Inside the Chamber column: Online bookings still changing the travel industry — what’s next?
Inside the Chamber
Glenwood Springs relies on a wide variety of online and offline booking channels. Over time the popularity of these channels can ebb and flow. The majority of Glenwood properties utilize third-party distribution websites, also known as Online Travel Agencies (OTAs), as booking channels. In North America, an estimated 14 percent of leisure travel bookings are made through OTAs like Expedia.com, Priceline.com, Orbitz.com and others. It is important that the Glenwood Springs tourism community keep abreast of some of the recent changes to the OTA market to help forecast future income sources.
Last fall, with the purchase of Orbitz Worldwide, Expedia Inc. now has what Forbes estimates to be a 75 percent share of the U.S. OTA market. (Expedia.com, Hotels.com, Hotwire Group, Orbitz Worldwide, Travelocity, and trivago are all subsidiaries of Expedia.) Initially, the large merger faced regulatory scrutiny as it raised concerns over the limits of healthy competition. However, the Department of Justice recognized TripAdvisor‘s brand new Instant Booking feature as a viable competitor and allowed the merger.
In additional to traditional lodging booking sites, peer-to-peer lodging networks (like VRBO and Airbnb) are also feeling the impact of the recent OTA acquisition trend. Peer-to-peer lodging is on the rise, specifically among Millennials and Gen-Xers as more and more travelers prefer to stay in short-term rentals. In the recent State of the American Traveler survey, 12.7 percent of all American leisure travelers used peer-to-peer lodging in the past 12 months, including an astounding 26.9 percent of Millennials. Expedia now owns HomeAway, a portfolio that includes VRBO.com and VacationRentals.com. FlipKey is a subsidiary of TripAdvisor. In fact, Airbnb.com, currently the most talked about OTA, is one of the last privately-owned distribution websites.
If the significant increase in Millennials utilizing peer-to-peer lodging seems counterintuitive to the traditional image of vacation rental travelers, Airbnb.com and similar websites are part of the cause. The reasons travelers prefer peer-to-peer rentals to traditional accommodations vary, but the most common answer, given by almost 50 percent of survey respondents, is affordability.
In September of last year, Glenwood Springs passed an ordinance allowing “accessory tourist rentals,” or “the short term rental of one bedroom in an owner-occupied home.” Up until this point, it wasn’t legal for Glenwood Springs residents to rent a room in their home. The difference in these rentals and the traditional vacation rental is that the homes are often owner-occupied at the time of rental and may or may not be vacated for the rental period. Travelers looking for an affordable place to stay know that they aren’t necessarily getting a “vacation home” when they surf these listings, but rather are going to be staying in someone’s house.
Glenwood Springs residents and businesses have varying opinions on this new ordinance; however, by opening up this market, the city is ensuring we can accommodate a new segment of the ever-changing visitor population.
Airbnb.com is one of few distribution websites to still be privately owned during this time of OTA consolidation. With the consolidation of both traditional accommodation OTAs and short-term-rental OTAs, the prevailing concern is that a lack of competition will mean higher commissions on room nights. This would not only hurt the lodging business, but in the long run would end up raising prices for the consumer. While this is a very valid concern, there is still a case to be made for partnering with OTAs.
Sites like Expedia.com, Priceline.com and TripAdvisor.com are often a trip planner’s first stop when vacation shopping, but usually they are not the last. The use of multiple websites across a variety of platforms is common practice in today’s Internet world. From user-generated reviews to social media, online travel shopping is rarely one-stop-shopping. A recent Cornell University study investigating what is known as the “Billboard Effect” shows that hotels listed on OTAs often see a boost in reservations through their own website. For the consumer who does wish to one-stop-shop, OTAs allow for a streamlined packaging process that can be difficult to achieve through a direct booking. Additionally, the merging of so many OTAs from around the world connects properties to networks they would not normally be able to access. The opportunity to target new forging markets with no language barrier, automatic currency conversion, and a cultural-specific staging for very little upfront cost is an added bonus.
With OTA usage increasing, the industry is not likely to see mass exodus of lodging properties abandoning these distribution websites for other booking channels anytime soon. The Glenwood Springs tourism community will have to take a step back and monitor this situation closely over the next few years to find out if the lack of competition will result in higher commission rates.
Cristin Barta is the Tourism Marketing Project Manager at the Glenwood Springs Chamber Resort Association. In her role she manages http://www.visitglenwood.com, the @VisitGlenwood social channels, and other online marketing tasks aimed at promoting Glenwood Springs as a premier destination. Email her at email@example.com.