Hotels in China and India with US prices? Online booking

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As more consumers in Asia go online, companies that hold a dominant share of online bookings may need to donate some of their profits to large hotel chains that can book directly.

The Taj Mahal Palace Hotel in Mumbai, India.

Dimitra DeFotis/Barron’s

The global market is dominated by American trends and online travel agencies account for only around 10% of room sales for the largest hotel brands. But branded hotels and online booking companies are setting the trends for hotel owners as a whole, and an industry power shift is evolving: “The two largest travel agents online have grown from a quarter the size of the market capitalizations of the top 5 hotel brands a decade ago to twice their size today,” Morgan Stanley analysts write. and India of a detailed Morgan Stanley report published today on the global hotel market:

“The online travel agent (OTA) market in China appears to be more concentrated than the US market after the ctrip.com (CTRP) acquisition of Qunar. We believe that with the dominant market share, OTAs, especially Ctrip, will have greater pricing power and are likely to charge higher hotel commissions. Some hoteliers we spoke to think it’s very likely. But hotels in China are stepping up their efforts to get customers to book more directly or diversify into other channels, for example Wechat booking, which is another form of proprietary channel, or other channels like Meituan and Alitrip. , who charge lower commission rates.

The penetration of Chinese hotel brands into mobile applications is clearly benefiting them. For example, 30% of Hosting group in China (HTHT) overnight stays come from its own mobile application. This allowed it to have an OTA mix and similar pricing to major US brands such as Hilton Global Group (HLT) and Marriott International (MAR), despite a third of the number of rooms …

Over the past decade, online travel agencies in India have steadily enriched their platforms in terms of number of hotels. Indian OTA MakeMyTrip (MMYT) for example now has 29,000 hotels (out of 70,000 rated/unrated hotels) on its platform compared to only 4,500 hotels in CY2010. Similarly, another OTA, Yatra, now has 52,000 hotels compared to only 6,000 in CY2012. OTAs were mostly focused on 3-5 star hotels until recently. However, after competition from budget hotel aggregators, OTAs began to aggressively expand their presence in budget hotels. … To illustrate what luxury hotels could do about their relationship with OTAs, we look at the example of the Indian Hotels company – the largest luxury hotel chain in India (before the merger of Starwood and Marriott) with 16.5k rooms and 136 properties (including those outside India). With OTAs gaining revenue share from the Indian luxury market and with IHCL paying, we believe, more than 20% revenue share to a few key OTAs (range is 5% to 20%), Hotels have now put focus on optimizing their channel mix to reduce distribution costs…”

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