Why Mideast OTA’s struggle.
Why do Mideast OTA’s struggle versus their counterparts.
Typical Online Travel Agency (OTA) Value Adds
OTA’s typically compete on price, convenience, post-purchase sales options, breadth of travel products in 1 place, service, or combination thereof. OTA’s usually benefit from substantial technical resources and significant marketing resources. The above list covers some, by no means all, typical OTA value adds, many of which are difficult to replicate (let alone innovate) within Mideast direct consumer sales and service.
EK and QR as Examples
Let’s take Emirates Airline and Qatar Airways as convenient and representative samples of Mideast airlines. Other carriers within and outside Mideast be readily substituted.
Strong Airline Offerings
First, these airlines have been and currently, in my opinion, been consistently commercially and technically savvy. Forward-thinking in deploying features and value adds covering before, during, and after the booking. Integration of technology from 3rd party and internal tech departments, the use of newer standards like NDC, increasing sophistication of their websites and app, unique loyalty program-driven benefits, and pricing, to name a few examples.
These airlines also offer in-airport connectivity integration (only a few originating airports, after all), intelligent upsell/cross-sell offerings, and visa and COVID vaccine pre- and post-arrival checking integration add to the use and stickiness of direct offerings.
The special fares airlines entice customers are often unavailable through other channels. If I get the same or cheaper price on the Emirates or Qatar app and much more functionality, why would I switch to an OTA as my primary booking method?
After accounting for some of the above features enabled to intermediaries, I conclude the above makes the pre-sales, sales, and post-purchase value adds & differentiations significantly harder for Mideast OTA’s to succeed.
Better Booking Experience
Secondly, let’s look at the ‘bread and butter’ booking experience; the high visibility consumer-facing air booking engine where trips begin.
The direct purchase airline experience handles real-time search options, including complex searching like 30 days views and ability to fly economy on the way there and business class on the way back, and airline-only and airline loyalty program-driven pricing. The scan charges intermediaries would need to accrue give me pause.
Airline value adds span multiple payment options, the use of miles and cash options for a booking, the purchase and use of loyalty points, and self-service customer support (real-time change/cancel/questions/itinerary lookups, seat changes, amenities purchases) in the booking flow via the airline website or app.
In turn, these in booking flow offerings make it challenging for Mideast OTA’s to differentiate themselves and successfully compete.
Consumer Affinity
Thirdly, I believe consumers have a level of affinity and comfort with direct booking in a way I feel isn’t the case in other parts of the world, particularly for the consumer segment. The airline website and app, over time, become the default booking channel – requiring alternatives to offer significant value (10X better) for the consumer to consider switching leave aside actually switching. There are too many reasons to justify this affinity.
Said another way, these airlines have built trust and brand loyalty over the years, leaving OTA’s significant ground to cover.
Additional Reasons
I would add the dominance of typically one carrier within home countries, a handful of originating airports (versus other countries) and the deep integration of the airlines, their respective tourism boards, the airports, and the countries they operate from as important additional reasons. The latter integrations are critical to the success of Mideast carriers and largely unique to the Mideast. These airlines further aggressively leverage their competitive advantages to restore revenue, profits, load factors, and RPM in a post-pandemic world.
The above are some of the reasons, by no means a comprehensive list, why many OTA’s have struggled in the Middle East.
The Effect
Mideast OTA’s simply don’t, don’t to the same level of success or been too slow in executing the right strategy. They’ve also been too hyper focused on the air product (versus it being a gateway to other travel offerings) or excluded from replicating some direct airline offerings.
Historically speaking, I believe the change in focus to other travel products was not initially decided upon and transitioned too slowly before running out of money, momentum, or market share.
The above conditions will drive the consolidation of OTA’s, provide context for the challenge existing participants face, and behind the success of Mideast travel companies who focus on other travel products and traveler types. Hajj Umrah bookings, packages & tours, and for some time corporate travel, to name a few.
By no means is my observation meant to belittle those OTA players who took on this challenge or ignore the success they did achieve. A large part of being a travel investor requires a deep belief in the ability of a new market entrant or travel startup to dethrone market leaders. You don’t need to be in the travel industry to name leading entrenched, seemingly unassailable, travel companies who are footnotes in today’s market.
Lastly, I do not doubt the extensive experience and highly talented teams driving current and past Mideast OTA successes; zero doubt whatsoever. Mideast OTA’s are indebted to these individuals and teams for their success.
Success in Other Markets
I’m mindful of many other markets where OTA’s successfully out-innovate and out-perform their airline counterparts. India, Pakistan, South Africa and Singapore to name a few. OTA’s do not face the same challenges, opportunity cost, and structural disadvantages in these and other markets.
I’m equally mindful of other travel products for other than consumer traveler profiles (corporate, inbound, groups, events, etc.). Still, I’m using the consumer originating Mid-East booking for the scope of this post.
Difficult, Not Impossible
I’m suggesting the above reasons makes it very difficult — by no means impossible — for Mideast originating OTA’s within the consumer air segment. It will require laser focus, sound strategy, extensive resources, an experienced team, and dedication to a long-term vision. Frankly, I am skeptical of the relative ROI versus investing in other markets as it now stands but markets do rapidly change. I’ve learned to never say never.
Change in Viewpoints
I appreciate your reading my viewpoint on the current Mideast OTA market and subject to updates as market forces and entrants ebb and flow in success. I encourage you to subscribe to remain updated on these changes.