Friday, November 22, 2024

Dependency on booking platforms remains too high, European hotel industry says

Must read

While digitalisation brings great benefits to the hotel industry, it also forces businesses, especially smaller ones, to be reliant on Online Travel Agencies (OTAs), such as Booking.com, which frequently works to their disadvantage.

Hotrec, the European association of hotels, restaurants and cafés, has published its 6th biennial study on the European hotel distribution market at the beginning of 2024. Conducted in collaboration with the University of Applied Sciences of Western Switzerland Valais (HES-SO Valais Wallis), the objective of the study is to monitor the evolution of distribution channels of European hotels with a specific focus on the role of OTAs.

Based on observations of over 3,000 hotels across Europe, the study shows that the dependency of hotels on OTAs remains very high. A significant portion of hotels heavily relies on OTAs for distribution, with 28% having OTA market shares of 30-49% and every fifth hotel exceeding 50%. This reliance is more pronounced among smaller hotels, with under 20 rooms, where 27% have 30-49% OTA shares and another 27% generate over half their bookings through OTAs.

During the Covid-19 pandemic, in 2021, there was a notable shift. Hotels’ reliance on OTAs remained almost at the same level as in 2019, with OTAs holding a 28.8% share. Conversely, direct bookings saw a significant increase, reaching 55.2%, an 8 percentage point increase compared to 2019. This indicates a temporary shift in consumer behaviour during the crisis period.

However, post-pandemic, the distribution landscape has seen a return to pre-Covid trends. Direct bookings have once again declined, approaching the levels seen in 2019, which were marked by the erosion of direct bookings’ market share due to the increase of global distribution players such as OTAs. By 2023, the share of direct bookings decreased by nearly 7 percentage points from 57.6% in 2013 to 50.9%.

© Hotrec | HES-SO Valais Wallis

Overall, the long-term trend from 2013 to 2023 highlights a 10 percentage point increase in the average market share of OTAs in the European hotel sector, rising from 19.7% in 2013 to 29.6% in 2023. This underscores the growing influence of OTAs over the decade.

The issue, Hotrec points out, is that OTAs undercut prices set by hotels in 4 out of 10 cases. They also multi-source offers by listing rates and availabilities of other OTAs on their own platform, affecting 1 in 2 hotels in Europe and creating multiple operational challenges for hoteliers (such as price inconsistencies).

“Hotels face unfair business practices from Booking.com every day: financial loss, operational strain and reputation damage. [The platform is also] withholding guest data from hotel partners and preventing hotels from offering better prices on their own websites. This must end. The DMA and fair digital rules are a first step in the right direction to tackle these pressing issues”, Hotrec Director General, Marie Audren, commented, referring to the recent designation of Booking as a gatekeeper under the European Digital Markets Act (DMA).

Affordability, transparency and choice are crucial for European consumers and travellers. This should finally be resolved thanks to the DMA.

Marie Audren, Hotrec Director General

The 3 main players within the OTA market remain Booking Holding, Expedia Group and to a lesser extent HRS, with an aggregated market share of 90%. Booking Holding is by far the most influential player, with a share of 71% in the OTA market (compared to 68.4% in 2019 and 71.2% in 2021). The dominance of Booking has been rising over the last 8 years by 11 percentage points, from 60.0% in 2013 to 71% in 2023.

Expedia was not able to maintain the market share it gained between 2015 and 2019 during the pandemic, falling from16.3% in 2019 to 12.5% in 2021, but then increased to 14.4% in 2023. Hotrec attributes this to some extent by the increase in American tourists to Europe in recent years. HRS has seen a steady decrease of market shares, from 16.6% in 2013 to 6.7% in 2021 and now to 4.6% in 2023.

© Hotrec | HES-SO Valais Wallis

On the other hand, the European hotel industry is taking significant steps towards digitalisation, reflected in the steady switch to direct online bookings. Most hotels use internet booking engines (IBEs), providing immediate, user-friendly online bookings.

Electronic distribution represents 45% of overnight stays booked via online channels (online travel agencies, social media, internet booking engines on hotel websites), while direct booking channels (telephone, fax, walk-ins, email, form or booking system on the hotel’s own website) continue to be the most important sales channels for the industry, accounting for 50.9% of overnight stays.

Ten years ago, almost half of hotels were unaware of the opportunities for integration with travel meta-search engines, but now, around 80% of respondents to the survey were aware of this distribution channel, which is used by 46% of hotels. Meta-search engines are platforms that aggregate hotel rates and availability from various sources, allowing consumers to compare prices and options in one place. Examples include Google Hotel Ads, TripAdvisor, and Trivago.

In 2013, TripAdvisor was the dominant meta-search platform in the market with a usage share of 71%. However, by 2023, Google Hotel Ads had become the market leader with an 80% usage share, followed by TripAdvisor at 44% and Trivago at 36%.

Latest article