Advertising such as bidding programs can be a higher margin business than transactions for online travel agencies. It looks like Expedia, at least, wants to get involved in that bidding revenue that Google and metasearch players have generated for years.
The American Hotel & Lodging Association believes that Expedia’s new hotel Accelerator program, which enables hotels to place bids to get higher placement in Expedia search results, is misleading and harmful to consumers.
Expedia Inc. CFO Mark Okerstrom discussed the program in a Skift interview February 10, and CEO Dara Khosrowshahi talked about it during the company’s earnings call and on CNBC the next day.
Earlier, in December at Expedia’s Partners Conference, the company presented a demo about the Accelerator program, explaining that it is a new tool being rolled out that gives hoteliers another way to move their listings higher in Expedia’s search results. Hotels can already advertise their way up the sort order through “Promotions,” a spokesperson says.
“This program will severely jeopardize consumer choice in the hotel booking process,” said Maryam Cope, AH&LA’s vice president of government affairs. “Clearly this is a pay to play program that fixes results consumers see so they are none the wiser. Biased or misleading search results from these sites or via Web searches can be highly problematic, particularly on those booking websites that purport to be ‘helping’ consumers comparison-shop based off of less than objective information.”
Algorithms Are Never Transparent
Online travel agencies have always been obtuse about how their sort order is determined and it likely varies from OTA to OTA. Factors include the amount of commission, allotments, rates, preferred relationships, property descriptions, photos and reviews, for example.
The American Hotel & Lodging Association, the leading hotel trade group in the U.S., has been a staunch opponent of online travel agencies, their affiliates and online travel agency consolidation, including Expedia’s acquisition of Orbitz.
“AH&LA cautions consumers to be skeptical of rankings offered through online travel company websites that don’t offer proper disclosures about criteria used, which might not be objective, or of extra fees and services that might not be immediately apparent,” Cope said.
“In contrast, the hotel industry prides itself on offering consumers ample choice, both in their booking experience and how they book that hotel stay,” Cope said. “No matter where guests stay, it’s always safest and best to book directly with the hotel. That helps ensure consumers get what they want, need, and asked for, and often, allows them to get the better value.”
Hotels, of course, likewise don’t provide information to consumers about how they display properties on their sites although there is probably less complexity to it than for online travel agency sites, where multiple hotel companies are competing against one another for shelf space.
Expedia rejects AH&LA’s criticisms, arguing that the quality of the hotel offer has an overriding impact on sort order and that hotels can’t merely bid their way to the top of results.
“Customers want to see hotels that meet their needs from the start,” says Expedia Inc. spokesperson Sarah Waffle Gavin. “Expedia offers a one-stop shop to search for and book various hotels based on rate, availability and service for the dates and location travelers are interested in. Our results are customized to show listings we predict will best meet the needs of our shoppers, and every search comes equipped with various filters to adjust content even further for things like amenities, neighborhood, or VIP status, to name a few.
“Overwhelmingly, we hear from suppliers that they care deeply about sort placement,” Waffle Gavin said. “Particularly in competitive markets, a small bump in sort position can have a big impact on a hotelier’s conversion. At Expedia, we’ve refined our algorithms over the last 20 years to prioritize sort by Offer Strength, Quality Score, and compensation. This combination has provided the greatest customer satisfaction, demonstrated by bookings. What’s more, by building a marketplace where the hotels with the best deals and positive hotel reviews are at the top, we generate the highest returns for our supplier community.
“Accelerator enables hotels to adjust compensation for the days they need more visibility and bookings, the goal is to get a boost in our marketplace relative to other hotels with similar Offer Strength and Quality Score ratings. This is just one of many levers a hotel can apply to increase its visibility to travelers. There’s no way a hotel will gain the best spot in the Expedia marketplace if its Offer Strength and Quality Score are low, no matter how much compensation it’s willing to pay – i.e. you can’t buy your way to the top.”
Skift reached out to several hotel chains and independents, including Hilton Worldwide, to find out their views on the new Expedia bidding program, and none decided to comment.
Booking.com Preferred Hotel Program
Expedia isn’t the only online travel agency to give hotels a means to get their listings higher on online travel agency pages.
Booking.com, for example, has a Preferred Program that enables hotels to rank the highest in its pages for specific destinations. It involves allotments, performance criteria and paying around 2 percent more than the negotiated commission through the booking site’s extranet.
Unlike Expedia’s program, hoteliers participating in Booking.com’s Preferred Program do not bid but pay a flat fee.
Booking.com emphasizes the performance criteria are critical and claims that a hotel can’t buy its way to the top position in search results. Booking.com states it wouldn’t let a subpar-performing property pay its way up the display ladder.
“Participating in the Preferred Program means that the hotel will be ranked above all other hotels in the search results for a certain destination,” Booking.com states in an online FAQ. “Those hotels have to give a contracted minimum allotment throughout the year and need to meet our performance criteria. Preferred hotels receive the special logo ‘Preferred Hotel Partner’ on our website.”
The Park Plaza Victoria Amsterdam, which was the highest in the display, and the Radisson Blu Hotel, Amsterdam below it, featured Preferred Property Program logos on Booking.com yesterday for an Amsterdam hotel stay on February 23, for example.
Mousing over the logo, Booking.com advises the traveler: “This property has agreed to be part of our Preferred Property Program, which groups together properties that stand out because of their excellent service and quality/price ratio with competitive prices. Participation in the program requires meeting a specific set of criteria and takes feedback from previous guests into account.”
Priceline Group CEO Addresses the Issue
Asked about the Preferred Property Program during the Priceline Group’s fourth quarter earnings call February 17, CEO Darren Huston said “like any auction you site you have to be careful with the dial” and the company can’t “crap up the site” by placing hotels high in the sort order if they don’t offer consumers value.
Huston said the primary driver in Booking.com’s sort order is conversion and consumer interest. Booking.com can’t put undue emphasis on monetization if travelers don’t want to book the property.
He explained that Booking.com’s Preferred Property Program enables hotels to pay a higher commission to move higher in results and there is also an “override” feature that enables some hotels to pay “a slightly higher commission” to move even higher but Booking.com never lets them move from the bottom to the top of results.
Online travel agency displays already can be pay-to play venues and with the launch of Expedia’s Accelerator program, they are likely to become more so in the future.
Advertising such as bidding plans can be a higher margin business than transactions for online travel agencies. It looks like Expedia, at least, wants to get involved in that bidding revenue that Google and metasearch players have generated for years.
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