Expedia, Inc released a study in partnership with Oxford Economics which reported that guests who booked using an OTA stayed 8% longer and spent nearly 18% more per trip than non-OTA bookers.
The study was released as Airbnb wrote an open letter to boutique hotel and B&B owners in which it highlighted its lower fees “compared to OTAs that may charge commissions of up to 30%”.
Expedia, Inc’s study was segmented by guests who booked part or all of their trip using an OTA and non-OTA guests. It found that travellers who booked via an OTA spent more per trip than non-OTA guests across all categories, regardless of whether they were traveling for business or leisure.
The company said that 21% of surveyed travellers used an OTA in trip planning and booking, and according to the data, OTA bookers stayed 8% longer and spent nearly 18% more per trip than non-OTA bookers. Coined by Oxford Economics as the “OTA Premium,” this variance between OTA guest and non-OTA guest spending was, it said, evident across all categories, including food and beverage, retail, recreation and entertainment, and transportation. The largest spend difference was in the retail category, where the OTA premium was nearly 26%, followed by transportation and recreation and entertainment, both upwards of 20%.
Abhijit Pal, head of research, Expedia, Inc, said: “With more than one-fifth of travellers using an OTA to book all or part of their trip, the data shows the scale and importance of this traveller segment to hotel brands and owners, transportation companies, restaurants and other businesses in destination.”
Charlie Osmond, chief tease, Triptease, told us: “Expedia’s press release suggests that their latest research reveals an ‘OTA premium’, with people booking through OTAs spending more on their bookings and delivering higher value to properties. This discovery has been used by some outlets to suggest that hotels needn’t fear a high proportion of OTA bookings, and that the push for direct bookings is misguided.
“In reality, we know that this is far from the case. In fact, if you look at the detail of Expedia’s study, what is actually revealed is that an OTA booker on average spends more on their entire trip than would a booker on a different website. This is of course true when you take into account that an ‘entire trip’ booked on Expedia may include flights, multiple properties, entertainment, and other transportation. The research doesn’t indicate any ‘OTA premium’ when it comes to spending on a per hotel basis.
“We know from our own research and our own relationships with hotels that direct bookings are the most profitable bookings for hotels. Kalibri Labs research shows that direct bookings are 9% more profitable than others on average, and almost 18% once you factor in ancillary spend. If we’re going to refer to any kind of ‘premium’ when it comes to guests, all evidence points towards direct bookers being the most valuable for hotels.”
At Airbnb, the company said: “Time and again, small business owners told us that the fees charged by travel agents like Expedia and Booking – which can be as high as 30% – are too high.”
The platform added: “Going forward, we want to ensure small business owners like you have access to our community of travellers. Some of the resources we offer include: New ways to help your rooms stand out. Last month, we announced that we will add four new property types to our platform – Vacation Home, Unique Space, B&B and Boutique. With this change, you will be able to easily distinguish your rooms from other listings and guests will be able to more easily find the space they are looking for.”
The company also took aim at the mix on OTAs, adding that joining did not mean long-term contracts: “You have full control over when your inventory appears on Airbnb and you’re not competing against big chain hotels on Airbnb.”
Airbnb charges a commission rate of 3% to 5%. It concluded: “We want Airbnb to be for everyone, including professional hospitality providers that offer unique spaces and personal hospitality to the Airbnb community.”
HA Perspective [by Katherine Doggrell]: The OTAs are finding themselves in a pickle of their own making. Expedia, Inc told us that the study “focused on on-property spend versus rates” and therein lies the issue for the OTAs. They must sell themselves as the cheapest option to the consumer, but able to drive the highest rates to the hotel.
Airbnb, which has form in spying a niche, is offering a cut-price route to market, making much play of its 300 million guest arrivals at its listings over the past 10 years. Booking has responded by putting its quirkier offerings on its homepage.
The USP for OTAs remains their scale. An issue which may be hoving over the horizon on this front is Amazon, which has made a couple of aborted attempts at the sector. Morgan Stanley analyst Brian Nowak said in a note that: “Online travel has proven immune to Amazon disruption so far. But as we have seen with other categories, that doesn’t mean Amazon won’t try again, and they should. Amazon’s focus on selection/service, pricing, and frictionless payment that drive conversion and stronger user economics also translate directly to travel.”
Nowak estimated that OTAs spent about USD620m on hotel room inventory acquisition, which would be affordable, he said, adding that Amazon could make USD600m in profits per year if it built an online business half of Expedia’s size.
‘Frictionless’ is a word we hear as an aspiration for hotel’s direct bookings. It may be time to move it past aspiration if hotel don’t want to be lost in the noise.