Of the myriad changes to the travel industry brought on by the pandemic, the return of direct bookings may be one of the most overlooked and the most lasting.
In Europe, the share of direct bookings across hotels reached 28% in 2020, up 7% from 2019. Direct bookings in the Asia-Pacific region rose to a whopping 36% in 2020, an 8% increase over 2019. And a 2021 study of over 130 short-term rental property managers across the globe found an even more dramatic increase in direct bookings, growing from 2.3% in 2018 to nearly onequarter in 2021.
So, what’s leading to this dramatic rise in direct bookings? The answer is tied to a broader trend sweeping across the digital economy: increased demand for greater control and ownership, which is ushering in web3, the next evolution of the internet built on blockchain technologies.
Travel, and complexities of vacation rentals in particular, presents a tremendous environment to examine these macro shifts through the relatively micro lens of direct bookings. As the travel industry braces for a busy summer that may lead to global revenues nearly reaching pre-pandemic levels, let’s explore the structure of direct bookings, the benefits they bring to hosts and guests, and some of their associated challenges.
What are direct bookings?
Direct bookings are just what they sound like: travel reservations placed directly with a property manager or host, as opposed to bookings made via intermediaries like online travel agencies (OTAs) and short-term rental (STR) platforms. Prior to the advent of these platforms, owners and travelers relied on direct bookings for reservations via phone call, email, or even fax.
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This matters largely due to the web of contracts in place between a platform, host and guest in the non-direct booking structure. A typical reservation through an OTA or STR enters the guest into a contract with both the platform and the host, the latter of which also has a separate contract with the platform.Each contract within this web covers unique aspects of the reservation, including payment terms and fees. The host/guest contract largely covers terms associated with the stay, including cancellation policies and house rules.
This sits in stark contrast to direct bookings, where a single contract between the guest and host covers everything from the initial booking to the completion of the stay. No OTA or STR platform is involved, just the host and guest.
This results in a streamlined process that aligns directly with the consumer demands that are helping drive the shift to web3: a desire for increased control, flexibility, ownership and transparency for users who have lost trust with centralized platforms. Direct bookings offer significant benefits for both key stakeholders:
Benefits for hosts
- More control over terms and policies: Hosts are unable to alter the terms and policies set by OTAs and STR platforms, and disputes are often resolved in favor of guests. Direct bookings give hosts the freedom to set the exact terms and policies.
- Increase repeat guests: Direct bookings can lead to more personalized relationships between hosts and guests, reducing the cost of acquisition and increasing the likelihood of repeat guests.
- Personalize to differentiate: A direct booking website gives hosts the freedom to design their own brand, layout, promotions, rewards, messaging, images, videos, and more.
Benefits for guests
- More flexibility: Any changes requested by a guest are sent directly to the host rather than to an anonymous support team.
- Enhanced experience: With hosts controlling and designing the direct booking site, guests benefit from unique experiences and more information available before booking.
- Lower rates: Direct bookings have no platform commissions, therefore hosts can provide their own discounts or add-ons as they see fit.
- Faster dispute resolution: Without an intermediary platform, guests have a single point of contact for disputes.
Challenges facing direct bookings
Despite these benefits, the 1:1 nature of direct bookings brings with it some challenges that OTAs and STR platforms typically cover:
Hosts seeking to build their own website to accommodate direct bookings must dedicate resources to developing the site. To compete with more mature OTAs and STR platforms, direct booking sites must be visually appealing, user-friendly and optimized for mobile phones. Building and maintaining such a site likely requires expert developers; the cost of declining traffic and tepid loyalty from a clunky site will outweigh the upfront costs charged by a developer who can build a website for both desktop and mobile.
Expedia, one of the world’s largest OTAs, spent $5 billion annually on marketing before the pandemic, so it’s common for hosts to keep their properties listed on a larger OTA or STR platform to benefit from such marketing spend.
Marketing a direct booking site can be among the biggest challenges hosts face, especially on a shoestring budget. A savvy understanding of how to optimize the budget for maximum results and how to increase search ranking so potential guests know the site exists is crucial.
A quality experience for guests extends beyond the stay to encompass activities that incentivize repeat bookings. Leveraging guest data — such as when they last visited, the length of their stay and any special requests they made — enables hosts to deliver personalized communications beyond the stay. Hosts engaging in direct bookings must ensure from the start that guest data is captured on a database and can be interpreted efficiently to drive leads. This, of course, requires the right technology and time. Boostly is a great resource; it gives hosts tools and tips to drive traffic to their bespoke direct booking sites.
Hosts weighing the decision to move to direct bookings should evaluate its challenges against its benefits, of which there are many. Though they have the flexibility to list their properties across both direct booking sites and OTAs/STR platforms simultaneously, the rise in the former is largely driven by a growing movement among consumers for more control and ownership over everything they do, online and off that’s part of a larger shift in the online economy and structure of platforms within it. Hosts gain significantly more ownership over the entire booking experience through direct bookings, which is more likely to drive repeat bookings today and may lead to new opportunities tomorrow as the technology matures and consumer habits continue to evolve.
About the author...
Eric Pace is head of supply growth at Dtravel