Priceline’s CEO questions long-term viability of online hotel booking startups
As one of Google AdWords’ best customers, of course Priceline knows what it’s talking about when it cautions potential competitors about the limited effectiveness of SEO, SEM, or any other search- or advertising-dependent ways travel booking sites get their traffic
Skift recently took a look at Room 77′s differentiation and the growing ranks of HotelTonight’s competitors, and Priceline CEO Jeffery Boyd separately chimed in on the issue yesterday during a presentation at the Goldman Sachs Lodging, Gaming, Restaurant and Leisure Conference at New York City University.
Boyd fielded a question about his take on the slew of travel startups, including Hotel Tonight, Room 77, and Hipmunk, and his answer focused on HotelTonight and Room 77.
In essence, Boyd argued that despite their original visions, both Hotel Tonight and Room77 are turning into hotel metasearch companies, and they might not be unique enough to justify the “substantial investment” that would be required to compete with larger metasearch businesses such as Priceline’s Kayak and Expedia-controlled Trivago.
“There is a lot of metasearch out there,” Boyd said. “To me, that is the question about those businesses [HotelTonight and Room 77].”
Boyd said HotelTonight and Room 77 are “very small right now,” and the only way they will make it is through substantial investment, with the implication being that it would take a lot more funding than the roughly $35 million and $43.8 million, respectively, that HotelTonight and Room 77 have raised.
HotelTonight, founded in 2010, launched with a “good idea,” but “everyone” in the space [including Priceline] has replicated its same-day hotel-booking product, Boyd said.
On the other hand, Room 77′s initial vision when it debuted in 2011 of enabling guests to book specific hotel rooms turned out to be “not such an important idea,” Boyd said.
Boyd said both Room 77 and HotelTonight in the interim have been “backing into” the hotel-metasearch model, which might not be different enough from competitors to attract the substantial investment that would be required for them to build viable businesses over the long term.
Room 77 clearly pivoted into hotel metasearch about a year ago, but Boyd’s statement that HotelTonight is doing likewise is a more curious categorization since so far it is sticking with its initial idea of curating a handful of hotels in each city, and offering them up for reservations the same evening.
Au contraire, HotelTonight says
Drew Patterson, Room 77 CEO, said he couldn’t respond directly to Boyd’s comments because he hadn’t heard them and didn’t know the context.
“But in our view, hotel search engines have a long way to go to satisfy the traveler’s needs for comprehensive, relevant results on a desktop, tablet, or phone, Patterson said. ”Hotmail and Yahoo Mail were well established before Gmail; Internet Explorer and Firefox dominated browsers before Chrome. Time and again, an obsession with product innovation and user experience have resulted in valuable franchises and global brands; that’s the journey we’re on.”
And, HotelTonight co-founder and CEO Sam Shank told Skift:
“HotelTonight is on pace to grow 300% this year, despite all the major online travel agencies attempting to copy the original idea. The OTAs need to offer something for everyone, from flights to cruises, making it impossible to match the simplicity and focus of the HotelTonight experience, both for consumers and for hotels. As a result, HotelTonight remains the first place both groups think of for same-day rooms. Same-day rooms is a big space — $90 billion at last count — so we’re pretty content to be the best at it.”
Shank added that HotelTonight is not heading toward hotel metasearch as it enters into direct relationships with hotels and has no intention of abandoning that practice. Kayak, Trivago and other metasearch companies typically forge relationships with online travel agencies as one means of getting access to hundreds or thousands of hotels rather than focusing exclusively on direct relationships.
Somewhat ironically, Shank is an investor in, and advisor to, Room 77. And, Room 77 founder Brad Gerstner is a HotelTonight investor and board member.
In other news, Boyd was bullish about the partnership of two Priceline companies — Booking.com and Agoda — with China’s Ctrip as a means of attracting business from the growing ranks of Chinese international travelers.
Boyd noted that Ctrip’s business model, with most bookings taking place on the phone even if the initial research was performed on the Web, is highly different than Priceline’s, but very effective, nonetheless.
“We like those guys a lot and we are very excited to be doing business with them,” Boyd said.
Priceline recently acquired Kayak for $1.8 billion. If Priceline ever had interest in acquiring Ctrip, it would be a much larger acquisition as its current market cap is nearly $4 billion.
SEO will be challenged
Boyd also issued a cautionary note directed at travel and other businesses that rely on search engine optimization for growth.
Boyd indicated that Google Flight Search and Google Hotel Finder aren’t especially worrisome to Priceline at this stage as Google Hotel Finder has proven effective for Priceline’s advertising efforts.
However, Boyd said businesses that rely on SEO, and not paid search, are the ones that are most at-risk from Google’s push to develop vertical businesses.