How customer confidence and competitive prices boost bookings

At Booking.com, we believe travel is a force for good, which is why we wanted to better understand the role we play and help quantify the impact of online travel agencies on the global tourism industry.

In this three-part series, we unpack the biggest themes to come out of our research with Oxford Economics: “The Economic Impact of Online Travel Agencies,” which covered Europe, Asia Pacific, and the US and Canada.    

In this first piece, we’ll look at how OTAs (1) boost travel by creating more confident consumers and (2) contribute to competitive pricing, which is good news for both travelers and accommodation partners. 

The confidence boost

How we plan travel has changed a lot since OTAs emerged in the early 2000s. By offering transparency, wider choice, and better matching of supply with demand, OTAs have created a more trusting, confident consumer base. 

This is something Lisa Fraser, owner of Frasers country house in the United Kingdom, has noticed, too. “People have confidence in Booking.com as a globally recognized booking platform,” she says. “If they’re going somewhere, especially if they’ve never been before, they rely on things like property reviews that they can trust.” 

When it comes to travel, confidence converts. Between 2012 and 2019, the number of nights booked across various channels online or offline, direct, or wholesale remained consistent. But OTAs drove growth and absorbed the increase in demand for accommodations, which can be explained in part by the ever-expanding importance of international arrivals as opposed to domestic tourism. 

The common misconception is that OTAs are taking bookings away from accommodation partners, but the research shows the opposite: OTAs help generate business that otherwise wouldn’t exist by creating a trusted place for consumers to find what they’re looking for. 

In 2019, of 1.2 billion room nights processed via OTAs in Europe, 134 million were incremental. In other words, this was additional business for accommodation providers that would’ve never occurred in a hypothetical world without online travel platforms. The corresponding incremental room nights for Asia Pacific amounted to 70 million and 56 million for the US and Canada. 

While the pandemic impacted global travel significantly, OTAs still made their mark by matching consumers’ changing needs with available supply. When Covid-19 hit in 2020, OTAs were still able to generate 53 million additional nights for hotels in Europe, 32 million in the US and Canada, and 26 million in Asia Pacific.

The price is right. For everyone.

With so many options, it’s no surprise that competition for consumers is steep, driving down prices at all hotels. Though it might not seem like it, making travel more affordable is great news for everyone – accommodation providers included.

Affordability makes travel more accessible, particularly to low-income households. The researchers at Tourism Economics established that if platforms like Booking.com didn’t exist, hotel prices in Europe would be €10 higher per night on average. This figure might seem insignificant, but it shifts the tipping point at which a vacation would be unaffordable for some families. When formerly priced-out customers enter the marketplace, they become a source of additional business for accommodation providers who gain new guests. 

While accommodations might be charging less per night, they’re gaining incremental sales through OTAs and selling more nights overall on average, which outweighs the losses (a point also validated in another independent study). Competitive pricing also introduces more transparency to the market, which helps hotels future-proof their businesses and build trust with consumers.

As Fraser discovered, that trust can translate into direct future bookings. “A lot of my business is repeat,” she says. “While they may initially book on Booking.com, they tend to book direct the next time.”

The takeaway

While the research doesn’t measure trust, it does show how the trust OTAs create with consumers (through authentic reviews and transparent pricing, for example) benefits everyone: more bookings, better prices, and increased demand. 

Coming up: In the next article of our three-part series, we’ll look at how the choices offered by OTAs benefit rural tourism and the overall economy.