The battle for direct bookings has entered a new phase as online travel agents (OTA) ramp up efforts to establish ownership of hotel guests and their booking journeys, a new report from hospitality technology specialist SHR Group reveals.
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While OTAs and hotels have a mutually beneficial relationship, the Hotel Industry Trends Report 2024 exposes for the first time the way a recent influx of marketing spend from OTAs is fast reducing hotels’ share of direct bookings.
The share of reservations represented by direct bookings fell from 39% to 38% in 2023, having been stable for two years following a post-pandemic return to normal. This is the equivalent of approximately 7.8million global reservations in 2023 when applied to the worldwide hotel market.
The ‘share of’ figures cited will be higher than industry averages because they don’t include group, wholesale or other contract bookings made through PMS platforms but the trend they betray is highly significant.
In fact, the extra investment driving this change is making itself felt in other ways too. Increased bidding on key search terms, including ‘brand searches’ that identify particular hotels, has sparked a sudden increase in cost-per-click, with Google Ads rising 62.5% from $0.16 to $0.26. The impact on Metasearch is even more stark, more than doubling from $0.21 to $0.48 (up 128.6%).
In the travel arena, a metasearch engine pulls in data from lots of other websites to produce its own results for consumer queries. It organizes all the information they need — whether it’s flights, accommodation, car rentals or vacation packages — on a single results page. Kayak and Trivago are both examples of metasearch engines.
A knock-on effect of this is that the revenues associated with organic search have fallen 15.3% YoY, almost exactly matching the increase won by paid search — 15.5%. This, in turn, is forcing hoteliers to invest more heavily in PPC to compete with the OTAs and prevent them from claiming all of the high-intent traffic, which was historically the domain of organic search.
A consequence of OTA strategies is that indirect bookings are also attracting guests looking for longer stays. This has meant that the change in indirect bookings’ share of room nights is even more significant, climbing from 53% to 56% in 2023 — a change equivalent to approximately 65.6million room nights worldwide.
The report’s findings substantiate the fact that the guest journey, lead generation and guest profile are the pivotal issues that will determine the future shape and scale of the role that OTAs play on the hospitality landscape. SHR Group warns that hotels are in danger of becoming too reliant on OTA lead generation, to the point that it becomes financially impossible to recover their current share of bookings and return on advertising spend (ROAS).
As the report makes clear, AI-powered personalization of the guest journey, greater leverage of loyalty schemes and the use of predictive analytics to reduce cancellation rates and unnecessary discounting do offer hoteliers a technological solution to the challenges they face. However, the effective window of opportunity to deploy these tools is shrinking.
This is a turning point for the hospitality industry. Hotel technology is leveling the playing field for hoteliers and their ability to compete for leads but that return on investment won’t remain the same forever. The race to bring guests into loyalty programs and win greater influence over how and where they shop for travel, possibly for the rest of their lives, is becoming much more intense. Personalization and ownership of the guest profile are top of the agenda for the OTA and hotel operators alike.
Rod Jimenez, CEO of SHR Group
This is an exciting time to work in the hospitality technology space, and the changes you’re going to see over the next couple of years are going to be transformative. From generative AI search to hyper-personalization, the guest journey is going to be unrecognizable, but with those opportunities also come threats. Only one thing is certain, hotels who fail to deploy the latest technology will be surrendering guest acquisition to those businesses more willing to invest in it, and this could have a devastating impact on growth and profit potential.
Frank Reeves, Chief Evangelist, SHR Group
