The fact that Google is leveraging its dominance as a search engine into taking market share away from travel competitors is no longer even debatable. Expedia and TripAdvisor officials seem almost depressed about the whole thing and resigned to its impact. Is there any more room on the couch?
In an unintended duet, the CEOs of TripAdvisor and Expedia Group separately talked this week about how Google’s increasing practice of directing search traffic towards its own travel businesses has adversely impacted their companies in the third quarter.
For its part, Expedia Group intends to push direct booking — it mentioned fledgling Instagram and Facebook influencer campaigns, as well as spending more on brand advertising — and bolster its loyalty programs. TripAdvisor plans cost-containment, to build hotel and media products that aren’t based on click-based revenue, and to ramp up personalization efforts.
In prepared remarks Wednesday night, TripAdvisor addressed the fact that the revenue in the largest part of its business, officially known as Hotels, Media & Platform, declined 12 percent year over year in the third quarter to $238 million.
“We believe our most significant challenge remains Google pushing its own hotel products in search results and siphoning off quality traffic that would otherwise find TripAdvisor via free links and generate high-margin revenue in our hotel click-based auction,” TripAdvisor stated.
In an earnings call with analysts on Thursday, TripAdvisor CEO Steve Kaufer expanded on the theme. Kaufer said TripAdvisor saw “incremental SEO (Search Engine Optimization, i.e. Google) headwinds over the course of the quarter.”
“And I think you’re seeing this across the industry as Google has gotten more aggressive,” he said, adding “we know that this SEO piece is an ongoing trend, and we’re not predicting that this is going to turn around.”
Despite upbeat news about a new TripAdvisor joint venture with Trip.com Group in China, TripAdvisor stated, “We are dissatisfied with our Q3 results, which are particularly frustrating because we entered 2019 with such great momentum built on strong profit growth, improving auction trends, and a return to sustained Hotel revenue growth seemingly well within our sights.”
Instead, revenue fell 7 percent to $428 million, and net income dropped 28 percent to $50 million when measured against the third quarter of 2018.
Although what TripAdvisor described as “softer than expected revenue trends” can’t all be attributed to Google, its adverse impact has been material to TripAdvisor’s financial results.
EXPEdia says Google Is More Active than ever
Across the country from Massachusetts, where TripAdvisor is based, Expedia Group CEO Mark Okerstrom in Bellevue, Washington, said Google is taking “more revenue per visitor, and I think it’s just the reality of where the world is in the Internet, and the importance of Google at the top of the funnel.”
Both Okerstrom and Kaufer complained that their organic, or free, links are ending up further down the page in Google search results as Google prioritizes its own travel businesses.
What’s Going On?
Over the last year, Google has been introducing more of its own travel businesses into search results, has been directing more traffic into its consolidated travel pages, and has been integrating more of its travel products into Google Maps.
For example, about a month ago Google introduced a stack of four vacation rental listings, including showing their nightly rates on a map, high up in search results pages above all organic results. Click on one of the listings, and users end up on Google’s travel pages.
Asked about Google’s impact on Expedia, Okerstrom told analysts Wednesday night during the company’s third quarter earnings call that Google is installing new modules into Google search results, and steering more consumers to Google Hotel Ads or Google Flights than it has historically done. He added that these moves resulted in a “traffic shift” for Expedia.
What this has done is force Expedia into putting more advertising dollars into higher-cost channels — presumably Google.
“And as we were prominently featured in the Google Hotel Ads product, of course, we were the recipient of that traffic,” Okerstrom said. “Again, (we’re) pretty pleased with the returns that we see in that channel, but (they are) not as good as they were in the place the traffic was coming from.”
In other words, Expedia has to spend more with Google, and its free links in search are not as effective as they were before.
In reaction to its disappointing quarter, TripAdvisor announced “a comprehensive cost structure evaluation,” a $100 million stock buyback plan, and a cash dividend of $3.50 per share.
TripAdvisor plans to prioritize business to business hotel services, and more media products that aren’t geared toward its click-based hotel auction. TripAdvisor Chief Financial Officer Ernst Teunissen said he expects continued negative growth in the company’s main hotel business in the fourth quarter, although the negative growth won’t be as severe.
Experiences and Dining
In one interesting twist, Kaufer said the company will reduce investment in its experiences and dining unit, where “we’ve invested quite heavily” in the last few years. He said the company will shift away from focusing on building supply toward leveraging the consumer demand that the business already has.
“I’d say with a firm lead, with excellent connectivity, with a rebuild tech stack in many different parts, we can say, excellent job team internally, and now we can work on the demand side, converting the demand that’s already on TRIP, that’s already on Viator, that’s already flowing through our third parties into finding the right product for the right individual,” Kaufer said.
In other news, TripAdvisor stated it is now mixing in short-term rentals with hotels “to better serve consumers’ evolving needs, and to drive conversion and improve monetization.”
While some companies traditionally kept their hotels and vacation rentals in separate buckets, the trend these days is to blend them together so consumers can see all their options in one place.
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Photo credit: TripAdvisor CEO Steve Kaufer (left) and Expedia Group CEO Mark Okerstrom separately pointed to Google as hurting their businesses' performance in the third quarter of 2019. TripAdvisor and Expedia