That’s one of the conclusions of an Amadeus-commissioned study conducted by Hermes Management Consulting.
The study, Understanding Online Travel Agencies’ Cost Drivers and Ways to Optimise Business in Europe, examined five mid-size OTAs from Scandinavia, France, Germany and the Netherlands and found that nonair products account for only 14% of their gross bookings on average.
Hence, European OTAs are grappling with a problem that leisure travel agencies, wracked by airline commissions cuts, understood years ago — there’s little money in the flight business.
Or, put another way, the margins are much larger in hotels, dynamic packages and advertising.
The study cites PhoCusWright research showing that nonair inventory — i.e. hotels, vacations and cruises, for instance — represent about 76% of traditional agents’ business and nearly 50% of U.S. OTAs’ revenue.
Regarding U.S.-based online travel companies, in the second quarter of 2010, Expedia Inc.’s hotel business accounted for 63% of its revenue, advertising and media represented 13%, air 12% and everything else 12%.
And, in Q2 2010, Orbitz Worldwide took in 36.6% of its revenue from air, 26.9% from hotels, 16.1% from vacation packages, 6.4% from advertising and media, and 13.9% from “other” categories.