10 facts from the EY Parthenon report you should know about online travel platforms

A new study by EY Parthenon in cooperation with Booking.com analyses the challenges Europe’s small and medium sized accommodations face in succeeding in a global marketplace and substantiates how online travel platforms (OTAs) such as Booking.com contribute to overcoming these challenges. This article highlights 10 key facts from the report that everyone should know. The full report is available here for download from EY Parthenon.

01. Online travel platforms are one of the most cost effective marketing and distribution channels — in particular for small and independent accommodations.

• 91% of hoteliers agree that online platforms allow them to realize incremental bookings
• 85% of hoteliers agree that online platforms are a cost efficient way to increase the reach of their hotel and source more divers guests
• We choose to do a large part of our bookings via Booking.com, as that is part of our distribution strategy. We believe OTAs are the most efficient channel for us. — Medium sized accommodation at tourist destination, France

02. For many small and independent accommodations, bookings via online travel platforms are cheaper than investing in marketing and distribution themselves.

• 81% of hoteliers agree that if they were to operate without online platforms they would need to significantly invest in marketing expenses
• We will have to invest more in marketing than the commissions we are now paying to the OTA to get the same number of bookings. — Medium sized accommodation at tourist destination, Spain

03. Online travel platforms help level the playing field between small independent accommodations and large chains.

OTAs are particularly important for Europe’s fragmented landscape of predominantly smaller, independent accommodations to remain visible — and thus competitive — vis-à-vis large and branded chain hotels that can invest significantly in brand and performance marketing to attract consumers from around the world. For the smaller accommodation providers, OTAs fulfill the role of a marketing and distribution channel, aimed at attracting (new) guests.

OTAs provide substantial incremental revenue and are the main growth driver for smaller accommodation providers. This significantly contributes to their profitability and as such to long-term viability. — EY Parthenon analysis

04. Online travel platforms bring in additional business for partner accommodations and increase hotel occupancy year round.

• 90% of hoteliers agree that online platforms enable attracting non-typical customer groups
• 88% of hoteliers agree that online platforms allow them to increase occupancy year round
• OTAs helped to increase the occupancy rate throughout the year since we get more bookings in the off-season and I can top off the occupancy in the season. — Medium sized accommodation at tourist destination, Portugal
• OTAs are a very flexible platform. I can post the rooms that I could not sell direct on the platform a week in advance. I almost always sell them with limited efforts. — Medium sized accommodation at tourist destination, France

05. Listing on an online travel platforms results in a substantial number of free bookings for accommodations via their own websites.

Apart from realizing (additional) bookings through an OTA, being listed on the platform typically also results in (more) direct bookings for an accommodation. This is what is called the “billboard effect”: consumers find an accommodation through the OTA, but eventually book their stay directly with the accommodation. In this case, the booking is a result of being listed on the OTA and the marketing efforts undertaken by the OTA to trigger a consumer’s consideration. However, the accommodation does not have to pay a commission for these bookings as conversion occurs outside the OTA platform.

Our research shows that 40% of direct bookings originate from OTA platforms, which is slightly above the range of 5%–35% as found in a study by Anderson and Han. Interviews with accommodation providers also confirm that a significant share of their guests find their accommodation through an OTA, but eventually place the reservation at the accommodation directly. — EY Parthenon analysis

• A lot of the guests that book direct found my accommodation on an OTA platform. So the OTA platforms are also an effective marketing channel for direct bookings, which comes at zero costs.” Rural accommodation, France

06. Online travel platforms provide accommodations with a highly flexible and risk free marketing channel. Platforms invest in global marketing and consumer service for partner accommodations but only get paid when a successful booking takes place via the platform.

OTAs provide a highly flexible and risk-free marketing channel, as accommodations do not have any obligations in terms of capacity or prices offered through the platform and are only charged a commission (or fee) in case of a successful booking (and stay). Accommodation providers have the flexibility to list and delist (any fraction of) their rooms at any time. OTAs hence provide scale without an accommodation having to make upfront investments (in technology, advertising and customer service, for example). The risk for these investments is borne by the OTA and recouped through the success-based commissions. Both the OTA and the accommodations share the marketing risk. — EY Parthenon analysis

• OTAs are a very flexible platform. I can post the rooms that I could not sell direct on the platform a week in advance. I almost always sell them with limited efforts. — Medium sized accommodation at tourist destination, France

07. Online travel platforms foster trust among consumers — which leads to more bookings.

From a marketing and consumer perspective, OTAs help in fostering trust, e.g., by providing confidence that an accommodation actually exists, processing payments through trusted systems, and offering reviews from other consumers that can provide a (more) objective view on the accommodation’s quality and performance. — EY Parthenon analysis

• The trust OTA platforms provide is a big advantage for smaller accommodations. OTAs have a strong brand recognition among consumers worldwide. Guests are more willing to make a booking via a trusted platform that also facilitates the transaction. This especially holds for places they are not familiar with, or when they don’t speak the local language. In addition, the guests get more confidence in (the existence of) the accommodation from the reviews from other guests. — Medium-sized holiday resort, Portugal

08. Online travel platforms provide partners with analytics tools and insights that help them optimize their business performance.

• 85% of hoteliers agree that the provided insights & analytics enable them to improve the quality of their service to customers
• 89% of hoteliers agree that the online platform’s analytics provide useful insight in the performance of their accommodation relative to their competitors
• The analytics help us to competitively price our rooms and thereby attract more guests. — Medium sized accommodation at tourist destination, France

09. Consumers and accommodations make use of various distribution channels in parallel to reach one another.

There are various ways and channels for consumers to go from looking to booking, and consumers make use of many of these channels in parallel or sequentially.

[T]he accommodation sector can market and sell its rooms directly or through a third party. The level of control exercised over each channel differs, and the required costs/investments, the associated risks, and the potential effectiveness of the channel are different, too.

From an accommodation’s perspective, while different distribution channels are generally substitutes, they provide different opportunities to reach potential customers. For example, a listing in a local travel magazine will only reach a specific and limited audience. In contrast, advertising on a search engine can reach a global unlimited audience. Ultimately, the goal of using the various channels is to attract as many actual bookings as possible at the lowest possible cost.

– EY Parthenon analysis

10. Free ancillary services provided by online travel platforms are of substantial value to SME accommodations.

OTAs provide a range of adjacent value added services to the accommodation sector, from reservation modules, payment infrastructure and customer service support to analytics and insights on market dynamics and customer preferences. These services are complementary and covered through the fee an accommodation pays (only) in the event of an actual reservation. — EY Parthenon analysis

• We do not have a mobile application for our accommodation, but we have many travelers that book last-minute while they are already in the city. The OTA apps enable our guests to easily book real-time. This is immediately visible in our reservation system. — Smaller-sized hotel at tourist destination, Belgium
• The virtual credit card of the OTA platforms helped to significantly reduce the number of no shows. — Accommodation with loyal customer base, UK
• The guaranteed payments options are a benefit for the guests as well as for the accommodation provider. We also know that we will get paid. — Medium sized holiday resort, Portugal
• The OTA platforms have a multilingual website and customer service that enables guests to read and communicate in their own language. I believe this lowers the barrier for guests to book abroad. — Medium-sized holiday resort, Portugal