Travelers pulling their luggage in front of a Marriott hotel in San Francisco.
David Paul Morris/BloombergThere’s good news for hotels in the latest travel search trends. After a year when consumers shifted to alternative properties like Airbnb and Vrbo homes, there is now evidence that they are returning to some of their old ways.
In an interview on Monday, Matthias Tillmann, chief financial officer at travel search site trivago (ticker: TRVG), said that his company was noticing that more travelers were looking at hotels again.
“Last year, we saw a significant shift away from hotels to alternative accommodations,” he told Barron’s. “This year, with a pickup in volume, it has reversed a little bit, so the shift came down, but it’s still above 2019 levels. What we have seen so far this summer is that it’s between 2019 and 2020 levels.”
That rebound was also evident in recent results from Wyndham Hotels & Resorts (WH) and Hilton Worldwide Holdings (HLT).
During the height of the Covid-19 pandemic last year, many people gravitated toward renting vacation homes where they wouldn’t have to be near other people. That helped Airbnb (ABNB) and Expedia Group (EXPE), which owns Vrbo. This year, many of those kinds of homes were still in high demand. Yet as overall travel picked up, some people started choosing hotels again. Part of the reason for that was simply that hotels had more availability, Tillmann said.
“As volumes come back, we have already seen in some destinations — and particularly in rural and nature destinations — that the alternative accommodations inventory is getting tight,” he said. “With more people looking for reservations, they have to go somewhere else. And on the supply side, only the hotels have the capacity to ramp up inventory quickly.”
That said, hotels will still need to see business customers return for their results to fully rebound.
In the longer term, Tillmann expects price to be a bigger determinant of where people travel, and for hotels to once again take a substantial share of the travel budget — if not quite as much as before the pandemic.
If people spend more time on vacation rental sites, that could presumably hurt trivago, because travelers wouldn’t need a broader search engine anymore. But Tillmann argues that search engines will become only more important, because they show both hotels and alternatives — and can appeal to price-sensitive shoppers.
“It’s a fragmented market, and you need an aggregator,” he said. “You need someone who shows you all the options. The shift toward alternative accommodations I believe is helping, because it fragments the market even more. Price is the one thing that has always been important, and will always be important.” If trivago can show it’s easy to find a great deal, “I think that’s a strong value proposition and that won’t change.”
Write to Avi Salzman at avi.salzman@barrons.com
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