How online travel platforms transform consumer choice into jobs and growth
Improved competition naturally leads to better prices for consumers, additional bookings for the hotels, and increased trust
At Booking.com, we have a set of values that aren’t simply posters on the walls, but anchors that guide our thinking every day and ground our decision-making processes. One of them is to learn forever.
As we relentlessly pursue our mission to make it easier for everyone to experience the world, we wanted to learn more about the wider economic and societal impact of platforms like ours. And, so we partnered up with Tourism Economics to conduct an independent study and generate new insights.
What researchers have found is that online travel agencies (OTAs) have reshaped the market for accommodations when they entered the scene in the early 2000s and introduced: wider choice for travellers, better matching of supply with demand, improved competition that naturally led to better prices for consumers, additional bookings for the hotels, and to top it all off — increased trust.
The numbers speak for themselves, but how exactly does it work? Anyone who ever shopped for a unique product or service knows that it’s difficult to buy something that you can’t find.
When thinking about our personal experiences with travel accommodations, it’s easy to recall how specific our requirements often get. A business trip is different from a family vacation. Traveling on a budget is not the same as splurging on your bucket list trip! Going abroad for the first time is quite unlike a repeat visit to a nearby town.
the biggest headache for the hoteliers was and remains the perishable nature of an unsolved room
Back in the days of vacation catalogs and paper guides, matching the right offers to the willing customers was a challenge. Like many successful ventures, online travel platforms addressed a pain-point and smoothed out a market inefficiency. On one hand, the biggest headache for the hoteliers was and remains the perishable nature of an unsolved room. Travellers, on the other hand, couldn’t always find exactly what they wanted, at the acceptable price, and available on their preferred dates.
Oxford Economics: The Economic Impact of Online Travel Agencies in Europe 2019–2021
When hotels are able to showcase their offers in front of millions of prospective customers, and the traveling public are able to find what they are looking for, the market flourishes and more business gets done
It is not surprising then that online platforms generate additional business for hotels, which Tourism Economics estimated at 134,000,000 room-nights for 2019 — the benchmark for travel. This is simply a function of better matching. When hotels are able to showcase their offers in front of millions of prospective customers, and the traveling public are able to find what they are looking for, the market flourishes and more business gets done.
The next layer of economic benefits is the impact of platforms on the competitive environment in which accommodation providers operate. Availability and choice is the starting point, but when the choices are easily comparable, then the customer finally gains real power.
Statista: Online travel platforms make all hotels cheaper
The researchers at Tourism Economics established that, if platforms like Booking.com did not exist, the hotel prices in the EU would be higher by €10 per night on average. This figure might appear marginal, but it shifts the tipping point at which a vacation away from home would be unaffordable for some families. When formerly priced-out customers enter the marketplace, that becomes the source of additional business for the hoteliers who gain new guests.
online travel platforms generate an intangible economic value in the form of increased trust
As our intuition would have it, this additional economic activity — spurred by travel platforms — translates into incremental GDP, as well as employment. For the reference year 2019 before the COVID pandemic decimated the tourism industry, researchers estimated the total incremental impact for Europe at 566,000 jobs. And, accounting for both direct gain in GDP as well as indirect effects through the supply chain and induced effects of spending of wages, the total incremental GDP impact came to €33.7 BILLION in 2019.
Oxford Economics: The Economic Impact of Online Travel Agencies in Europe 2019–2021
Lastly, and perhaps most importantly, online travel platforms generate an intangible economic value in the form of increased trust. Consumers are naturally and appropriately apprehensive of transacting with unknown entities. And that’s where the authentic customer reviews come into play. 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.
All and all, the study we commissioned to better understand the economic impact of online travel platforms gave us unique insights and confirmed our initial theory that consumer choice translates into a number of system-wide benefits: stronger competitive environment, better prices, and additional business for the travel accommodation providers. We are reassured once again that when the customer wins, everybody wins.
