Think Equity recently conducted a proprietary survey of 34 European hotels. The survey indicates a continued positive outlook for online hotel bookings in 2011 driven by both increased travel bookings and online share shifts. They believe the survey was most positive for Booking.com (Priceline) which showed the strongest expected increases in room allocations with more mixed results for Expedia as hotels viewed commissions as too high.

Hotels Expect a 5.9% Increase in 2011 Bookings on Average. According to the survey, 88% of hotels expect total room bookings to increase in 2011 with 6% indicating no change and 6% indicating a decline. Of those that expect an increase, 33% indicated 0-5%, 30% indicated 5-10%, and 24% indicated 10-15%. On average, hotels expect a 5.9% increase in total bookings in 2011, slightly ahead of 2010 results.

Hotels Expect Online Bookings Penetration to Show Solid Increase in 2011. The TE survey indicated that 51% of Europe hotel bookings were online in 2010 on average (45% median) vs. average/median of 43%/35% in 2009. In 2011, hotels expect the average/median online penetration to reach 58%/58%. While these figures are much higher than what many believe to be the actual penetration rates for Europe, the survey indicated hotels' clear expectations for continued online share gains.

Booking.com (Priceline) and Expedia Clear Market Leaders. According to our survey, Bookings.com and Expedia (owns Expedia, Hotels.com, Venere) are the clear leaders today. Booking.com represents 27% of Europe OTA bookings according to our survey and Expedia/Hotels.com/Venere accounted for 37% combined. We believe that actuality, Booking.com is the market leader across all of Europe, though our survey clearly indicates Booking.com and Expedia have dominant market share today.

Booking.com Shows Strongest Expected Trends for 2011. According to survey, of the 25 hotels that use Booking.com, 16 expect to increase their allocation of rooms over the next year (vs. 12 for next highest agency), while 3 indicated no change, and 3 expected a decrease. Our survey also indicated increased allocation for most of the other agencies, including Hotels.com, Expedia, and eBookers.

Booking.com: Hotel Commentary mostly positive. Booking.com was generally considered the best overall with high volumes, good reviews, and good service. A few negative comments indicated that Booking.com is experiencing some growing pains - in essence that as they have become bigger the quality of the service has declined. Given the strong profit margins of the Booking.com business, many believe it makes sense to improve the overall customer service levels in order to drive long-term hotel satisfaction.

Expedia: Hotel Commentary Mixed. Commentary suggested that Expedia is the second best player with generally good quality of service though Expedia received a number of negative comments for its relatively higher commission rates.