How can hotels and OTAs prepare for the new phase after the pandemic?

Linh Ngan
Linh Ngan
05:30:24 - October 13, 2020

It is undeniable how tremendous the pandemic has swept across the tourism and travel industry as airlines were grounded, hotels were deserted and most business and leisure travel had to come to a halt for several months. Hotels are one of the most impacted fields that suffer terrifying damages and as a result, online travel agents (OTAs) are pushed to the verge of great losses as well.

Global Travel Barometer calculated that there have been 537,990 people in the travel industry to be laid off or furloughed. According to the World Travel and Tourism Council, 100.8 million industry jobs could be lost in 2020, as well as there would be a GDP loss of 2.7 trillion USD.

At the peak of the pandemic, travel tech specialists recorded a plummet to less than 5% of occupancies in COVID-affected countries. Particularly, Booking Holdings reported a 51% drop in bookings in Q1 and 91% in Q2 year-over-year while Expedia Group saw revenues sink 82% in Q2. Recently, McKinsey research also suggests that the U.S. hotel industry’s recovery to pre-COVID-19 levels could take until 2023 or later.

As the pandemic is still very prevalent, the outlook for the hotel and travel industry is ominous and unpredictable. However, the industry is still believed to have the ability to recover, especially with tech playing a key role.

What do hotels and OTAs need to pay attention to post-pandemic?

Since governments ease lockdown measures and reopen borders, travel businesses as well as hotels are slowly picking up. However, the threat of local lockdowns, travel bubbles and enforced quarantine measures presents uncertainty for hoteliers, preventing them from forecasting 2021 performance or planning for new investments. Besides COVID, another prominent issue affecting the future success and profitability of hotels is the mismatch between supply and demand as of the 15 million items of accommodation worldwide, 14 million (93%) are not available to book online in real-time.

Without an online presence, those 14 million accommodations from hotels have limited visibility and discoverability, particularly beyond their local market. For millions, their rates and availability are managed manually and not in real-time and they are not benefiting from instant, last-minute and long-term bookings.

To be fit for a future post-COVID, hotels must continue to manage cancellations effectively, encourage and facilitate rebookings, cut costs and increase their discoverability, availability and “bookability” in real-time.

Last year, Euromonitor International predicted 44% of travel bookings would be digital in 2020 and 80% of 2019 hotel bookings by travelers under 30 were made online and thus, hotels must start leveraging technology to grow. The challenge they face is a very fragmented tech market, in which solutions are complex, expensive, not scalable and not connected. That is why transitioning to managing and accepting real-time online payments worldwide remains a huge problem.

For OTAs, the hotel supply-demand mismatch causes equally frustrating challenges. A lack of inventory, compared to global availability, reduces choice for travelers and means OTAs are competing for customers with the same, relatively small, product offering.

Moreover, 70% of the inventory on the world’s biggest OTAs like Booking.com, Expedia, etc. is still not connected in real-time although statistics prove that connected properties drive the best revenues. On average, 70% of an OTA’s revenue comes from its connected properties, which account for just 30% of its inventory, and revenue from those connected properties can be 500% more than from unconnected ones.

Sustainable and scalable supply acquisition, distribution and engagement drive incremental revenue growth for both hotels and OTAs. Of course, it is not that simple as the booking chain is very crowded and there are many intermediaries slashing away at profit margins from both sides.

What is the new phase for both hotels and OTAs then?

As discussed above, both hotels and OTAs should concentrate on “real-time” connectivity in bookings and payments.

Therefore, hotels which improve their guest communication and experience, including increasing accommodation sales performance with autonomous features, and onboarding and engagement with seamless integration experience, auto-payment processing, PMS, contactless and mobile applications, will be able to stay one step ahead. The next step hotels need to do is to increase total transaction value by connecting with more unconnected properties.

With OTAs, it will be best if they can add more real-time inventory to their offering and find a suitable platform or software provider that helps them engage and manage those properties with the right automation and tech stack provides. With an affordable, scalable solution, OTAs will have a direct connection to reach out to an ecosystem of hotels that would not be economical for them to find themselves, whether in their home cities and countries or not. Finally, hotel management software providers must increase their content quality through their certified partner ecosystem to be able to present it well.

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