Hotel revenue: the catalyst for agency recovery?

There's no doubt that 2020 is the year of the staycation — and this trend is likely to continue into 2021. For hard-hit travel agencies, this presents new, untapped opportunities in an industry transformed by COVID-19.

Traditionally, air ticket sales have been the primary driver of revenue for travel agencies. But with air travel significantly down, agencies are shifting their focus to capitalize on the domestic travel trend instead.

Travelport has just published a new guide, Hotel revenue: A recovery guide for travel agencies , to help agencies navigate this unfamiliar retail landscape.

Below is a sneak-peek of five reasons why we think hotel sales will jumpstart recovery for travel agencies:

1. Consumers want travel agencies to advise on hotel safety measures

Before COVID-19, many travelers considered themselves confident and autonomous when booking and managing their trip, thanks to the vast range of online booking tools offering first-class user experiences. But COVID-19 has created uncertainty for even the most confident travelers.

Now, agencies are proving their value by guiding unsure and hesitant travelers, issuing refunds, changing bookings, and facilitating cancellations.

Travelport research found that travelers are now more likely to use an agency than before COVID-19. This is made up of 33% of travelers increasing their preference for agency support, against only 18% less likely, with the remainder the same as prior to COVID.

Of this group, 65% said this was because agencies can provide information on the safety measures that suppliers are implementing. So, as travelers get back on the move, they’ll be looking to agencies more than ever before to guide them on their hotel stays.

2. Domestic travel means hotel stays

Domestic leisure travel is overtaking international to lead the initial recovery, with people visiting friends and family (VFR) and taking vacations within their home country, where they feel most comfortable. The preference for domestic travel is also motivated by uncertainty and the potential for restrictions to change while abroad.

Government guidance to avoid non-essential travel and staycation campaigns by destination marketing organizations (DMOs) are also contributing to domestic travel's rise in popularity. There is now less scope for agencies to claw back lost revenue through air ticket sales, which puts hotel sales into the spotlight in the short-to-medium term.

3. Hotels have solid safety standards, promoting confidence

Hotels stand to benefit from the clear, consistent, and global approach established within the safety guidelines issued by groups including the World Travel and Tourism Council , the World Health Organization , and American Hotel & Lodging Association (AHLA) .

Social distancing is also straightforward in hotels, and the digitization of processes like check-in and booking guest services is reassuring travelers that their stay will be safe.

GDS technology can help you and your team to manage this challenge, with convenient access to this information within your workflow, to support your conversations during booking.

4. Hotels beat air for margin

Long before COVID-19, hotel bookings were the most profitable sale of an agency's itinerary, with large multinational agencies' accommodation revenues reaching ten times that of air.

In fact, 86% of travel agencies place hotel commissions as one of their three most important sources of income , ahead of airline commissions (70%) and transaction fees (64%).

However, in the past, a hotel booking was considered an attachment to an air booking, rather than an independent revenue stream. By changing the focus from attachment rates to driving hotel sales, travel agencies could be looking at a longer-term shift in revenue models — but this will require a different mindset among agents, training, and a state-of-the-art user experience.

5. Demand for hotels may be less price-elastic in the short to medium term

Some of Travelport's hotel partners have expressed views that travelers may be less price-focused now than before COVID-19. They expect that people may be willing to accept a higher price point for premium brands if it means a safer experience.

Travel management companies (TMCs) may also benefit from this perception in the longer term, as domestic business travel makes a gradual comeback. Employers will want to meet their duty of care by ensuring their business travelers are safe and comfortable throughout their hotel stay, even if that means paying a higher cost.

However, it remains to be seen how this will evolve across both leisure and business stays if the health crisis is followed by the anticipated economic crisis, in which case budget properties could stand to benefit.

But wait, there's more...

This is just a snippet of what's covered in our guide. If you want to know more about the potential value of hotel bookings to your agency's recovery journey, read on to find out more about:

• the key trends and changes taking place across the hotel sector that your agency should know.
• the first commercial opportunities to aid your recovery journey.
• the 10 steps to drive revenue with the most relevant hotel content, including safety information, reviews, personalization, and more.
• the GDS capabilities that can support your agency's recovery.