This document summarizes a research study analyzing the evolution of market share and final penetration rates of online travel agencies (OTAs) in Swiss hotel distribution channels. The study finds that except for mid-scale hotels, the final OTA share is below 40% for most hotel segments. Budget hotels currently have the highest OTA share but will reach saturation sooner. Upscale hotels may see a steadily increasing OTA share longer-term. The results suggest OTAs pose a serious threat to the majority of Swiss hotels. The dynamics in the hotel distribution landscape will remain highly complex with ongoing consolidation among OTAs and hotels as well as new players like TripAdvisor entering instant booking.

1. ENTER 2016 Research Track Slide Number 1
Forecasting the Final Penetration Rate
of Online Travel Agencies in Different
Hotel Segments
Miriam Scaglione & Roland Schegg
Institute of Tourism, HES-SO Valais, Switzerland

2. ENTER 2016 Research Track Slide Number 2
Table of Contents
• Background and goals
• Research purpose
• Methodology & data
• Results
• Conclusion & future research

3. ENTER 2016 Research Track Slide Number 3
Background
• The Internet as a key tool for marketing and
distribution in tourism
• Online intermediaries such as OTAs play a major role
in the distribution of hotel rooms all over the world
(24*7*365)
The Direct Booking Wars Are in Full Bloom
(Skift 2016)

4. ENTER 2016 Research Track Slide Number 4
Background
• Hotels have underestimated the importance of online
marketing strategy whereas OTAs have invested in
SEA/SEM and conversion techniques
• Poor online distribution power as (vey often) website
lacks of quality

5. ENTER 2016 Research Track Slide Number 5
• Many hotels still do not fully exploit their own website
as a tool for selling hotel rooms and as a way to gain a
competitive advantage
Background

6. ENTER 2016 Research Track Slide Number 6
Research purpose
The aim of this research is to analyse the evolution of
the market share and the final penetration rate of OTAs
in the distribution channels of Swiss hotels.
The analysis takes into account the following segments:
 Category (budget, medium, upscale)
 Location (city, holiday resorts)
 Size (<21, 21-50,>50 rooms)

7. ENTER 2016 Research Track Slide Number 7
Methodology & data (1)
• Since 2003, regular surveys have been carried out
among the over 2000 members of hotelleriesuisse.
– There are «snapshots» for the reference years: 2002,
2005, 2006, 2008, 2009, 2010, 2011, 2012, 2013 and 2014
• The online questionnaire monitored how bookings
are distributed among available direct (telephone,
fax, walk-in, etc.) and indirect (tour operator,
tourism office, GDS, OTA etc.) distribution channels.

8. ENTER 2016 Research Track Slide Number 8
Distribution channels 2014
Sample: n=257
Market
share (in %)
Direct - Phone
Direct - Mail / fax
Direct - Walk-In (persons without reservation)
Direct - Contact form on own website (without availability check)
Direct - Email
Direct - real time booking over own website with availability check 8.3
Destination Marketing Organization (DMO) / trade associations 2.6
National Tourism Organization (NTO) 1.5
Tour operator / Travel agency 5.3
Hotel chains and cooperations with CRS 0.8
Wholesaler (e.g. Hotelbeds, Tourico, Gulliver, Transhotel, etc.) 2.1
Event and Congress organizer 2.5
Online Booking Agency (OTA) 24.2
Globale Distributionssysteme (GDS) 2.8
Social Media Channels 0.2
other distribution channels 0.7 0.7
49.1
57.4
4.1
10.7
27.2

9. ENTER 2016 Research Track Slide Number 9
Distribution trends
2002-2014

10. ENTER 2016 Research Track Slide Number 10
Methodology & data (2)
• Limited number of observations
• Diffusion models estimations: lack of convergence
• The authors used 4 different models
- Logistic / Bass / Bemmaor / Gompertz
• Best forecasts chosen on the Median Absolute
Percentage Error (MAPE) and the significant level of
parameter estimates.

11. ENTER 2016 Research Track Slide Number 11
Methodology & data (3)
#N #N % #N % lux (4-5*) %
2006 99 4.00 16 4.8 60 6.55 23 4.90
2007* n/a 4.91 n/a 6 n/a 8.07 n/a 6.46
2008 185 5.70 42 6.8 88 9.79 55 7.93
2009 131 10.60 15 16.7 68 11.70 48 10.30
2010 205 13.60 37 18.3554 127 13.90 41 11.30
2011 180 16.40 22 22.1 98 16.00 41 12.50
2012 199 20.90 39 28.4 120 19.10 40 17.70
#N % #N %
2006 13 9.00 67 4
2007* n/a 10.00 n/a 4
2008 21 10.00 122 4.5
2009 26 15.00 86 10.3
2010 53 17.20 121 12
2011 68 18.00 98 16.2
2012 62 23.30 108 19.8
#N % #N % #N %
2006 27 3.80 49 4.30 22 3.09
2007* n/a 4.30 n/a 5.97 n/a 3.95
2008 47 4.60 79 6.40 58 5.50
2009 16 15.60 58 12.50 46 9.40
2010 44 16.03 84 15.50 45 11.80
2011 52 20.30 77 16.80 59 12.80
2012 49 23.40 93 22.00 52 15.30
* interpolated
> 50
Rooms
Location
Overall Budget (1*, 2*,
no category)
middle (3*)
lux (4-5*)
Category
year
year
year
city holiday resort
0-20 21-50

12. ENTER 2016 Research Track Slide Number 12
0
10
20
30
40
Numberofnewadopters
-2.50 -1.50 -0.50 0.50 1.50 2.50Innovators
2.5%
Laggards
(13.5%)
Early
majority
34%
Early
adopters
(13.5%)
Late
majority
34%
Adoption of Innovations over time non-cumulative
(Bass-Rogers categories)
Methodology & data (4)
Peak
date
rateofgrowth
rateofgrowth

13. ENTER 2016 Research Track Slide Number 13
Methodology & data (5)
T*=5
T*=22
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39
q/p=2; p+q=0.15 q/p=100; p+q=0.202
time
S- shape for cumulative

14. ENTER 2016 Research Track Slide Number 14
Results: Final share

15. ENTER 2016 Research Track Slide Number 15
Results: Final share (2)
(23% - 51% )
Peak 2011
(20% - 41%)
Peak 2011

16. ENTER 2016 Research Track Slide Number 16
Results: Final share (3)
(23% - 34%)
Peak 2009
(15% - 22%)
Peak 2012

17. ENTER 2016 Research Track Slide Number 17
Results: Final share (4)
(9%-65%)
Peak 2010

18. ENTER 2016 Research Track Slide Number 18
Conclusions (I)
Except for mid-scale hotels with an estimated final penetration rate of
more than 50%, the final share for OTAs is below 40%
By category
 Budget hotels have the highest OTA market share at the moment,
but will reach the ceiling level sooner than the others
 Upscale hotels might see a steadily increasing OTA market share
for a long period
 Middle : S-Shape is well-defined =>customers’ behavior probably
more influenced by an imitation behavior than in other hotel
segments

19. ENTER 2016 Research Track Slide Number 19
Conclusions (II)
Three-star hotels constitute the majority (>50%) of the members
of hotelleriesuisse therefore they are the most important
element of the Swiss lodging sector.
The foreseen very high market share of OTAs is therefore a
serious threat for the Swiss lodging sector.

20. ENTER 2016 Research Track Slide Number 20
Conclusions (III)
For all hotel segments under study with the exception of city
hotels, the diffusion process has already reached the Rogers’
late majority category; therefore, they have entered the
descending part of the diffusion curve.
That means that, hereafter, the year-to-year (growth rates)
evolution will decrease and no longer increase as it has up to
now, unless OTAs find an innovation that allows them to launch a
new hypercycle.

21. ENTER 2016 Research Track Slide Number 21
Limitations
• Poorer performance of some of the models could be due to
bias of estimates (Nigel Meade & Towhidul Islam, 2006; Van
den Bulte & Lilien, 1997)
• Reasons :
1. poor “signal-to-noise” ratio of the raw data.
2. bias is higher “for recent than for all innovations” (Van den Bulte
& Lilien, 1997)
Finally, these results have to be taken with caution because
there are still few observations available, this was specially
an issue for upscale and city hotels.

22. ENTER 2016 Research Track Slide Number 22
Outlook: highly dynamic and
complex distribution landscape
The Priceline Group Joins TripAdvisor’s Instant Booking: The
Expected Impact on the Travel Industry

23. ENTER 2016 Research Track Slide Number 23Source «word cloud»: O’Connor, white paper, 2015
Outlook: highly dynamic and
complex distribution landscape

24. ENTER 2016 Research Track Slide Number 24
• Consolidation OTA (Expedia-Orbitz)
• Consolidation hotel industry (Marriott–Starwood
Deal, Accor - Fairmont, Raffles and Swissotel)
• Vacation rental (Expedia-HomeAway, Booking.com-
Villa-Interhome) and Sharing Economy (Airbnb as
threat for hotels)
• New (old) kids on the block: TripAdvisor Instant
Booking, Book on Google
Outlook: highly dynamic and
complex distribution landscape

25. ENTER 2016 Research Track Slide Number 25
Thank you for your attention!