Skift Take

Google wants consumers to buy more travel on it. That may prompt industry players to closely patrol the gray line between the search giant referring more customers to them and Google becoming customers' first choice for booking trips.

Google has been rolling out changes to its hotel search on mobile and desktop platforms as part of a broader, year-long realignment of its travel strategy.

And as the company steps up its efforts in travel-product development, we expect Google to further ramp up Google Hotels from both consumer-facing and tech-stack perspectives in a way that has parallels to what it has recently done with Google Flights.

Not everyone is happy with Google parent Alphabet Inc.’s more assertive effort to move from being a research tool to becoming even more of a booking venue.

“This is clearly a situation where Google is sucking a lot of profitability out of the travel space, not just for us, but for, frankly, for all the online travel agencies and other online players,” said Greg Maffei, CEO of Liberty TripAdvisor Holdings, during an investor day presentation mid-month. Maffei’s holding company owns a controlling stake in TripAdvisor, where he serves as chairman.

Google announced a series of design changes in hotel metasearch, or comparison shopping, and most of the tweaks were for mobile users. In early November, the company said it rolled out a new front-end experience in five countries, or about 1 percent of its global users. It has not yet offered the service to U.S. mobile users.

Google’s changes this year flow from what some have claimed is a long-term trend in it de-emphasizing organic search for hotels while promoting its metasearch engine, instant booking, and Hotel Ads, which display rates and drive users to online booking engines.

A Google spokesperson said, “We are absolutely not de-emphasizing organic search. With hotel search, it’s our goal to help users get the information they need about hotels as quickly and easily as possible.”

“The vast majority of clicks within the hotel search unit are free,” adds the spokesperson. “For example, a click to see photos of amenities, a click to see directions, a click on the phone number, or a click on the hotel website itself. And we believe that this organic information is beneficial for both users and advertisers: users have the information they need to make a more informed decision, and hotel advertisers get a more qualified lead, which is likely to lead to increased bookings.”

What follows are highlights of design tweaks and broader changes at Google Hotels over the past several months.

Instantly Book Room Types

In the mobile version now appearing in the U.S. and showing up in some other markets since September, Google has added a “room finder.” This is a carousel of images of specific room types at any significant property.

In the past, the company merely displayed generic lowest rates without specifying visually the type of room being offered.

A search for rooms at the Ritz Carlton in Dallas showed an image of the “deluxe” room at the entry-level $399 rate next to the “standard room” with a king bed that’s $30 more.

By clicking “Book Now,” a consumer could reserve either room. In some cases, such as with the Ritz in Dallas, the consumer completes the transaction while remaining within the Google interface, in a so-called “instant booking” scenario.

In a plus for hoteliers, the hotelier is only charged only when a traveler clicks to book a room, which they can do through Book on Google – which is a Google-hosted page that allows the advertiser to completely own the transaction and customer data.

For a majority of other listings, Google refers consumers elsewhere to complete the transaction.

Instant Booking for Independents

Online travel agencies and global hotel chains have used Google’s instant booking feature for four years, paying Google finder’s fees for brokering the sales.

But independent hotels have begun to try it, too. In October 2017, one of Google’s distribution software specialists for hotel integrations, Peakwork, did the technical work that made it possible for independent hotels and small chains to seek instant bookings via Google, starting with customers of a third-party tech service Mirai.

Google restricts the service to the U.S. and the UK for now. But it will add more markets.

To be more appealing to hotels, two years ago it began offering a commission-based model that’s like what online travel agencies use, rather than a cost-per-click model as it had used in the past. That remains “a very small part” of Google’s revenue according to statements a company executive made earlier this year, but it could add to its appeal for hoteliers.

Google’s interest in instant booking stands in contrast to how TripAdvisor’s instant booking push may have backfired on it, while Trivago’s, Kayak’s, and Skyscanner’s attempts haven’t taken the world by storm.

Loyalty Rates Pop Up

Much fuss was made a year ago when Expedia began to let a first hotel chain, Red Lion, prompt users to sign up for the chain’s loyalty program to get the best offer. Earlier this year, Priceline Group said that its brands might make a similar move.

This year Google gave a metasearch twist on the concept.

Running a search today for hotels in Rotterdam, the Netherlands, Google fetched identical rates for the Hotel Novotel Rotterdam Brainpark from all its partners. But Google also noted that the room would be “5 to 10 percent” cheaper if the consumer clicked the link, signed in to the AccorHotels’ membership program Le Club, and booked directly.

Mobile-Only Rates Get Called Out

In a Google mobile search for a hotel stay in Chicago in February, Google returned results for several properties including Hotel Versey. Clicking on the hotel listing offered sample rates from several sources, including one from TripAdvisor that, according to a call out from Google, is “19 percent off” the desktop rate offered on TripAdvisor “because you are on a mobile device.”

Google recently gave advertisers the ability to display a targeted message to consumers regardless of where they appear in the search order — a perk previously reserved for winning bidders on the top placement.

A Tilt From AdWords to Metasearch

Some have wondered: As hotel metasearch becomes more prominent in Google, is the company cannibalizing its traditional ad revenue from Priceline Group and Expedia Inc.?

In May, when asked if hotel metasearch is profitable enough to grow, Google’s managing director of travel, Rob Torres, said: “It’s definitely profitable enough. It converts at a much higher rate than when a normal AdWord is shown on the page.”

“Part of that is the inclusion of the rates with dates that provide a more robust experience,” said Torres, speaking at Phocuswright India 2017. “We don’t see a lot of cannibalization.”

The profitability of hotel metasearch explains Google’s renewed push with it. Before, the company had been cautious. It worried it might accidentally scare away all the money Priceline Group and Expedia spent on it for ideal paid placement for text-based ads or app-install ads.

As Skift Research calculated in September, “Google’s travel business could be worth as much as $100 billion — and that would make it larger than Priceline with its $86 billion market cap.”

Google’s rate-based ad units may be popular with some, though. At Skift Forum Europe, Oliver Heckmann, Google’s vice president, travel and shopping, said that the hotel ads that drive its metasearch product are showing “high momentum now in Europe.”

Striving for an Agency-Like Design

Overall, the biggest conceptual shift is in the company making its hotel booking flow on desktop and mobile in the past half year is to provide a look and feel that is more like the online travel agency experience.

Up until now, the search giant has thought that it would be less jarring for users if their hotel search felt the same as Google searches for other products and services.

But now the company is switching its design philosophy to offer the best experience for the complexities of hotels as a product, which often means mimicking the user experience employed by online travel companies.

A case in point: In the past week, any mobile users in the U.S. have begun to see a sliding scale for the range of rates one is willing to consider. While the slider has been a side feature at Google and other agency sites for years, it is now being given prominence at the top of the mobile search interface.

In 2017, Google decided to “completely rewrite” its “hotel front-end technology stack,” said Heckmann at the Phocuswright Conference. Its objectives were to speed up the product’s response time and become able to react based on more contextual clues about the consumer’s behavior.

Since August, Google has been adding to its mobile search a nightly rate in the calendar view that makes it easier to find off-peak nights and see pricing trends. The option builds on the company’s rollout worldwide on mobile and desktop of blue-colored labels for offers it chooses to call “deals.”

Trying to Dislodge TripAdvisor Reviews?

Google’s redesigned mobile experience for hotel search incorporates and standardizes several experiments in how it displays hotel reviews that it has been testing since May. Google works to make reviews more readable on the tiny-format of a mobile screen in a few ways, such as with a carousel of called-out reviews from third-parties like Expedia and hotel chain websites.

Users can also click for more details to filter reviews by relevant categories, clicking on the image of a family to see reviews written by and for people traveling with kids.

Google has annoyed TripAdvisor for years when it comes to user reviews as it has increasingly given a prominence to its own user reviews. In its display, Google-solicited reviews get premium placement on individual hotel listings. Clicking on a listing within its mobile search offers an option to check reviews that promote Google-solicited reviews first.

To be sure, Google aggregates reviews from multiple sources in a standardized way without disfavoring TripAdvisor’s over the others.

With Google compiling its own reviews and aggregating reviews from others who have done verified purchases, does TripAdvisor risk seeing diminished traffic?

No, said TripAdvisor CEO Steve Kaufer at Liberty Media Investor Day earlier this year.

Google is undoubtedly taking some share from online travel companies, said Kaufer, but the trend is a manageable one. “Google continues to try to get into the travel game, and they have been able to siphon away traffic from everyone else in the free space,” Kaufer said. “So yes, a challenge, but wait a minute, we already have plenty of traffic to be able to monetize.”

Kaufer said that TripAdvisor has 455 million unique monthly visitors on its platform  — an audience that’s growing at a double-digit rate. He added, “So in essence, we don’t need to use paid Google to get more shoppers. We have to do more with the shoppers already coming to our site.”

In fact, on TripAdvisor’s third-quarter earnings call, Google wasn’t mentioned as a competitive threat. The company instead said that lower cost-per-clicks in its auction were the main driver in softer third-quarter click-based performance.

But that dynamic also gives the company less to invest in performance-based channels, primarily Google, which may exacerbate Google’s potential share-taking. In other words, TripAdvisor might be growing faster if Google weren’t as assertive — a possibility that may affect all online travel players.

Will Hotels Bite?

All of the above changes are a reminder of the Mountain View company’s potential in hotel search.

Independent hotels have not rushed into Google metasearch. That inventory gap limits the breadth of its selection — a key drawback for consumers.

In turn, hotels may be wary about joining Google’s move to metasearch.

If customers that come through Google metasearch to a hotel for a booking would have come directly anyway by seeing the traditional text ads, then Google may be hurting hotel bottom line revenue by shifting consumers into a more expensive channel.

On the other hand, if Google is shifting share from online travel agencies to direct bookings, then it’s a plus for hotels. If the search giant also offers more direct customer information than other companies do, that’s another plus for hotels looking for help in reducing the share that the online travel conglomerates have over distribution.

Google shares with hotels lots of data about consumer buying patterns that online travel agencies hide from hotels and that hoteliers can use to help drive more direct bookings by improving demand forecasting, rate-setting, and booking flow optimization on their own websites.

Online Travel Players Remain Unfazed

In early 2018, the company is moving Hotel Ads into AdWords — a move that is unrelated to the improvements in hotel search.

One wonders: Might Expedia and Priceline someday adjust their view of Google — similar to the way Amazon and eBay, around 2012, unofficially reduced their spending on Google AdWords rather than compete against each other. The informal mutual disarmament agreement in the search marketing wars enabled the companies to stop feeding Google as a new rival and appears to have let them turn to other methods of generating demand and improving monetization of existing demand.

In fact, Priceline Group CEO Glenn Fogel recently explained that the company is rethinking digital advertising and will tilt toward TV commercials.

Expedia-backed hotel search site Trivago’s executives probably hope that Priceline rethinks its pullback on spending on their metasearch channels. It may try to position itself as a proxy army in the battle against Google’s incursion into stealing customers who are primed to book, pitting its vertical metasearch against Google’s.

Trivago faces competition from Google metasearch more directly than the online travel agencies. Speaking earlier this month at the Morgan Stanley TMT Conference, the CFO of Trivago Axel Hefer said that his company could stay ahead of Google by offering more relevant, nuanced, and personalized results.

“[I can say in Google that] I want to have 5-star hotel and I want to have gym and I want to have whatever, but the search is still pretty binary,” said Hefer. “It doesn’t say, okay, actually, a good gym is actually better than a bad gym…. It is too much black and white, in a way, in the selection process.”

Expedia CEO Mark D. Okerstrom, speaking to investors at the RBC Capital Markets conference earlier this month, responded to concerns that pressure by players like Google could hurt its business.

Okerstrom acknowledged, “What we have seen over time is that, between traditional paid search, like searching on ‘New York hotels’ and getting links, versus metasearch, this particular hotel at this price on these days, we’ve seen a channel shift.”

He added, “Generally, metasearch is a channel where the repeat rates are generally lower, and returns-on-investment [ROI} can also be lower than if you’re very effective in traditional destination-linked Google searches [like we are]. So as we see that mix shift in the industry generally, there could be pressure on ROIs. But we haven’t seen big changes.”

Earlier this month at the RBC Capital Markets conference, Priceline Group CFO Daniel Finnegan said that Google would remain his company’s biggest performance marketing channel because it is not competing with it for its customers.

“That’s a positive difference between Google and some of the other channels,” said Finnegan. “We’re still fully participating in Google, although we have looked to improve ROIs on the margin there as well.”

But executives evaluate the situation regularly. When asked whether he has seen either Google, Facebook, or Amazon “do anything that’s negatively impacted your platform,” Fogel of Priceline said: “I haven’t seen anything yet that has been severely detrimental, but I see the potential.”


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Tags: google, hotels, metasearch

Photo credit: Google is slowly rolling out changes worldwide to its hotel search. Skift

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