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SHR Group reports the Hotel Industry Trends Report for 2024


-The reciprocal relationship between hotels and online travel agents (OTAs) is well understood but it would be a mistake to think that there exists an unchanging status quo. Hoteliers need to know that there have been some big shifts in spending patterns in the past year as OTAs seek to claim market share and, ultimately, redefine the role they play in the hospitality landscape.
These businesses (hotels and OTA) depend on each other, and there’s no getting away from that. The hotels need a wide audience, exposure and lead generation, while OTAs need inventory. It’s a bond that will never be broken.

The battle remains one of lead generation and guest acquisition, and it’s the financial firepower available to OTAs that is really starting to alter the dynamics of the hospitality market in a way that hasn’t been seen before. In 2024 Hotel Industry Trends Report, we’ll show just how fast the landscape is changing, what trends represent the biggest threats to revenue share and what hoteliers can do about it. Our data is based on analysis of over 50 million room nights across more than 2,000 international hotels that are currently using one or multiple Allora products and services, all designed to help hotels and resorts optimize their revenue generation and boost their bottom line.

The OTAs lost most of their revenues during the COVID-19 pandemic

The OTAs lost most of their revenues during the COVID-19 pandemic but are now investing heavily to claim market share from direct hotel bookings. For the last two years, our customers have seen the proportion of reservations booked directly remain stable at 39% but the past 12 months have seen a dramatic change in OTAs’ strategies, including increased marketing spend and intensive investment in their own loyalty programs. OTAs are also attracting longer staying guests, which means their progress is even more visible when we look at the share of room nights. Direct share of room nights has fallen from 47% to 44% year-on-year, while indirect has increased from 53% to 56% — a change equivalent to approximately 65.6million nights worldwide.

These are important shifts, and how significant they are will become clear in 2024 and 2025. However, if this is the start of a multi-year trend and a concerted effort by the OTAs to increase market share, there’s no bigger clue than that emerging from the world of advertising.

OTA marketing investment has doubled the cost of paid advertisements for hoteliers

The OTAs charge commission of between 18% and 23% but much of this is reinvested to try to ensure that their share of reservations only goes in one direction. Over time, this reinvestment becomes increasingly efficient, as hoteliers end up effectively paying the OTAs to generate their next guest, not the one who has just booked. This is why the central theme of OTA business strategies will always be digital marketing and, in 2023. The OTAs’ commitment to dominating search engine results has driven huge increases in the cost of pay-per-click, and they’re doing it across multiple categories. The cost of Google Ads has risen 62.5% from $0.16 to $0.26, while the cost of metasearch has grown 128.6% from $0.21 to $0.48.

The proportion of bookings made on mobiles has been steadily growing, and reached 47.8% in 2023. This is likely influencing buying trends, because consumers are more likely to favor speed on mobile devices, making sponsored results much more attractive. Desktop’s share was 50.1%, which means the days of the computer’s dominance are numbered. This marketing reinvestment also raises the level of competition for brand searches (when a guest who knows what hotel they want to stay at punches the name into a search engine). These searches show high intent because they are typically returning guests, guests for whom a particular hotel is the only one they want to stay at due to an event like a conference or a wedding or those who are acting on a recommendation.

Owning guests not only their reservations

Until now, it seems like we and other hotel groups are grappling with the OTAs to win loyal customers and repeat guests. That’s why, as the OTAs ramp up their loyalty programs, a huge focus for us has been to offer our guests rewards that the OTAs can’t compete with. Our ‘Friends and Family’ loyalty program, which we first implemented around eight years ago, has five different levels, with each level offering different perks and allowing guests to earn points.

As the OTAs become more aggressive, they’re investing more in loyalty programs in an attempt to own each guest, and not just each reservation. These programs create loyalty among consumers by rewarding them for returning to the OTA each time they want to book. This is exactly the same strategy many hotels are using to create repeat business. However, this loyalty contest is not just a race between hotels and OTAs but a competition between the OTAs themselves that further intensifies the battle of marketing spend. The current intensification of investment
in acquiring users likely reflects the urgency the OTAs perceive in signing up as many travelers to their programs as they can. Hoteliers have even more to gain from well-deployed loyalty schemes as they are a powerful way to shore up direct bookings.

Cancellation rates back to normal

With the cost of acquiring guests on the increase, minimizing cancellations can mitigate the impact. Fortunately, one big trend seen in 2023 was a return to pre-covid levels of cancellations. Last year, 23.1% of bookings were canceled, in line with 2019. Cancellation rates had risen as high as 34.2% during the pandemic, on what were very thin booking volumes, so this was a welcome development. The share of direct booking revenue lost due to cancellations has also declined, falling from 19.2% in 2022 to 15.4% in 2023.

OTAs have a vested interest in bringing the number of cancellations down too as they only get paid when the guest stays, not if they cancel. They can be expected to invest heavily in this area as a result and will be looking to take
advantage of new search marketing tools such as Google’s ‘Performance Max for travel goals’ which targets searches with greater intent. This gives OTAs an easy way of reducing cancellations without innovating — they can just spend
more, effectively outsourcing the problem.

What’s in store for 2024?

  • A greater focus on cancellations
  • Revenue management
  • Personalization
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