Booking and Expedia: After Easy Money, What Comes Next?
22.03.2024 - 20:27
/ skift.com
/ Pranavi Agarwal
/ Skift Research
The period after the Great Financial Crisis in 2008-2009 until 2019 was a golden decade for online travel agencies. Booking and Expedia benefitted from the shift to online bookings, a consolidation of the online distribution landscape, and share gains from hotels. They become the most powerful duopoly in online travel.
However, Booking and Expedia now face slower growth, stiffer competition and increased pressure on profit margins.
Booking, which was posting more than 40% growth in 2011, grew just 4% in 2019. Growth may be less than 10% in the next decade.
Why the slowdown? The tailwinds that drove market share gains are now diminishing. There’s increased competition; new entrants into the travel space, such as banks and credit cards; and smarter, more tech-enabled hotel brands are gaining back share.
The OTA landscape is filling up with strong new players that won’t be as easily acquired as they were in the past. Our proprietary survey shows that since 2020, Booking and Expedia have lost market share to other OTAs. Expedia in particular has felt the pressure from both new entrants and Booking, which is aggressively expanding into the U.S.
The introduction of free organic listings by Google Hotels in March 2021 has democratized the online distribution landscape: Direct hotels and smaller OTAs are now competing head-on on with Booking and Expedia.
Booking and Expedia still dominate the paid sponsored listings. But for free organic results, there is no one commanding player. Expedia.com and Booking.com are as likely to appear as the direct hotel and smaller OTAs such as cheaptickets.com and bluepillow.com.
For further analysis of our proprietary web-scraping of Google Hotels, refer to our series on Google Travel: A Deep Dive into Google Travel Part I: U.S. Hotel Distribution and A Deep Dive into Google Travel Part II: U.S. vs Europe in 20 Charts
Online travel is increasingly shifting away from direct consumer relationships towards business-to-business (B2B), which has become an important strategy for companies like Expedia and Hopper. B2B makes up more than 25% and 40% of their total sales, respectively.
Why would the OTAs move into the B2B space? B2B partnerships are a lucrative source of revenue growth that allow the OTAs to access roughy 3x the number of loyalty members through a new form of distribution channel that bypasses Google.
Here’s how Expedia CEO Peter Kern put it at Skift’s Global Forum in 2021: “I prefer to spend money on almost anything than spend it with Google.”
However, this comes at a cost. The OTAs only receive half the commission, and they are now actively powering the supply of their competitors, with fintech players such as Chase Travel and Revolut having a large enough