With inflation putting a squeeze on household finances, a growing number of people are at risk of being priced out of leisure travel. However, research suggests that online platforms, such as Booking.com, could play an important role in keeping tourism affordable for the many and not just a luxury available for the few.
With inflation putting a squeeze on household finances, a growing number of people are at risk of being priced out of leisure travel. However, research suggests that online platforms, such as Booking.com, could play an important role in keeping tourism affordable for the many and not just a luxury available for the few.
Before the pandemic, decades of progress in democratising travel had helped to bring people closer together by promoting cross-cultural exchange and understanding. In 2019, 65% of Europeans made at least one trip for tourism. Yet, before the pandemic hit, “29% of the EU population aged 16 or over could not afford a one-week annual holiday away from home,” according to Eurostat. Travel might be opening up again, but affordability concerns remain.
Prices are spiking around the world. In the United States, for example, the latest figures say many travel-related costs are rising particularly quickly — rental car prices are up by 23.4% year on year, airfares by 23.6% and hotel rooms by 25.1%, compared to an overall inflation rate of 8.5%. Two in five Americans plan to cut back on planned travel as a result, according to one recent survey. The story is similar in Europe, where accommodation providers are struggling with the higher costs of electricity, gas and food.
Rising prices are driven not just by the cost of inputs, but also by pent-up demand from wealthier consumers who have been able to accumulate savings during the pandemic. As they rush to catch up on travel, those on a lower budget are being priced out.
But there is a reason for some cautious optimism that online travel platforms will cushion the blow. Before the pandemic, Booking.com commissioned Tourism Economics — part of the Oxford Economics group — to analyse the impact of online travel agencies (OTAs) on the overall market in Europe.
The average rate per night for accommodation booked online stayed fairly constant through that period covered by the study, while the average rate for the sector as a whole increased by 17%. That could, in part, reflect changes in the types of trips booked through online travel services, so we asked Tourism Economics to analyse more precisely their impact on prices.
The researchers found that if online travel agencies had not existed, chain hotels in Europe would have been charging 4.2% more in 2019, while independent hotels would have been charging 10% more. Across the market as a whole, this means people were paying an average of EUR 11 less per night than they would otherwise have done because of online travel agencies.
How do online agencies help to keep prices down? One way is by giving consumers greater transparency, so they can be confident they are getting the best deal on a travel experience that meets their needs. Another is by giving accommodation providers access to analytics, which helps them to pitch their rooms at a competitive rate.
But as more families weigh up whether they can afford a holiday, a different benefit of online travel agencies may come to the fore: they make it easier for people to find travel options in locations that are less well known and often less expensive.
Looking at France as an example, we found that the chain hotels gravitated towards the most economically successful parts of the countries, whereas the small & independent hotels covered the entire map. In the tourism hotspots — the top quartile of chain penetration within Booking.com listings —the average GDP/capita reached €33,400, but for the bottom quartile, it was only €25,400. For smaller properties in these off-the-beaten-track areas, online travel agencies provide a low-cost and risk-free way to make themselves known to cost-conscious travellers.
As one accommodation provider put it, in a survey conducted by Booking.com and EY-Parthenon: “Guests are more willing to make a booking via a trusted platform that also facilitates the transaction. This especially holds for places they are not familiar with.” In some respect, the search for affordability comes with a silver lining; it could open new horizons and lead to discoveries of unexplored destinations.
COVID presented the biggest challenge the modern travel industry ever faced. Now, our sector is poised for recovery, so the accommodation providers, small and large, are eager to revitalise their businesses and recoup losses. Nevertheless, we have to remain cognisant of the threat inflation poses to the most price-sensitive consumers, and we must not take the democratisation of travel for granted.
