a market with low internet usage and not necessarily a wealthy one. However, developing online business services here is relatively easy.

Hong Kong, on the other hand, with all its modern technology and better infrastructure, surprisingly finds online travel service business more challenging. It's hard to believe. In Hong Kong, customers don't struggle to find a travel agent, where service providers are responsible for their transactions. Once again, the key issue is customer experience, and in Hong Kong, people find it easier to purchase services from a travel agent than online.

So you believe that Hong Kong is a prime example of travel agents effectively safeguarding their 'territory'?

Exactly, in any market where customers haven't adopted the habit of purchasing services online, brands and accompanying services become even more crucial. At the same time, investment in OTAs in Hong Kong isn't overly high, unlike in India, where there's been significant investment in OTAs like MakeMyTrip, Cleartrip, and Yatra. In Hong Kong, we really only have Priceline, Expedia, and Zuji, and they haven't invested too much yet, although that may change. 

In Taiwan and Korea, the strongest contenders in the 'race' are travel agents, once again highlighting the importance of customer experience and brand. In these markets, local companies are leading the way.

There seems to be quite a significant gap between the number one and number two positions in local markets?

Indeed, it seems those leading the pack have a much greater opportunity to capture market share compared to those following behind – so anyone pioneering in this field tends to be very successful.

In India, it's MakeMyTrip, and Ctrip clearly dominates the market in China. So, in Indonesia, the winners will be those who lead and have a large scale, and you can see a 'race' between new OTAs like Nusatrip, Tiket, and Traveloka. And perhaps Rocket Internet is actively expanding Traveloka's scale with that perspective.

Australia is an intriguing market where local businesses used to dominate, but now it seems things have changed?

That's indeed the case, this market was once dominated by names like Wotif and Webjet, but global competitors have entered the scene with careful investment strategies. They've built services based on customer experience and developed strong brands over the past 7 – 8 years, and Expedia has suddenly become a prominent name here, even before it acquired Wotif.

Mr. Brett Henry, Vice President of Commerce at Abacus Travel Solutions. Photo: webintravel

So, do you think the dynamics could change in India too?

I think it could be different in India. By now, the Indian market scale is massive, and it seems local businesses are overlooking Expedia's efforts. But you never know what might happen. I recall Dara Khosrowshahi, CEO of Expedia Inc, saying 'We'll lose a lot of money in Asia, it's not about making money, it's about building brand, customer trust, and user experience.'

This isn't something local mid-range competitors are considering. This is a long-term 'game', not just about scale but also about investment and brand building. Expedia is a name that brings the best experiences to users in Australia; I reckon it's now also a leading online brand in Singapore, Malaysia, and Hong Kong. Expedia is also heavily investing in Thailand, and you'll see this name everywhere in Bangkok. They've been pursuing their aspects and have long-term commitments to customers.

I think you'd say the same thing about the two Priceline Group brands, Booking and Agoda?

Priceline is very savvy. Their first strength is having a far vision when acquiring these two brands; secondly, it's their humility in letting their 'team' be themselves, along with their investment in Ctrip. It's not about ego here, it's about good business sense.

What do you think about the upcoming wave of OTAs?

I believe it will see even more aggressive moves from two global brands as they penetrate the Asian market. The interesting things are just beginning like Skiddo, Jetabroad (Australia), or Tiket.com (Indonesia) all running on the same shoestring, led by super-smart individuals who think they can conquer the world. These are third-generation OTAs – and the development is limitless.

Looking at Singapore, how do you think a brand like airfares.com.sg can protect their 'territory'?

I think Kenny Chew, the founder of MISA Travel, has done an exceptional job in building a robust online business model. They have a distinct strategy, and they'll execute it well. They know they can't outdo Expedia, so they'll focus on services, conveying a good message based on relationships with airlines. It's a unique business, and customers recognize it as such.

Another wave is local brands like MakeMyTrip and Ctrip expanding beyond domestic markets. Do you think they'll succeed?

It will be no if they continue to use the same model as for their domestic market. But they still have a chance to expand globally and regionally, why not? They can learn to approach like Expedia and have a long-term vision. Or they could adopt Priceline's method of acquiring big brands, operated by a good team, and let it grow on its own. 

Ctrip seems to have a harmonious blend of both. They've acquired the best businesses in the market like eztravel, an online/offline tour forum in Taiwan – and they have Ctrip in Hong Kong.

What about Qunar, wanting to expand outside of China?

This remains unclear. Qunar has an excellent leadership team, and history has shown that great teams always win. But I wonder, the market opportunity in China is too big for both brands, they might focus on their own market and not try to conquer other markets.

According to Phong Chau (via Web In Travel)

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Reference: Travel Guide by Mytour