Booking Holdings-owned Booking.com has been fascinating to watch as it has emerged as a leader in vacation rentals over the last four years. The company launched Villas.com in May 2014 as a testing ground for what the company calls alternative accommodations, which includes homes, apartments, villas, and other unique places to stay.
In late 2016, the company shut down Villas.com and transitioned its alternative accommodations inventory onto the Booking.com platform. According to Tnooz, “the Priceline Group-owned [now Booking Holdings, Inc.] accommodations giant said there is no change in its strategy for alternative accommodations such as homes, apartments, and villas, but concedes that data has shown its consumers prefer having all their options under one brand.”
Since moving all its alternative accommodations inventory to Booking.com, inventory growth has exploded. With no traveler fee and with accommodations that are entirely instantly bookable, Booking.com has surpassed both Airbnb and HomeAway in reported supply.
We reached out to Booking.com’s vice president of the home division, Olivier Grémillon, to find out more about the company’s growth, business model, and industry outlook. Although Grémillon only joined the Booking.com team in January, he spent the previous five years at Airbnb, where he helped its transition from a short-term rental company to a more comprehensive hospitality company. Now he is helping Booking.com grow the company’s business across the homes and apartments sector and working with owners and managers in 220 countries around the world.
AH: To what do you attribute recent vacation rental growth, and what do you see as your differentiators when compared to your competitors in this space?
Olivier Grémillon (OG): At Booking.com we have a relentless focus on our partners as well as the customers who book with us all over the world listening, learning, and driving continuous, rapid innovation that leverages technology to consistently ensure our product is the best in the space. Homes and apartments are a very big and important space for us, and we’ve been investing in both partner and customer acquisition for some time, which includes technology investments, to ensure we can remove as much friction from the sign-up, management, and booking processes as possible. Not only do we listen and respond to meet travelers’ needs—an effort that ultimately brings our property partners more guests through their doors—but we build easy, effective tools that allow our partners to simply list and manage their businesses with us, including a new process to sign up a property in less than fifteen minutes. With more than 5.4 million listings in homes, apartments, and other unique places to stay, we offer the largest potential source of inventory in this sector worldwide. This is a competitive industry, so building a product and experience that differentiates us from others in the space and that enables us to deliver the choice and diversity travelers crave is critical to maintaining a leadership position.
AH: In which markets do you see the most inventory growth now and in the future?
OG: We’re an incredibly global business with operations in more than 200 countries and territories. As such, we’re growing inventory in multiple markets that include Europe, the USA, China, and Japan as well as emerging markets across Latin America and Asia. We’ve been actively building our supply and business in the vacation rental segment for years, growing supply globally by 27 percent over the last year by recognizing the consumer demand for all types of accommodation, and we will continue to do so.
AH: Booking.com has a huge advantage in international markets. Do you see a path to leveraging your success outside of the United States to grow inside the United States? Or is there a reason that less of your attention is on US markets?
OG: We are a European company, and our long-term efforts across Europe have certainly led to strong brand awareness and growth internationally. However, the United States is and will continue to be a very important market for our business. We have twenty-seven offices and over 2,300 employees in the United States who are dedicated to empowering customers and supporting our partners with the commercial tools, technology, insights, and advice to grow their businesses via our platform. We’re also investing in additional and enhanced payment methods through partners such as Stripe to enable an even wider range of customers to book via our platform.
The opportunity is immense, and the more we collaborate, the faster we can have impact and further accelerate that growth. Property owners and managers can rely on companies like ours even more to invest in the technology, marketing, and infrastructure resources because that’s our expertise, and we can build the products and tools that will fuel more people through our platform that, in turn, drives more business for our property partners. We are better positioned than anyone in the space to bring significant incremental international travelers into the US market, given our global reach, and we absolutely intend to push that opportunity to make Booking a more scaled player in this market.
OG: Google has long been a good partner of ours, and Amazon continues to build an impressively diverse ecommerce business. With the constant and transformative effect technology innovation and evolving consumer expectations are having on the way we travel, I’d say that any business in this space needs to be open to continuous learning and reinvention of its approach in order to keep pace.
At Booking we focus on what we do best and what we know customers want. For us, that means constantly testing, experimenting with, and optimizing the customer experience on our platform to solve the challenges travelers face and strip friction out of the process.
AH: With the global scope of your inventory, as the industry develops, how do you see the terminology relating to vacation rentals (holiday lets, self-catering, cottage rentals, holiday rentals, holiday homes, urban rentals, etc.) changing, and which of the terms will evolve to become the dominant one?
OG: That might be for the customer to decide. In recent research we conducted with more than 57,000 travelers across thirty markets, 30 percent said they want to stay in an apartment, aparthotel, or condo in 2018—further evidence that consumer demand for accommodation beyond the hotel remains strong. In fact, in other research conducted with 19,000 travelers in twenty-six countries, one in five (21 percent) said they would consider listing their own home on a travel accommodation site over the coming year. In that light, how exactly the industry defines itself is not that important. What matters most is what’s useful for customers. We currently have thirty property types on our platform, and we keep experimenting to ensure customers can easily find what they’re looking for. Defining those properties is one example of how we’re continuously testing and listening to what gives customers the clearest and best experience.
Booking.com Business Model and Technology
AH: Some of your competitors have gotten pushback from their core suppliers as they attempt to expand into other verticals or further monetize their platform. Why do you think your suppliers do not have those same struggles in working with Booking?
OG: We try to make it as easy as possible for all and welcome all types of property to our platform. We foster great relationships and ensure transparency to all our customers, partners, or suppliers so they know they can rely on companies like ours to invest even more in the technology, marketing, and infrastructure resources to bring them more business because that’s our expertise.
AH: Airbnb, HomeAway, and TripAdvisor do not appear to be backing off the traveler fee. Is Booking.com considering adding a traveler fee?
OG: We’ve never charged a booking fee to customers for our service, and this is something that we are extremely proud of. From our point of view, charging travelers is far from optimal for the customer. At Booking.com, we want to be as transparent as possible towards partners and customers, so that means that what you see is what you get. We believe our approach is much clearer for both travelers and partners than others in this space who charge in different places, making for similar fees once guest and partner fees are added. At the end of the day, we are committed to delivering the best possible consumer experience to ultimately win more business for our partners.
AH: In your US contracts, you require rate parity, but to date there doesn’t seem to be a way to enforce it. Are you looking for ways to enforce rate parity, or do you believe rate parity is a thing of the past?
OG: We believe our model guarantees a transparent and consistent price comparison experience for consumers, but at the end of the day, we will always look at what the right model is to ensure Booking.com customers can have the best possible prices. That will ensure we can deliver the customers and demand our partners expect from us as one of their most critical marketing channels.
AH: Where do you see your revenue management services going over the next year? In setting prices for alternative accommodations, is there a conflict of interest as you also look to promote your large hotel clients?
OG: To clarify, we don’t set prices; our accommodation partners do. We also see demand for all types of accommodation on our platform, which is why we look to offer the widest choices all in one place with millions of hotel listings on our website alongside millions of other unique types of property listings. When it comes to revenue management, we provide tooling to all kinds of property partners to support them in their individual pricing strategy and execution as well as data around seasonal or high demand dates (think increased interest for a beach bungalow during the summer months) and special events such as major sports competitions or concerts.
AH: Is there a difference in how you sell to and support professionally managed inventory versus owner-managed inventory?
OG: We have historically come from the more professionally managed side, but today we support the needs of both professionally and owner-managed. Each has its own unique needs. For example, professionally managed properties face particular challenges in managing a portfolio of several vacation homes with different owners, but evolving payment solutions and chat-bot-assisted messaging can help. We also know professionally managed inventory is often connected via software or channel managers, so we are actively building our products in a way that can integrate solutions seamlessly with the systems our partners use.
Individual homeowners listing for the first time may have more questions and need a different type of support and guidance, but we’ve worked on introducing simplified cancellation policies, different workflows, a fifteen-minute sign-up, and a specific online onboarding module to help support and empower owners here. Overall, we want to make it as easy as possible for any property manager or individual to sign up and manage one or more listings with us, so we work hard to provide the tools, flexibility, and insights that will help them grow their businesses.
AH: In terms of ranking, are there any changes to your algorithm that can help property managers improve their performances?
OG: We believe that every property that offers our customers a great experience deserves to be discovered. That’s why our default ranking is based on an algorithm built on customer feedback. It takes into account a variety of factors and data points to present initial search results in the most meaningful way for consumers. Beyond that, we have created a number of filters to help customers search for exactly what they’re looking for. That can help them quickly spot the properties that have what they are looking for, especially in destinations that have thousands of listings. The search behavior and preferences of travelers change constantly depending on the context of a specific trip.
So for property managers, it is key to ensure that properties stand out from the crowd. The attractiveness of the offer plays a vital role in making a property stand out in the search results as well as ensuring you understand your market and what drives the customer experience. Everything from high-quality photos to providing great rates, responding to customer reviews, and ensuring strong availability can help here.
AH: Regarding channel managers, how vital are third-party channel managers to the core OTA business? As you integrate with more and more software systems, do you believe the need for a “channel manager” as we know it today will disappear?
OG: Our goal is to make booking any type of accommodation anywhere in the world digitally as seamless and as easy as possible, and we work with a vast number of partners throughout the world. The travel industry is growing at great speed, and the opportunity is immense. We want to make it as easy as possible for all our partners to work with us, supporting their connectivity choices by working to ensure all our innovations are equally available for connected partners while also fostering our relationship with connectivity providers, including channel managers, to impact and accelerate growth in the travel ecosystem.
AH: Do you see blockchain technology as the next game changer?
OG: There is a lot of talk about the potential of blockchain technology at the moment and the many applications it might have for the wider travel industry. It’s still early, but there are definitely some potential opportunities, interesting ideas, and business models beginning to be debated and developed further. As with all emerging technologies, including cryptocurrencies like bitcoin, it’s something we keep an eye on. Right now, among several potential game changers, we think the bigger opportunity is in AI and machine learning, so we’re investing more on that front, but we have very smart people looking at if and when something like blockchain can solve customer friction in travel.
AH: Are there any new technologies you are adding or technology acquisitions you are considering to better serve your suppliers?
OG: Absolutely. We’re constantly experimenting with new technologies to take even more of the friction out of the overall travel experience and help deliver more customers to our property partners. For us, any application of technology must serve and enhance our partners’ and travelers’ experiences in some way. We don’t experiment with technology for its own sake—it must actively solve a customer problem, remove friction, and make our customers’ lives easier.
Right now we’re actively exploring various applications of artificial intelligence and machine learning to enhance the customer experience on our website and mobile apps, including everything from how we interpret search queries to providing recommendations on where to stay and where to go as well as automatically tagging photos uploaded by travelers. With our Booking Assistant bot, we’re currently using machine learning models and natural language processing technology that has all been built in-house to identify and respond to more than 50 percent of our customers’ most common enquiries automatically. Think simple questions like “Is there parking available?” or “Can I check in late?” That is immensely helpful for our partners because we can essentially handle their customer service for them. This not only saves time for our property partners, allowing them to focus on delivering incredible experiences to their guests, but it empowers travelers with seamless support. As these technologies and their applications advance, whole new levels of personalization at all stages of a customer’s travel journey will become possible as will decision-making, listing management, and optimization by property managers and hosts.