//Industry insights: Google Travel and the OTAs

Industry insights: Google Travel and the OTAs

Travel agencies pay to advertise on search engines and social media, but are also now competing with them for business, writes Jenny Southan

For years, online travel agencies (OTAs) have been relying on Google to reach their customers through the power of search and, as a consequence, have spent billions of pounds on advertising auctions to make sure they appear at the top of the rankings. Data from travel intelligence platform Skift suggests that the Priceline Group – now Booking Holdings – and Expedia Inc spent £2.8 billion on Google advertising in 2016. However, as the tech giant branches into travel metasearch and booking, the battle lines have been drawn in its perceived attempt to circumvent OTAs. Not good news for travel companies that rely on organic search alone.

The metasearch works like this: type “flights from London to Hong Kong” into Google and you will immediately see a panel linking to google.co.uk/flights with times and prices. Search for “hotels in New York” and you’ll spot another Google panel displaying a map, calendar, rate graph, “sort by” buttons and prices for hotels (as well as OTAs that have paid to advertise deals on Google Hotel Ads). Google is coming under fire for its lack of “fair play” and its critics say it is changing search results to its own benefit, as well as taking money from paying clients.

In June last year, Google was fined a record €2.4billion by the European Union’s anti-trust watchdog, after an investigation prompted by a complaint by UK price comparison site Foundem. In the US, Google anti-trust regulators
are also taking notice of its activity within the travel sector.

An opinion piece in The Wall Street Journal titled Google-Hotel Travelopy said: “Google ought to compete on fair terms by opening its auctions to all players and stop favouring its metasearch. Otherwise, regulators may soon ask if the search giant is abusing its market power.”

A spokesman for Google said the way its advertising products work had been “mischaracterised”. However, according to Skift, Google’s travel business will generate more than £9.8 billion in revenue this year. Is the company
really living up to its new mantra of
“do the right thing”?

It was 2011 when Google launched Google Flights after buying a company called ITA Matrix Software that allowed it to aggregate airline prices in real time. (Kayak also uses the technology and you can try it out yourself by going to matrix.itasoftware.com.) Its Hotel Finder platform arrived at around the same time but search results are now displayed directly within Google Search and Google Maps.

For the consumer, the ease of using Google’s own travel search platforms is tempting – the results and prices are so prominently displayed, and link through to airlines and hotels directly (OTAs on the other hand let customers pay within their own platforms). That is, however, unless you are logged into Google and have uploaded your credit card details to Google Wallet, in which case it’s possible to complete the booking on Google itself, which is even simpler.

Although Google hasn’t quite got to the point where it is offering the same user experience as OTAs (in terms of booking entire trips – with car rental, flights and hotels all bundled up), it isn’t far behind. This is worrying for the likes of Expedia, which also owns OTAs Travelocity and Orbitz; Priceline, which owns Booking.com; and Opodo and eDreams (part of Odigeo). For them, the concern is that not only are they spending millions of dollars every year on Google AdWord services (Skift estimates that 12 per cent of its revenue comes from travel spend) but at the same time, Google is developing ways of competing with them. The tech giant seems to want to both profit from them
– and beat them at their own game.

This, however, is something Google denies. Richard Holden, vice-president of product management for the company, says: “Google has no intention of becoming an OTA. Our OTA partners are better positioned to offer customer service and support, and we do not want to supplant their customer relationships. Our goal is two-part: one, help consumers by streamlining the travel planning and booking process, and two, provide our partners with cost-effective, highly qualified leads.”

Hotels and airlines are also competing with OTAs for direct bookings, which saves them paying commission. If customers have come via Google AdWords or Hotel Ads, it will also cost the hotel or airline,
but it may be be a cheaper and more effective alternative (WSJ says Google charges a 10-15 per cent commission on net revenues from reservations booked through its own travel metasearch.)

The newspaper article said: “The problem is that Google is working with hotels to stifle competition. They also know that travellers searching for ‘Houston Hilton’ are more likely to book a room at a Hilton than those who query ‘hotels in Houston’. Several hotels have inserted terms in their global agreements with large OTAs that prohibit the agencies from bidding on key word ads that include their brands or trademarks.”

According to Alexa Internet, the biggest website in the world according to web traffic is google.com, followed by YouTube (which Google also owns) and Facebook, which has more than two billion active users. Last year, the social network demonstrated its interest in venturing into the travel booking sphere with the launch of its City Guides app feature that allows members to reserve hotels and restaurants with “Book Now” buttons that link through to individual property websites. You only have to type “Hotels Las Vegas” for example in Facebook’s search window and “Book Now” buttons appear on the business pages of hotel Facebook profiles. Users can also send the property a message through Messenger.

Robert McNamara, eDreams Odigeo’s head of UK and group external affairs, told ABTA Magazine: “Mobile and omnichannel integration has undoubtedly been one of the biggest disruptors to the sector. In our 2017 financial year, we saw a 35 per cent  growth in year-on-year in mobile bookings, representing 30 per cent of total flight bookings. We are beginning to see several tech giants taking advantage of this trend by integrating travel booking into their own mobile platforms.

“At the same time, we continue to benefit from our relationships with the biggest tech platforms. Search engines and other online platforms are a crucial source of customers to our sites. While in some cases, the distinction between partners and competitors might be blurring, we believe the distinction between our competitors’ value proposition and our own is clear: OTAs are still the best placed to deliver the full customer journey for travel bookings.”

Facebook’s move may have inspired ripples of concern throughout the travel industry but with so much bad news around member data being harvested and sold (Cambridge Analytica is at the centre of the most recent scandal), users may be more cautious about using its travel booking add-ons. For OTAs with household names, having the edge on Facebook in terms of trust could prove profitable in the long run.

In terms of Google, it seems sensible that it maintain the position it currently holds and keep everyone happy, rather than start competing with OTAs head-on who could withdraw their ad spend. (According to ehotelier.com, OTAs spent an average of £47,450 per day on Google AdWords in 2016.)

Google’s Holden says: “Our focus is to make it easier for people to be fully informed about their travel choices and help our partners improve the travel experience. It’s important to us that our partners own the consumer relationship and are able to grow their business. For example, with the growth of Google Flights, clicks through to our partners have more than tripled this year. We want to continue to work with travel partners to showcase the best of their services right when people need them the most. We also want to use machine learning to provide
a relevant and personalised experience to users.”