OTAs dominate but grow negatively
While on a negative growth in both Europe and Asia-Pacific*, the market share of OTAs in both markets is the dominant source of online revenue. With 63% of market share in Europe and 61% in Asia-Pacific, the similarities in both regions show a trend that is likely global. Both regions have seen online distribution growth over the last three years. In 2019 Asia-Pacific* region saw a 35% growth in online distribution (all online channels combined) compared to 2017 (across the same hotels and distribution channels). European growth over the same period was not as fast with 17% growth from 2017 to 2019.
Looking further into the various channels, it becomes evident that website direct has been taking market share from the OTAs. This trend accelerated in 2020, which is possibly explained by the reduction in advertising by OTAs while Website Direct kept a level of online advertising. When OTAs reduce their advertising budgets, organic results for hotels rank higher in search engines resulting in sales on hotels websites. We have noticed an increase in customers desiring a direct relationship with hotels. Especially during times of uncertainty in restrictions and fast-changing regulations, guests prefer to be in direct contact with their hotels.
Website Direct: a rising second
Both Europe and Asia-Pacific have Website Direct revenue as the second-largest online revenue stream (in the Asia-Pacific region it is the largest if Booking.com group revenue is segmented) and has recorded a steady growth for several years. However, the Asia-Pacific area leads with 8 points more than Europe in 2020.
Booking behaviour evolution
Cancellation rates: an endless issue
Growing cancellation rates have been plaguing hotels internationally; however, the Asia-Pacific area has a much lower cancellation rate than European hotels. Due to the pandemic, we are not comparing the cancellation rates for 2020. We’re analysing the cancellation rates for 2019.
2020 has changed the hotel distribution market – not just the volumes which experienced record lows – but more significantly, the trends. Surprisingly, several of those shifts were already in motion before the pandemic. They were just accelerated. OTAs losing market share in a market that has seen steady growth until 2020, shows that strategies hotels have been implementing to balance their distribution channel weights have been paying off. Even though we are entering a phase where distribution profitability will be less important than distribution volume, hotel distribution managers should remain conscious of how long it has taken them to successfully shift channels from being dominated by OTAs. While similar in many ways, European and Asia-Pacific online distribution for hotels is evolving a little differently in the face of the 2020 pandemic. Easy cancellations have been the largest winning category in Europe while more direct relationships are becoming the biggest category in Asia-Pacific. The importance of having a strong direct channel is not to be under-estimated for the future of hotel bookings, as travellers seek clear communications and reassurance for their bookings. Working out the balance between direct and reassuring channels, where guests know they can communicate with and manage their bookings without surprises while maintaining a fair cancellation policy and re-booking for guests, will be essential to retain as much business as possible in the foreseeable future. Due to the current uncertain conditions around booking travel and hotels, it is more important than ever to have reassuring communications with the guests before they book and to understand their needs, preferences, and habits. We recommend hotels to invest in CRM technology and ensure they have a connected technology stack to ensure bookings, emails, past emails etc. are managed smartly.