Where do most travellers begin planning their trips – on Expedia, Booking.com, or maybe a metasearch site like Kayak or Trivago?
Probably not. Their initial online searches are most likely to be on the mother of all metasearch platforms, Google, itself.
While the search engine giant's best customers are the two big OTAs (online travel agents), Expedia and Priceline/Booking.com, the latter of which spent about US$3.6 billion on PPC (pay-per-click) advertising in 2016, this has not prevented Google from steadily extending its reach into the travel and hospitality sector.
Already in 2011, Google launched Flight Search with booking links to airline websites, following its acquisition of ITA Software.
Google's Book Direct
In early July 2015, Google added Book Direct for hotels, thus copying TripAdvisor's instant booking feature, which was launched a little over a year previous.
This development has made it possible to book a hotel room without leaving Google's site.
In a shift from its earlier hotel metasearch offerings, Google's Book Direct works on commission-based model like the OTAs, rather than cost-per-click (CPC).
What happened was that Google expanded their Hotel Ads offering to include a commission-based option, which means that there are two kinds of Google Hotel Ads programmes available.
A commission-based option is better suited to smaller hotels because:
- They don’t have to compete on a cost per click (CPC) basis with the large OTAs; and
- Instead they have the option to pay a commission per actual reservation.
Hotels can choose to pay for ads via commissions on actual reservations instead of just the CPC model.
Now hotels can be searched directly with Google Maps which show available hotels in a location with a direct link to the hotel's website, as well as prices for specific dates, many of which are offered by OTAs.
In fact, Google has all the tools, including the biggest search engine, to take the lead as a hotel search and booking platform and its competitors are starting to feel the heat.
Metasearch competitors, like the abovementioned Kayak and Trivago, have been anticipating that Google would inevitably be taking steps to disintermediate them.
Exponential growth in Google ads
In a recent analysis of metasearch sites, including, Google, TripAdvisor, Trivago and HotelsCombined, the hotel digital marketing group, Fastbooking has noted that Google Hotel Ads have grown exponentially “in terms of click volume, as well as return on ad spend.”
Fastbooking, acquired in April 2017 by AccorHotels, tracks some 1.2 million transactions per year and advises hoteliers about their digital marketing campaigns.
In its report, which is based on client data, Fastbooking maintains that Google is becoming one of the most important metasearch platforms for hotels.
“Based on click volume, Google’s Hotel Ads matured in 2016, and today the click volume equals or surpasses TripAdvisor while keeping a very profitable return on ad spend,” according to Fastbooking's analysis, which adds that, “As Google is integrating the ads deeper into its search results, maps, and other products, it is poised to become one of the leading hotel metasearch providers in the market.”
Fastbooking estimates that the return-on-advertising-spend for hotels using Google Hotel Ads reached 10.1x in Q1 2017, just edging out TripAdvisor's 10x.
Furthermore, Google Hotels Ads’ traffic volume is outpacing TripAdvisor hotel metasearch and so is the increase in cost per click.
According to Fastbooking, TripAdvisor had “held the dominant position in metasearch advertising [for hotels] over the past five years,” especially in areas of the quality of traffic and the revenue Google generates.
This news may resonate with those who have observed how TripAdvisor has struggled over the last few years - first with its rollout of metasearch, which started four years ago in 2013, and later with the transition to Instant Booking beginning in August 2014.
Furthermore, Fastbooking notes that, “although TripAdvisor remains as one of the key channels on the market and is still one of the best-performing platforms for metasearch, its numbers have recently declined both in traffic volume and return on investment.”
Will Google become an OTA?
Google has continually denied its intention to become an OTA; meanwhile its actions (as illustrated by launching Google Book Direct) point in the opposite direction.
Observers have often noted that Google would have no interest in competing with the big OTAs in their space due to the 'enormous' advertising revenues that the search engine earns from them, especially the two market leaders, Priceline/Booking.com and Expedia, as explained above.
Although the two big OTAs are ranked amongst the top clients of Google for advertising revenues, the proportion of Google's total ad revenues that they represent is actually rather small - at most about 7%, based on recent data.
Given all the sectors of activity that Google has attempted to enter, including even something as remote from their core business as self-driving cars, it beggars belief that they would have more trouble building up an online travel booking business.
In conclusion, a more forceful entry by Google into the online travel market in the medium term should not be ruled out.
With US$86 billion of liquid assets on the balance sheet at yearend 2016, the company certainly has the financial wherewithal to bankroll such an endeavour.