OTAs look for new path

Consumers are searching online for trips at a level last seen in 2019, according to analysts. But those searches are not yet converting into bookings, leaving the big OTAs still in the red.  

Booking, Expedia and Tripadvisor are also wondering which direction to strike out in, as they plan their post-pandemic futures.  

At Booking.com, where the group’s bookings largely come from leisure travellers, CEO Glenn Fogel reported an improving picture: “Compared with 2019, Q2 room nights were down 26%, which was significantly better than the 43% decline we previously reported for the month of April and the 54% decline in Q1.” And, as travel restrictions ease, notably in Europe, he expects volumes to pick up.  

The group finished the period with over 28m listings, of which it said 6.6m were classed as alternative accommodation.  

“In the second quarter, we again saw a higher mix of our customers booking directly with us than in the comparable period in 2019. It is encouraging to see these gains even as we look for opportunities to lean into performance marketing channels where we see attractive ROIs.” 

Fogel said the group is testing social and digital media channels to broaden their promotional efforts away from online ads :”We will continue to expand the diversity of our marketing and customer acquisition channels as we aim to drive incremental traffic to our platform and increased consumer awareness of our brands.” 

Booking has set up a separate fintech unit, to help smooth the booking process further, and improve the percentage of payments that run through the company’s own payment platform, which is currently less than a quarter.  

Fogel said there was progress on Connected Trip, Booking’s concept to sell many elements to the consumer. “Since our last earnings call, we have launched our flight product in six new markets and now live in 24 countries. However, these still represented a small portion of our total reported air tickets.” There are also increasing listings of events and experiences – potentially another avenue for opening up the opportunity to sell accommodation during the same visit.  

However, selling other ancillary items won’t necessarily look great on the bottom line, he worried: “We recognize that a lot of things that we’re doing nowadays can actually end up with a lower margin, obviously air, for example. I mean it’s wonderful when we say 120% increase over 2019 in air tickets, yeah, it’s wonderful. But we all know, those margins are nowhere near what they are in the accommodation business.” 

Expedia, too, is adding new focus to its technology, with the appointment of Rathi Murthy from Verizon Media as the new CTO. “As we move from our multi-stack, multi-domain enterprise that we’ve had historically into one platform that can service all our brands and all our business partners, it was really important to have great technical leadership across the organization,” said CEO Peter Kern. 

The company is still working on streamlining its structure, moving from an internally competitive one to a more collaborative approach. “We are doing a lot of work to figure out long term how we want the brands to work together as a family of brands rather than as competitors,” said Kern. Vrbo, its home rental brand, continues to deliver well out of the back of the pandemic.  

And there have been disposals, said CFO Eric Hart: “We’ve made significant progress reshaping our cost structure through fixed and variable cost initiatives. Since the beginning of 2020, we have either shut down or sold eight businesses, and these simplification efforts have continued with the sale of ALICE last month. In addition, in early May, we announced the binding offer from Amex GBT to acquire our Egencia business.” 

At Tripadvisor, the group’s results announcement was dominated by discussion of the new Tripadvisor Plus subscription which, said executives, is showing early post-launch promise. “”I have to say I really think we’re on to something here,” said CEO Steve Kaufer. “The biggest thing, absolutely above expectations, is we’re saving travellers lots of money. And these are discounts that hotels are passing on to our travellers. Most users are seeing in the flow of booking their hotel, that they can save money as they subscribe along the way – that’s the no-brainer moment.” 

Kaufer reiterated his belief that the subscription model could sign up millions of customers, potentially. But its success will also rely on hotel operators signing up to offer deals to members. One major OTA is already on board, but Kaufer said: “To be candid, we haven’t made as much progress signing big chains as I would have hoped.” Part of this is down to their understanding of rate parity, something the Tripadvisor team is working on. 

HA Perspective [by Chris Bown]: Hurrah, finally something substantive to watch. A new fintech team, a new CTO and Tripadvisor Plus are all initiatives we may, finally, be able to get our heads around. All pandemic, the OTAs have been promising they are “figuring out” where to go next.  

Connected Trip remains a challenge. Quite apart from pulling all the pieces together, Booking already sells the highest margin item in a connected booking, and so adding too many other ancillaries will have shareholders quaking. But we like the idea of Tripadvisor Plus – so long as those pesky hotel groups can be persuaded to offer their midweek and shoulder season rooms at heavy discounts.  

The leisure traveller is back – looking, at least, if not actually booking, while those becalmed business travellers have been making a dent in the booking volumes of the loyalty-led platforms of the big brand groups. And that has, for many of them, led to loyalty programmes, mostly, being somewhat off previous highs. But not all – Hyatt CEO Mark Hoplamazian declared his to be firing on all cylinders: “Our base of loyalty members is the largest it’s ever been and has grown 14% since the same point last year. Our enhancements to our digital platform are driving hi.com booked revenue more than 20% higher than 2019 levels which is outpacing OTA channels.” Welcome to the post-pandemic round of the book direct battle.  

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