At Google, the product side in travel is gaining an upper hand over its traditional advertising business.
What this means is that the trajectory of Google’s own travel offerings beyond the search box — in Google Hotels, Flights, Maps, Trips, and Home, to name a few — highlights the fact that the product folks are winning out over the ad sales team.
Not that anything is so cut and dried at Google. Google Hotels and Google Flights are still, by and large, advertising-driven businesses, but they may be gaining an edge within Google in comparison to its traditional search business.
Rob Torres, Google’s managing director of travel, has said that advertisements in Google Hotels, the company’s metasearch product, convert at a higher rate than those generated in a conventional Google search. The hotel product has dates and rates, and consumers selecting an advertisement with those details are closer to making a buying decision than those who are just starting a search with “hotels in New York.”
In addition, a Google promo for Hotel Ads quotes Ted Schweitzer, La Quinta’s senior vice president of marketing and e-commerce, as saying that Hotel Ads convert at twice the rate of “what we see on regular mobile traffic.”
So this megatrend makes for an interesting twist on the Google dilemma: Will it be more aggressive in building its own travel products, and could that come at the expense of its massive Google AdWords business? In its drive to provide consumers with better answers to queries, Google indeed seems to be tilting toward the product side and is adapting AdWords to meet the challenge.
Google will have a breakout year in its travel products in 2018 as it builds on its behind-the-scenes technology acumen and focuses anew on user experience.
But Google’s strides on the product side don’t mean it won’t face difficulties and a huge regulatory challenge. The European Union fined Google $2.7 billion for favoring its own shopping products over those of its rivals in 2017. Although the regulatory slap didn’t directly impact products such as Google Flights and Google Hotels, these travel businesses are likely next on the agenda in the EU’s antitrust review.
At the same time, Priceline Group CEO Glenn Fogel announced that his company would be reviewing — presumably reducing growth in — its advertising spend with companies that compete or help others compete against it. Most of the headlines have been about Priceline and its Booking.com unit consequently reducing spending in Expedia’s Trivago hotel-search business. TripAdvisor, too, is undoubtedly feeling Priceline’s sudden marketing miserliness.
But Google, including Google Hotels, is likely a huge focus of Fogel’s review as Priceline tilts toward TV/brand advertising to enhance its direct relationships with its customers.
That being said, 2018 likely will be a big expansion year for Google in travel. After several years of product experimentation, Google has relaunched Google Hotels on mobile and may be leaning toward making it once again a standalone destination instead of embedding it in Google Search. Google also has recrafted its hotel technology stack to provide faster responses to consumer queries and offer more relevant results.
Meanwhile, Google transitioned Google Flights, which had a somewhat utilitarian look and feel, into a more consumer-friendly redesign that may owe some inspiration to Kayak.
By all accounts, including a Phocuswright-Jumpshot study, Google Flights several years ago surpassed flight search leader Kayak in traffic. Google Hotels hasn’t yet matched TripAdvisor’s audience, according to the study, largely because of the site’s substantial lead in hotel reviews. But TripAdvisor is floundering as a hotel-transaction site, and Google will likely make further traffic gains with its improved user interface.
TripAdvisor CEO Stephen Kaufer acknowledged at a Liberty TripAdvisor Holdings investor day that Google is likely picking up share from TripAdvisor. Meanwhile, in a brief statement about TripAdvisor in a third-quarter earnings call in November that received scant attention, Liberty TripAdvisor Holdings CEO Greg Maffei said: “TripAdvisor certainly experienced a tough quarter for online travel in general and TripAdvisor in particular, with headwinds from Google and mobile.” Liberty TripAdvisor exerts voting control over TripAdvisor and Maffei doubles as TripAdvisor chairman.
A TripAdvisor spokesman said Maffei’s comments were meant to summarize trends that have been in play in recent years and weren’t intended to pinpoint drivers of TripAdvisor’s performance in the third quarter.
In addition to Google expanding its flight and hotel products, it is separately experimenting in Europe with offers of both vacation packages and vacation rentals, the latter being a bow to the sharing economy gains of Airbnb and a host of other homesharing businesses.
As a harbinger of Google’s potential to get more aggressive in its growth plans, Google may be feeling less constrained in the U.S. because its five-year antitrust agreement with the Department of Justice over Google’s purchase of flight fare and shopping engine ITA Software ran its course. Google marked the occasion by ending its offerings of ITA flight-search technology, called QPX, to small businesses. The move hasn’t seemed to impact Google’s portfolio of large customers, particularly major airlines.
One thing that at first glance could be standing in Google’s way is the move by the Priceline Group to reassess its spending in third-party channels — presumably including Google Hotels. But even if Priceline decided to diminish its spending in Google Hotels, the search giant would be big enough to take the hit even though Priceline is Google’s largest travel advertiser.
Looming regulatory constraints, particularly in Europe, would likely be more impactful if anything is to get in the way of Google’s growth trajectory in travel.