When global internet platforms disrupt an industry, people often worry that something important is being lost – the personal relationship that can build up between small businesses and their customers.
In the hotel sector, however, the reverse is true: online travel agencies are not getting in the way of building relationships, but sparking relationships that would otherwise not have happened.
For any business to build a relationship with a customer, the said customer first needs to know that the business exists. Big hotel chains have the marketing budgets to get their brand names in front of travelers, but for smaller independent accommodation providers – especially outside of tourism hotspots – acquiring new guests is not so easy.
In Europe, the hotel sector is dominated by small and medium-sized enterprises, and that presents a unique challenge. According to 2019 research, 87% of Europe’s hotels are independent, providing 63% of room capacity.
Around 70% of guests who come from an online travel agency would not have been in an accommodation’s typical sourcing market, according to a survey of 600 independent European hotels by EY-Parthenon. Platforms like Booking.com are especially useful in reaching potential guests from countries further afield. Between 2009 and 2019, for example, the number of Chinese tourists in Europe grew fivefold.
1. Low no-show
For hotels, online travel agencies are a way to showcase their property to millions of prospective guests, only for every successful booking. They also get the assurance that the guest is serious: Accommodation providers surveyed by EY-Parthenon indicated that the no-show rate is significantly lower for bookings through online agencies.
Establishing initial trust is an even more important function for potential customers, who need reassurance before they transact with a small business in a faraway place with which they are unfamiliar. Booking a room with an online travel agency significantly reduces the risk that the hotel is not going to disappear with their money, and the travelers gain a higher level of confidence that they will have access to customer service in the language of their preference if they encounter any issues.
Online travel platforms match services with consumers, and from there, it is up to the hotel to build the relationship. While the internet is changing many things, it hasn’t changed what people are looking for from a stay at a hotel – a pleasant experience with good service at a fair price. Having been introduced to the new customers by the online platform, the hotels have it fully within their control to delight the guests and thus win travelers’ trust and loyalty.
An added benefit is the power of authentic customer reviews, which the Yale School of Management termed the digital word of mouth. “Almost 90% of consumers trust online reviews as much as they trust personal recommendations.” On platforms like Booking.com, customers reward excellence with generosity, and the hotels with exceptional review scores enjoy increased demand.
Following the first stay facilitated by an online platform, hoteliers can subsequently keep in contact with the guest, ask for feedback, make exclusive direct offers, etc. Customer experience is absolutely central, and an unforgettable one can develop into a long-term relationship with multiple repeat visits. In such cases, the commission fee on the original booking comes to represent a smaller and smaller proportion of the value of the relationship.
2. The billboard effect
Often, the direct relationships between travelers and accommodations get initiated by the online platforms at no cost at all. As research by EY-Parthenon shows, around 40% of direct bookings via a hotel’s own website come from the “billboard effect” of online agencies. In other words, the customers first discover a hotel through a website such as Booking.com, then do further research and end up booking directly.
According to researchers who looked at accommodation providers in Belgium – a country where the most detailed records are publicly available – the smallest hotels experienced proportionally the biggest benefits from partnering with an online travel agency. There are many reasons not to be surprised by this – the smaller the company, for example, the higher the hurdle they need to jump over to stay competitive with the larger internationally recognised brands.
On a flipside, the independently managed, smaller hotels are often best placed to offer a personalised experience to their guests, which can kick off a virtuous circle: a happy customer leaves a glowing review on Booking.com, which increases the chance of future potential guests choosing their accommodation, giving the hotel another opportunity to build a direct relationship with a new customer. It is this virtuous circle that online platforms are proud to facilitate.
