Source: CoStar Group
By Danny King
February 4, 2021
Hotel companies took a small piece of online-distribution market share away from online travel agencies in 2020 as years of direct-booking campaigns and heightened concerns over property cleanliness amid the pandemic shifted some potential OTA users toward hotel websites.
With analysts projecting that it will take at least a year before business travel trends begin returning to pre-COVID-19 levels, experts believe hotel companies and OTAs are unlikely to engage in renegotiations over room-purchasing terms anytime soon and will likely take a more collaborative approach to minimize the travel-industry damage caused by the pandemic.
Higher-end hotels were forced to sell a higher percentage of rooms to OTAs such as Expedia Group and Booking Holdings to compensate for the lack of corporate business, but this increase was more than offset by the propensity for leisure travelers across all sectors to book direct through hotel websites to ensure both the best rates and cancellation opportunities.
As a result, the percentage of U.S. online hotel bookings through hotel websites rose 1 percentage point last year to 49%, while OTA share fell to 51%, according to travel-industry research firm Phocuswright. Online bookings, which account for about half of total U.S. bookings, took a larger piece of a smaller pie as travel agent and travel management company bookings through the global distribution systems declined due to corporate travel nearly vanishing. Meanwhile, the wholesale market, which was largely dependent on inbound international travelers booking rooms far in advance of their arrivals, has virtually disappeared.
Hotels and OTAs are battling for distribution share as the pandemic last year narrowed the pool of prospective guests to the smallest it’s been since STR — CoStar Group’s hospitality analytics firm — began tracking that data roughly three decades ago. In 2020, U.S. revenue per available room plunged 47.5% year over year to $45.48. Occupancy fell to 44%, and room rates declined 21% to $103 per night, STR reported in January.
Looking ahead, both Estis Green and Anderson predicted a return to normal travel demand will be delayed, thus preventing hoteliers and OTAs from negotiating any major new agreements anytime soon. Indeed, U.S. RevPAR, which was cut in half last year, will rebound slightly to 61% of 2019 levels this year and 81.5% in 2022, according to STR.
“We still have at least a year before the impact of COVID filters through the system where people are comfortable to travel again, so the bias towards booking direct is going to remain in place,” Estis Green said.