2023 Hotel Online Distribution Trends: Europe & Asia

In 2022, the rebound was driven primarily by leisure demand. In 2023, continued strong leisure demand is expected to be accompanied by growth in the international, business and group segments. However, a possible economic slowdown, ongoing inflationary pressures, a renewed pandemic outbreak or another disruptive force may slow down the pace of growth.

Hoteliers should pay close attention to the segments in growth mode:

• International travellers. In 2022, Europe recaptured nearly 80% of the pre-pandemic volume in international tourist arrivals, whereas Asia reached only 23%, according to the UNWTO. This year, Europe is forecasted to fully recover, bolstered in part by strong demand from the US. In Asia, a strong rebound is anticipated but is less certain due to the region’s high dependency on China, the world’s largest outbound market in 2019.

• Business travellers. In 2023, Europe is forecasted to be the fastest-growing business travel market in the world, increasing travel spend by 25.3% over 2022, according to the GBTA. In Asia, a strong rebound in business travel may be tempered by restrictions on Chinese travellers in some countries.

• Group business. According to Amex’s 2023 Global Meetings and Events Forecast, in-person meetings and events are roaring back, with internal and small meetings already surpassing 2019 levels in some regions. With more companies operating with remote workforces, the need to bring employees together has never been greater, reports Amex. However, group lead times are 25% shorter on average than in 2019.

It’s important to note that rate growth relative to 2019 is much less impressive when adjusted for inflation. Hotels are commanding higher rates but paying more in distribution, labour and operating costs. This year, there will be intense pressure to grow revenue and profitability while containing costs.

However, with inflated pricing and fears of an economic downturn in the air, travellers are expected to show greater price sensitivity. Many will look for ways to tighten travel budgets by taking shorter trips, staying closer to home, downsizing hotel categories or seeking special deals and discounts. 

Nevertheless, with the right strategies in place, independent hotels and small to medium-sized hotel groups are well-positioned to flex their pricing power. While branded hotels generally enjoy higher occupancy rates, independent hotels command higher ADR and RevPAR, according to research published in the International Journal of Hospitality Management. Substantial rate increases by the big global hotel brands in Q4 2022 suggest that ADR has not yet hit a ceiling in Europe, whereas the Asia Pacific region is poised for substantial rate growth in 2023. 

In addition to maintaining a dynamic pricing strategy and increasing rooms rates where feasible, here are some pricing strategies to consider this year:

• Increase occupancy by targeting the market segments in growth mode and developing pricing strategies for each segment and booking channel.

• Continue to practise rate discipline, avoiding discounting when demand is strong. Protect rate positioning by limiting discounting to opaque channels and packages and fencing rates for price-sensitive groups.

• Maintain rate parity across booking channels, promoting your best-rate guarantee on brand.com to capture more direct bookings.

• Sell more premium room inventory through promotions and upsell programs.

• Generate incremental revenue through sales of food & beverage, spa, retail, parking, and ancillary products and services.

• Maintain a guest-centric marketing strategy, utilising a centralised guest data management platform to send targeted offers and communications to increase total spending and build loyalty.

In 2023, the shift from domestic to long-haul, international travellers should automatically push up average length of stay. Another way to increase ALOS—and, in turn, average booking value—is to target the rapidly growing segment of blended travellers. Blended travel, which includes bleisure travel, workcations and flexcations, is the combining leisure and business activities on the same trip. 

The “work from anywhere” trend is changing travel patterns by enabling remote and hybrid workers to extend vacations and weekend getaways to work remotely. According to Expedia, usage of its “business-friendly” accommodation filter increased by triple digits in Q4 2022 year-over-year. 

To target these travellers, hotels should highlight services and amenities that appeal to guests who work and play on property. This includes extra workspace, coworking facilities and in-room technology and refrigerators. Special long-stay rates and offers such as “stay five nights, pay for four” will also help attract these travellers.

We know that direct bookings are generally more profitable than OTA bookings due to lower acquisition costs, but our data also tells us that direct bookings generate more revenue per booking, longer lengths of stay and (as we’ll see shortly) lower cancellation rates. 

However, previous gains in direct market share slipped in Europe in 2022 and threaten to do the same in Asia in 2023. How can hotels maintain direct market share in 2023—and even increase it? This takes us back to the fundamentals of direct-booking strategy.

• Whip your website, booking engine and SEO practices into shape to capture more organic traffic and convert more hotel website visitors to direct bookers. 

• Protect your brand by bidding on your brand name keywords in Google Ads to prevent OTAs from diverting traffic away from your website.

• Ensure direct bookings always receive the best rates and most favourable booking conditions—and make that message prominent on your website. 

• Provide a simple and seamless payment experience on your booking engine to reduce cart abandonment and increase conversion rates.  

• Dedicate a proportion of marketing spend to attracting direct bookings, including search marketing, retargeting and social ad campaigns. Consider engaging an expert digital marketing agency to drive higher performance.

• Invest in metasearch. A recent study from D-EDGE found that hotels experienced an average increase of 95% in revenue from Google metasearch from 2019 to 2022, with an average distribution cost of only 8 percent in 2022.  

• Make it a goal to convert every OTA guest into a direct booker on their next stay.

With international travel in growth mode, the pendulum is swinging back in favour of OTAs. During the pandemic, it was a free-for-all as hotels pursued any type of business they could get. Now it’s time to be more strategic and targeted, focusing on the most profitable channels. 

In addition to the direct booking strategies mentioned above, here are some distribution strategies to consider:

• Maintain a balanced multichannel strategy, targeting bookings from the entire distribution value chain, including direct, OTAs, wholesale, travel agencies and tour companies.

• Target travel agency and corporate business via the GDS. Ask your technology provider about direct connectivity to GDS platforms, enabling you to manage pricing and availability via your channel manager.

• Be careful not to become overly dependent on one OTA (ahem, Booking.com). Pursue a diverse strategy that also includes smaller, regional players  such as Traveloka, Tiket, PegiPegi, MGholiday in Asia or Szallas and Slevomat in Eastern Europe and specialty OTAs such as VeryChic for example. Look also for fast growing newcomers such as Hopper, one of the most downloaded OTA App in the U.S. in 2021. Check here all OTAs available on D-EDGE Channel Manager. 

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• Expedia was down, but it’s far from out. Expect bookings to grow as international long-haul travel returns—particularly from Americans, who typically show a preference for Expedia Group sites.

• Don’t allow OTAs to undercut your rates or offer more flexible cancellation policies. Always match or beat OTA pricing and booking conditions, including offering refundable rates, flexible cancellations and payment policies, and special rates for loyalty members and mobile bookings. 

• Be careful not to participate in so many OTA promotions that the commission add-ons and rate discounts erode your profitability. Compare costs of acquisition and profitability on every channel. 

• Consider working with Airbnb if you aren’t doing so already. In 2022, Airbnb showed the strongest growth of all major channels among hotels in our European data set. 

• Covet your loyal guests. With Expedia’s One Key program launching this year and Booking.com snapping up bookings with Genius discounts, hotels must remember that true loyalty isn’t bought, it’s earned—through recognition, preferred rates, preferential treatment and rewards. 

• Track booking data closely, using it to understand and influence guest behaviour with loyalty incentives, marketing programs and direct booking campaigns.

Although cancellation rates have levelled off, at 33% of total revenue in Europe and 34% in Asia in 2022, there is not much to celebrate. In Europe, the low rate of cancellations from direct bookings relative to OTAs is another reason to make direct bookings a priority. In Asia, however, hotels need to analyse the reasons behind the high rate of cancellations from direct bookings and find ways to bring the numbers down.

During the pandemic, flexibility was a top priority for travellers. Now, hotels can afford to tighten up policies and place more emphasis on non-refundable rates. This will help you gain better control over inventory, forecast more accurately and prevent last-minute cancellations and “trip stacking”—travellers booking multiple hotels and then cancelling at the last minute. An online payment solution will help automate authorisations and payment processing, reducing cancellations, refunds and chargebacks. 

Longer lead times provide one more compelling reason for hoteliers to prioritise direct bookings over OTA bookings. Hoteliers can expect longer lead times in 2023 as more international travellers take to the road. Offering discounts and incentives for advanced bookings will help provide a base upon which higher-rated business can be built. The same goes for group bookings, which generally book further in advance than individual travellers.