Online giants jostle for position

The online accommodation platforms are plotting their return as the post-pandemic market picks up.  

Consumer relevance was assured during 2020, for those majoring on home rentals, as travellers switched from hotels to private accommodation, for the additional reassurance of the isolation offered. For Airbnb, this led to a resurgence in business, after a weak start to the year.  

At Expedia, it meant pushing its homestay brands Vrbo, Wotif and others from its portfolio.  

At the same time, hotel groups have been doubling down on their efforts to grow direct business. Wyndham, with its new app, Accor and Melia all declared during results presentations that their digital efforts had increased their percentage of direct bookings in the last few months.  

With months to consider how best to re-engage with consumers, Tripadvisor has come up with a subscription model. It is market testing Tripadvisor Plus, a USD99 per annum membership for consumers that the company hopes will be a “win-win-win” for users and hotels. Currently being trialled in parts of the US, the hope is to extend it to more English-speaking markets into 2022. 

“Travelers, they’re getting these amazing discounts, the perks,” explained CEO Stephen Kaufer. “It’s something that’s turning their trip into fabulous. When it comes to Tripadvisor, we’re making some money on the actual subscription in building up what we hope to be a wonderful recurring revenue stream.” 

“For your hotelier, we are changing the model, whereby folks like Tripadvisor would ordinarily take a commission on the hotel sale and we’re going direct to the hotel and say, instead of paying us, let’s offer that discount directly to the consumer. So if you might have been paying X percentage to your other distribution channel, let’s instead offer that same percentage, but as a discount. Tripadvisor passes it directly along to the Plus subscriber, who gets the deal.” 

“Now when you add the value of the perk and you add the value of the discount, it becomes something pretty compelling for the consumer, and something that’s well within the availability of the hotelier to offer that package at the same or better travel distribution cost as they go through for other channels.” 

“Our goal is nothing less than building an affordable travel subscription product that pretty much everyone would love to be a part of travelers because it turns them into better travelers no matter where they’re going.” 

CFO Ernst Teunissen said that in 2019, the site saw 160m visits where consumers clicked through its site to book on other platforms. “That’s a 160m times we think of it as shots on goal, 160m opportunities for Tripadvisor with Tripadvisor Plus to say, hey, on a lot of these properties, we have an amazing discount and a perk that’s going to make you, the customer, a savvy traveler.” 

At Airbnb’s first results presentation since the business went public, CEO Brian Chesky hailed the delivery of USD3.4bn of revenues in 2020, down only 30% on 2019. Having spent the early part of the year chasing new sources of cash, the company enjoyed a pandemic bounce as travellers sought self-contained accommodation.   

The company currently lists for around 4m hosts, and is launching a marketing campaign to encourage more consumers to host. “90% of our hosts are individual hosts,” said Chesky. “The average host on Airbnb makes under USD10,000 a year and they do that by renting out just occasionally. So we think there’s a huge opportunity to increase productivity of the hosts that we already have.” 

Occupancy averages 17%, it is reckoned, but CFO Dave Stephenson said it wasn’t about chasing higher occupancy per se: ““Occupancy is probably not the best measure of performance on Airbnb because if you’re an individual host, it’s not like you want to constantly drive up the use of your existing home.” 

One way will be to ease the booking journey, and Airbnb has now made it possible to review options on their site using flexible date options. “People are living more nomadically,” said Chesky. “Some people are taking longer-term stays, one or two months at a time in Airbnb. People are taking extended three, four-day weekends, like many weekends in a row because they don’t have to be in the physical office.” 

In response to questions, Chesky gave a hint that the future may involve hotels some more, after acquisition HotelTonight was mothballed during a busy 2020. “When the crisis happened, we had to scale back certain investments. And one of the investments we scaled back was our investment in hotels.” 

“We think that hotels, in addition to property managers, are really important for our strategy in filling in our network gaps. Again, we don’t want anyone to come to Airbnb and leave because they couldn’t find a place to stay. And as we know, most hotels around the world are below 50% occupancy, so we know they’re in need of demand, and Airbnb certainly can provide that demand for them.” 

Expedia CEO Peter Kern said the business had benefited from the swing to alternative accommodation, pushing its brands in those parts of the world where they were strongest. The strongest alternative brand, Vrbo, has a big presence in the US, while in Australia, it has pushed its Wotif and Stayz brands. “So we are leaning into those and seeing good growth across all our alternate accommodation brands in our strong markets.” 

Work is going on behind the scenes to work more closely with hotels. “Relations have been quite good with the hoteliers. I think we’re all aligned….we’ve renewed a number of agreements without much debate. And I think our focus has been really on doing more to help the hotelier, through data. But some of the examples include things like optimized distribution, which we’ve talked about before where we essentially become the wholesale distribution point for a number of hotels. We’ve done this with a few chains now.” 

So there’s a lot of work going on. I think we’re tightly aligned in wanting the hotel to come out and be successful.” 

Finance director said Expedia was ready to look at M&A. “I would say we’re more in an opportunistic posture at this moment. We are certainly out and having conversations and seeing what might be opportunistic, if you will.” But Kern cautioned: “Our historical M&A is what made us as complicated as we were as a company. And we are keen to make sure we don’t make those mistakes again. It doesn’t mean we will never buy something, doesn’t mean that we won’t find opportunities, but that is not going to be the core of what drives us.”  

At Booking, there were few surprises as the company looks to restart its growth having stripped USD370m a year out of personnel costs. CEO Glenn Fogel remains agnostic about the type of accommodation the company lists, noting that alternative accommodation in Europe had done better in recent months – and there were areas where coverage would be beefed up. “While we have built a large and competitive alternative accommodations business globally we believe we have a significant opportunity for improvement in the US, which will involve product improvements, supply acquisition and raising consumer awareness of this type of inventory.” Whether that might involve M&A, he would not say.  

The group also sees more growth potential in selling air tickets, and expects this to become a larger part of their business over time.  

HA Perspective [by Chris Bown]: Airbnb was keen at its first results presentation to talk lots about hosts, and little about hotels. The company’s pandemic tailwind led it to finish 2020 in a much better place than it started out. So what next? Simply persuading guests to become more hosts is not a compelling strategy for growth, not least as some city markets already appeared to be at peak Airbnb. Its next move with HotelTonight will be of more interest.  

And so to the latest walled garden, Tripadvisor Plus. Or maybe we should think of it as the Amazon Prime of hospitality, or is it just Secret Escapes with more inventory? Time will tell whether the subscription model has wide appeal – though hotels will certainly like it, if they can sell rooms for a greater margin than through traditional OTA routes.  

Additional comment [by Andrew Sangster]: As we discuss elsewhere in this issue, this has been an unusual recession. As the recovery kicks in, consumers and corporates are, on average, not licking their wounds but, instead, desperate to spend. 

There is no demand deficit for OTAs to exploit (at least in Northern Europe)In addition, making things even worse for OTAs, the strong demand is local and domestic, meaning that the greater reach of the OTA marketing machine has less benefit for hotel customers. 

A recovery that sees the strongest plays in domestic and upscale is a recovery that does not suit the biggest OTA, Booking Holdings, in particular. Analysts at Bernstein have turned bearish on the stock. They forecast that the CAGR of 26% in revenue achieved between 2010 and 2019 will slump to just 6% between 2022 and 2030.  

This would be a calamitous result for what is viewed as a high growth stock which currently does not pay dividends. If revenue CAGR does turn out as Bernstein predict, then Booking will be brought rapidly down to earth, most likely at the same time as the market for other growth orientated tech stocks nose dives. 

Expedia has for a while been positioning itself as a service provider to the hotel sector rather than just an OTA. The relationship with Marriott is the best example of this. 

But perhaps the surprise winner among the technology players is going to be TripadvisorConsumers have historically used the web for price comparison but the past decade has seen a switch to using the web to seek expertise and recommendationPrice remains critical but increasing importance is being placed by consumers on making the right choice.  

Tripadvisor is crucial to this discovery process. But so too are hotel brands. Having a compelling story is going to be more important than the perception of prestige of the badge on the outside of the building. Brands that deliver meaningful experiences look set to benefit from the pain of the “pile them high and sell them cheap” online stores like Booking. 

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