As governments across Europe shape their tourism recovery plans, some see reducing the power of the large online booking platforms as a way forward.
The COVID-19 crisis has brought the commissions earned by players such as Booking.com and Expedia into the spotlight as well as the feeling that suppliers need to regain their relationship with customers.
In addition, there has been a backlash from many hoteliers for the lack of help that has come from intermediaries.
In Italy, for example, hoteliers are angry that Booking.com refunded guests for forthcoming stays even though some guests had been prepared to accept a credit.
Expedia recently announced a $275 million partner recovery program, and Airbnb has allocated $250 million to help its hosts who have lost out during the COVID-19 crisis.
At the hotel association and even government level, many are now thinking there may be a better way going forward.
France was the first to declare its hand a few weeks ago with talk of a massive data platform containing all tourism information about restaurants, attractions and more for visitors to the country.
Portal proposals
Press reports quote Eric Lombard, chief executive of the French government’s financial institution Caisse des Depots, as saying it’s time for the industry to take back the relationship with the customer.
Lombard cites the level of disintermediation of the industry from U.S. platforms including Airbnb and Booking.com.
The project is still very much in its infancy, and a decision about whether it will actually take on existing online giants in terms of providing a booking engine has not been decided.
More recently, the association that represents all the hotel associations in Italy said something similar could be created in the country.
It’s not the first time such initiatives have been proposed.
Peter O’Connor, Phocuswright's analyst for online travel in Europe, recalls many initiatives across the U.K. and Europe that never really fulfilled their ambition.
He puts this down to a number of factors including that tourist boards are not allowed to use public funds to compete with private entities.
But, says O’Connor, the challenges are greater in that there is a “fundamental misunderstanding as to what online distribution systems do.”
He says it’s not only about the demand collection side of these businesses, but also the huge cost of customer acquisition.
Booking Holdings and Expedia Group invested some $11 billion on marketing in 2019.
O’Connor says that the large U.S. platforms spend significant proportions of their revenue on sales, marketing and loyalty, but their margins are relatively small.
He adds that there’s also the cost of getting the hotels signed up and the technology.
“When governments or even startup online travel agencies say the technology is cheap, that is not the only cost you have. You have to be known, the consumer does not know you exist and they are not going to use you.
Alex Bainbridge, founder and CEO of autonomous sightseeing startup Autoura, says four pillars are required for a booking service: product data, customer service, contracts and money handling.
Bainbridge, who set up B2B tours and activities platform TourCMS before selling it in 2015, says that most of these projects fail because they think there is only the product data side to consider.
O’Connor adds that while governments may think they can do something cheaper, it becomes a bit of a “vicious circle” because if they get hotels and others suppliers to sign up, they have to produce the bookings, and to do that comes the necessary investment in customer acquisition.
Put like that, it’s hardly surprising that any government-funded initiatives are going to find it hard to gain real traction for a nationwide portal.
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The French initiative is unlikely to be realized any time soon, while the Italian suggestion of something similar is just that.
Italian hotelier Giancarlo Carniani, who manages ToFlorence Hotels and is president of the local hotel association, also talks of many attempts at taking on the online travel platforms.
He says different regions in Italy have tried to have their own websites as well as some national efforts with none ever really gaining serious traction.
“In my opinion, the problem is always the same. They are doing something that is not their job.”
Carniani does not believe the current crisis brought about by the COVID-19 pandemic changes anything in terms of the likelihood for these types of national initiatives to work.
Distribution relationships
Carniani hopes the rules of engagement between OTAs and hoteliers might be reshaped, but that there isn’t much appetite for putting money into another national tourism website.
O’Connor is less sure that much will change in the hotel distribution relationship going forward.
Expedia announced a $275 million partner recovery program recently, mostly to be paid in marketing credits and a reduction in commission, but experts agree that hoteliers need to be aware of the potential pitfalls.
Like others, O’Connor believes it’s about capturing as much of the developing supply as possible.
He also sees the OTAs as “consolidating their hold over the market” further going forward.
“In the short term, less OTAs, more direct booking up until Q1 2021 and after that, as international travel starts to come back, OTAs will be better positioned to consolidate.”