The competitive landscape between online travel agents (OTAs) and hotels is heating up as per the latest insights from SHR Group’s Hotel Industry Trends Report 2024. This report, based on analysis from over 2,000 international hotels leveraging SHR Group channels, sheds light on emerging trends that are shaping and reshaping the hospitality industry.
The report delves into proprietary data drawn from over 50 million room nights across 2,000 international hotels, underlining a ‘tussle’ for market share in the industry. Notably, hotels find themselves grappling with intensified OTA competition, as seen in declining direct booking shares as well as escalating costs.
Direct bookings, which traditionally accounted for a significant portion of hotel inbound traffic, saw a marginal dip from 39% to 38% in 2023, translating to approximately 7.8 million global reservations. Although subtle, this decline tells a different story from the stability observed post-pandemic and reflects the growing influence of OTAs in the booking sphere.
SHR Group’s data says that the recovery in overseas travel has provided OTAs with a significant advantage. According to Booking.com, room nights booked by international travellers surpassed 50% in Q3 2023, up from approximately 45% the previous year, aligning with pre-pandemic levels. This resurgence underscores the traditional strength of OTAs in catering to international travellers.
Meanwhile, hotels are exploring strategies to mitigate challenges posed by the intensified competition. Efforts to reduce cancellation rates, coupled with dynamic pricing powered by AI, are gaining traction. Leveraging AI-driven personalisation, hotels aim to enhance the guest experience on their direct booking platforms.
The report also underscores the rising cost-per-click (CPC), with Google Ads witnessing a steep 62.5% surge while Metasearch advertising costs have more than doubled, increasing by 128.6%, attributing this surge to heightened bidding on key search terms by OTAs. Because of this, hoteliers are compelled to ramp up their PPC investments to remain competitive in capturing high-intent traffic.
Despite the commission charges ranging between 18% to 23%, OTAs are reinvesting a considerable portion of their income into marketing efforts to bolster their market share.
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.
The allure of longer-stay guests gravitating towards indirect bookings is also a direct result of OTA strategies. Indirect bookings’ share of room nights surged from 53% to 56% in 2023, representing a significant shift in consumer behavior and preference.
The report underscores the importance of addressing the guest journey, lead generation, and guest profiles. SHR’s data highlights that there’s a real risk of hotels becoming overly reliant on OTA lead generation, jeopardising their booking share and return on advertising spend (ROAS).
OTAs are doubling down on loyalty programs as a means to cultivate customer loyalty and ownership. This strategy mirrors the efforts of many hotels in fostering repeat business. However, it’s interesting to note that the battle for guest loyalty extends beyond hotels and OTAs, with intense competition among OTAs themselves. The escalating investment in user acquisition reflects the urgency among OTAs to onboard travelers into their loyalty programs, signaling a competitive land grab in the industry.
However, amidst these challenges, the report points to technology as a useful tool for hoteliers. AI-powered personalisation, loyalty schemes, and predictive analytics can offer avenues for hotels to navigate the shifting hospitality ecosystem effectively.
One thing to note from the report, however, is that the window of opportunity to deploy these tools is rapidly closing.
Rod Jimenez, CEO of SHR Group, highlights this juncture as a turning point for the industry, emphasising the significance of personalization and guest profile ownership in shaping future strategies. Frank Reeves, Chief Evangelist at SHR Group, echoes this sentiment, underlining the potential of emerging technologies.
