hotel welcome concierg
7 months ago
 

Online travel agencies tipped to lose market share to hotel direct channels

Hotels in the third biggest tourist market on the planet are starting to fight back against the dominance of online travel agencies.

At least, this is the forecast contained within research from Phocuswright shared at the FITURTech event in Madrid, Spain, this week.

Spain comes behind France and the US in the rankings for the most popular tourist destinations in the world, with some 65 million visitors in 2014 (up 7% on the previous year, according to figures from the United Nations World Tourism Organisation).

Yet the country’s hotels have relied for many years on OTAs to fill their rooms, or have agreements with European tour operators for package holidays.

Currently, just under half (48%) of online travel in Spain is booked on OTAs, versus the direct channel, compared to 43% for Europe as a whole.

But in 2017, Phocuswright says the figure will tumble to 43%, signalling a significant change in the marketplace.

The research house’s director of sales for EMEA and a European market specialist, Florence Kaci, says hotels are “becoming much more aggressive” and are starting to push direct sales through their own websites.

Spain, similar to many other countries in Europe, is dominated by Booking.com and Expedia in the online travel agency marketplace (globally, the pair are estimated to have an eye-watering 65% market share between them).

But Spanish hotels, including the many independents (around 70-75% of the country’s accommodation sector), are beginning to erode the influence of OTAs in online bookings.

For the properties not belonging to a chain, this has been driven by ease of access to affordable online booking tools for the first time in their history.

There is also a general acknowledgement in the sector – even among small, family-owned properties – that some investment in digital marketing and social media (Facebook pages, Instagram profiles, etc) can be a source of new traffic to a website.

Yet the issue remains for thousands of properties in Spain: don’t bite the hand that feeds you (too much).

Many are extremely reliant on the OTA giants (Booking.com, in particular, with some getting as much as 60% of their rooms filled by the Priceline Group-owned brand) for customers, but equally they mirror many of their counterparts elsewhere around the world in wanting guests to come in through the front door, rather than a side entrance via an intermediary.

One issue that many in the Spanish hospitality sector will note privately is the continued concern many have around rate parity clauses in contracts, with a close eye on how the saga unfolds in Northern Europe as Booking.com and others find they have to operate in a new way after having their wings clipped in various countries in recent years.

It is too early to say if the expected drop in market share for OTAs in Spain is likely to continue beyond 2017.

There is, some believe, a strong chance that the market will level out at around the 40% mark for OTAs, but others forecast a period of volatility as meta-book services for hotels (as well as chains) on TripAdvisor take their time to level out.

NB: Hotel welcome image via Shutterstock.

NB2: Disclosure – author’s attendance in Madrid was supported by FITUR.

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Kevin May

About the Writer :: Kevin May

Kevin is senior editor and a co-founder at Tnooz. He was previously editor of UK-based magazine Travolution and web editor of Media Week UK from 2003 to 2005.

He has worked in regional newspapers (Essex Enquirer) and started his career at the Police Gazette at New Scotland Yard in London. He has a degree in criminology, a postgraduate diploma in magazine journalism and publishes his first book - a biography about Depeche Mode - in late-2016.

 

Comments

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  1. Max Starkov HeBS Digital

    Kevin, 5% drop in OTA share in just 1 year? Please ask OhoCusWright to share more about the magic for this achievement! Magical new affordable booking tools? What type of complete naïveté is that? It takes much more than a booking tool to increase revenues from the direct online channel, the most important being the adoption of top-down Direct is Better Strategy and adequate investments in digital technology and marketing.

     
  2. William Beckler

    There’s a lot of red flags in this analysis that say to me that the Phocuswright may not know what their talking about. First, they cite rate parity as an issue for OTAs. If anything, the end of rate parity contracts would increase, rather than decrease, the market share for OTAs, as hoteliers don’t like those restrictions. In fact, rate parity is a big red herring that never mattered anyway. Second, they talk about better booking software for hoteliers. Again, that can increase, rather than decrease, the power of OTAs, as hoteliers become more reliant on online bookings. Third, they mention social media, which is the biggest joke of hotel marketing channels. Who books a hotel because they heard about it on facebook or twitter?

    It seems the Phocuswright analyst is hanging out with industry vendors with their own agendas and inaccurate sense of importance. They need to have their ears to the ground with real hoteliers and OTA staff.

     
    • Mark Ramage

      William your logic does not make any sense to me. Surely if price parity is no longer and the hotel direct price is cheaper then this will boost direct bookings. However many challenges ahead for hoteliers to increase their direct market share.

       
      • Evan Davies

        I also don’t understand your points but I do understand why you are pro OTA. Booking.com are fighting hard against the new laws in France and Germany because if they lose parity then the hotels will sell cheaper on their website. Also new technology allows hotel to sell directly in very sophisticated ways, my startup is one of such new breeds of tools that will significantly increase direct bookings by allowing hotels to offer discount without breaking the price parity rules.

         
      • Jonathan Boffey

        I have to agree with Mark on this but it could be that losing rate parity will force down OTA commissions rather than the booking volumes since the hotels will still need to get presented to consumers.

        OTAs are also likely to come under further pressure from meta-search sites that have really good inventories – but many of them ultimately rely on the larger wholesalers. Perhaps a large wholesaler will provide a decent B2C channel that will be ‘near direct’ and eat everyone’s lunch.

         
 
 

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