Hotel distribution resembles a game of musical chairs, with global mega brands and major OTAs claiming seats of power while smaller properties scramble for leverage. Three interconnected forces – the ascent of OTAs, meta search domination, and alternative lodging – have upended traditional distribution:
NB: This is an article from EHL Insights
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The OTA oligarchy
The early promise of OTAs to democratize discovery has given way to an oligarchy controlling guest access. Online travel agencies now account for over 35% of hotel bookings globally. Giant OTAs like Booking.com and Expedia have raised the table stakes so high that boutique hotels struggle to compete:
- Booking.com lists over 28 million listings across hotels, homes, and other properties.
- The Expedia Group owns 400+ booking sites spanning 75 countries.
- Airbnb offers over 6 million alternative lodging options worldwide.
Wielding unmatched reach and budgets, mega OTAs influence every stage of trip planning and booking. Flight aggregators like Kayak funnel airline shoppers to integrated hotel booking options. Sites like Tripadvisor siphon organic search traffic while earning commissions through hotel referrals.
The cost of distribution via OTAs keeps rising. OTA commissions that once ranged from 15-20% now reach 30% or higher. Recent finds hotels paying up to 40% commission when accounting for volume discounts.
With commissions devouring hotel margins, direct bookings emerge as an urgent priority. Tools like integrated loyalty programs can shift bookings from OTA channels while lowering guest acquisition costs.
The Commoditization of Search and Discovery Meta search engines like Tripadvisor, Trivago and Google Hotel Ads have conditioned guests to filter primarily by quantitative metrics like star rating, guest rating, and nightly price during hotel evaluation. By reducing differentiation to sortable criteria, the meta-search boom commoditizes hotel discovery and accelerates price transparency.
While vital for visibility, meta-search marketing costs keep rising even as click-through rates decline. Research by Kalibri Labs finds meta-search producing over 30% of site traffic for some hotels but driving under 20% of bookings.
With high volumes of low-intent traffic, meta-search efficiency suffers. Still, with over 40% of online bookings touching a meta site at some point, hotels can hardly abandon the channel. Creating differentiated meta landing pages through unique descriptions and imagery becomes critical for rising above rate comparisons.
Competition from alternative lodging
The spectacular rise of Airbnb has inspired a Cambrian explosion of alternative lodging platforms. Airbnb now claims listings in nearly every country worldwide, its 6+ million global listings far exceeding major hotel chains. Vrbo, a key Expedia holding, manages another 2 million vacation rental listings. Other alternative stay platforms serve rapidly expanding niches:
- Outsite – Coliving rentals for remote workers
- Zeus Living – Furnished corporate rentals
- Hipcamp – Campground and glamping sites
While extended stay rentals compete most directly with urban hotels, unique alternative properties also threaten to siphon leisure and business demand. As the chart below shows, Airbnb has gained significant market share across global cities.
Hotel rates prove highly elastic in markets with low barriers to entry for short-term rentals. A 2022 study by STR and AirDNA analyzed over 8 million Airbnb listings across 10 key markets, finding:
- New York: 10K+ new entire-home Airbnb listings resulted in a -4% change in hotel occupancy and -7% fall in ADR
- Los Angeles: 6K+ new entire-home listings led to -11% occupancy drop and -12% ADR decline
These impacts underscore the need for integrated hotel distribution covering both transient and group/extended booking channels.
Seeds of opportunity in channel disruption
Yet for all the challenges in distribution, immense possibility exists for hotels that take an imaginative omnichannel approach. While OTAs will remain a significant channel at least in the near term, technologies that optimize conversion across the guest journey enable hotels to gradually shift share. After years of steadily rising customer acquisition costs, lower cost, and higher intent booking avenues emerge.
We group these opportune channels into four key categories:
