Will otas expansion be a threat to the hotel industry?

Abstract

This dissertation studies essentially how Airbnb and Google could change the current paradigm of online travel agents’ industry (OTAs), in the sense that, these entrances would erode the duopoly from Booking.com and Expedia, a duopoly that has been increasing the commissions percentage and controlling the hotel booking process. With the OTAs market gaining relevance and representing more than 50% of total hotel revenue in 2019, this is a sensible market for the hotel industry. To measure the direct effects of these OTAs’ market expansion on hotel industry, specifically on NH Hotel Group’s value drivers three cases were analyzed: Scenario 1a, where Airbnb would enter in the market with reduced commissions (4%) and gaining 10% of OTAs’ market share; Scenario 1b, where Airbnb would enter in the same conditions but now gaining 25% of OTAs’ market share; Scenario 2, where Google would enter in the market and reduce commissions absolute amount in 25%. I concluded that the direct effects of any of these scenarios would not be a threat to NH since it leads to a better position of NH versus OTAs’ market, revealing an increase in the return to NH Hotel Group’sshareholders from the previously expected 19.9% (base case) to 66.3%

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