BrazilHow online travel agencies add value to SME accommodations
More than 95% of small and medium accommodations in Europe have expanded their global customer base through online travel agencies. New research from EY Parthenon presents the details.
Setting the context: more than half a billion tourists arrive in Europe from non-EU countries every year – a figure that is rising steeply and changing the face of the region’s tourism industry.
Millions of small and medium enterprises (SMEs) currently represent 63% of Europe’s accommodation supply. With international tourism growing, large hotel chains with global marketing capabilities reach more customers than small accommodations – eating into their dominant market share.
The advantage for SMEs is that the lion’s share of travel is booked online – particularly in a transformed consumer market – which creates a relatively level playing field. According to experts from EY Parthenon, partnering with online travel agencies (OTAs) such as and Booking.com and Hotels.com can help SMEs compete with large hotel chains and their big-ticket marketing strategies.
The researchers surveyed over 600 accommodation providers across Europe, and analysed more than 5,000 Booking.com accommodations using internal data, to find that 96% have increased their global visibility by partnering with an OTA. Over 90% have also clocked incremental bookings, while upwards of 80% are now in a position to track and improve their performance through advanced data analytics.
The fact is that OTAs have their own strategies to reach a global customer base. Search engine optimisation, advertising and social media campaigns help them build a presence worldwide – to such an extent that 80% of bookings through an OTA come from regions outside an SME’s “typical sourcing market.”
A wide range of accommodations combined with filters on price, location and type give users a quicker and better experience. Data-driven market insights allow for a more tailored offering that finds a better match for travellers – not just in the practical sphere but also at a more personal level. And reviews give customers a nuanced overview of what's on offer.
All this combines to build trust in the OTA as an objective and accurate bookings intermediary. Crucial to this business model is a constantly growing base of partner accommodations, spelling a win-win scenario for SMEs – who benefit from wider reach, specific tastes and the high level of trust.
Add to this the advisory role that OTAs can play, leveraging their vast pool of market data. “Based on these insights, OTAs give accommodation providers valuable advice on how they could potentially improve their yield by differentiating their pricing to improve occupancy and visibility or by increasing capacity offered through the OTA at times of high demand,” explained EY Parthenon partner Bram Kuijpers.
Driving future growth
Lastly, OTAs don’t just serve as a ticket to survival in a competitive market – they’re also an engine of growth. The researchers observed 3% annual growth in the number of overnight stays at small European accommodations through online booking platforms. Part of this is down to the “billboard effect” – where customers identify an accommodation online, and then contact them directly.
All things considered, OTAs are a readymade marketing instrument for smaller accommodations. Adding to the allure is the lack of risk, and the flexibility on how SMEs can use these online platforms – both in terms of volume and timing. The key drawback here is the usually sizeable cost of partnering with OTAs, although the researchers tip the cost-benefit scale heavily towards the latter.
For Kuijpers, this holds particularly true as the future of international travel will unfold through online channels. “It will remain crucial for smaller independent accommodations to focus on generating as many bookings as possible at the lowest price, something for which OTAs currently prove to be the most attractive platform — and may also remain in the future.”
