Social Commerce & OTA’s, Are the business models flawed?

Now 8 months into my role at a hotel company I am curious and really have to wonder, Do both OTA’s (Online Travel Agencies, Expedia etc) and Social Commerce (Groupon etc) have a long term viable business?

If you look at the social commerce world and the business model, the assumption would be that they are a fad of sorts. They provide immediate results at an unsustainable cost. I’m not sure many companies will have a long term desire to sacrifice more than 50% of their revenue. If you look at the offers on these social commerce sites the offers are usually 40 – 50% off of the regular price and then for every sale the company sacrifices a further 25 – 50% of the potential revenue to the social commerce provider. That is a really expensive way to shift some product, could less money be spent, over a longer period of time and produce better results? 

What do you think?

Moving on, the online travel space. How long will this last? Airlines, Hotels etc sacrifice revenue to sell through these channels. The catch, the OTA’s don’t really have a product, they are a reseller. So what happens if hotel companies and airlines start shutting off sites like Expedia, Travelocity and Already the airline industry in the US has grown tired of the OTA’s with American Airlines and many smaller airlines shutting off the taps for the online travel agents. 

In 1 year, maybe 5, will these companies exist and if they are still around what changes will occur or what is in store for this industry? It is unreal the fees charged by both social commerce and OTA’s, fees that are not sustainable in the long run … Especially when you really have no product.

Again, What do you think?

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