travelweeklybusiness CONTINUED FROM BACK COVER
on Priceline and Expedia. These huge OTAs have been reliable customers for the search giant, but history teaches that eventually Google would decide it could do a better job. Google is pushing into OTA territory
with products such as Limited Offers linked to Google’s Hotel Finder service. Next will come a yet-to-be-branded ‘captive demand platform’, which will give Google’s hotelier customers the ability to upload lists of loyal, valuable customers into the Google engine and churn out special rates to them. Finally, this will be connected back to Google Wallet, allowing the search giant to control the whole process. This opens up several possibilities, not least the rise of opaque pricing based on personal information – a huge departure from the existing rate-parity agreements signed with OTAs. Key to this is the bait for hoteliers – they keep the customer lists and transactions, don’t see 15%- 25% of revenues taken as commission and can market aggressively to their own lists of customers.
Fighting back According to Evercore, the OTAs are not just going to lie down. Priceline, in particular, has been fighting back by buying specialist outfits such as Buteeq, HotelNinjas and Open Table. The game plan here is to build another leg to the business, allowing the OTAs to turn into white-label customer intelligence and servicing propositions for hoteliers. As these changes ripple through the industry we will see some profound changes, not least for the OTAs. These account for 20% of travel advertising spend while contributing 8% of global bookings. They simply charge too much,
with Evercore suggesting that Priceline and Expedia “charge hoteliers more than 20% of each booking on average”. This will force the OTAs to plump for one of three options: to be the biggest and offer the most comprehensive selection (the Expedia model); to look at white labelling and working with hoteliers to provide optimisation services (the Priceline approach); or to become the brand customers trust, and base product around search and knowledge via reviews (the TripAdvisor solution). What are the implications for the
rest of travel? We all want to cut the time spent online working out what to do next. Evercore cites a Google travel study that states “travellers spend an average 55 minutes to book a hotel and flight, visit 17 websites and click four search ads per travel search, with 90% conducting the booking process over multiple screens”. The point is that Google can retain
the traveller from search to book. Google already starts with an advantage.
Evercore notes that “22 billion hotel searches are performed on Google per month, with 58% of travellers (64% of business travellers) beginning their travel experience on Google”. My take on this is that major existing
travel businesses should give up thinking they can stop the Google juggernaut and instead back its fight against the OTAs and build their own platforms on top of the search giant’s architecture.
Game changer
What happens to the customer? The game changer is the degree to which phones and tablets become the main digital interface. These relatively constrained devices lend themselves to modern equivalents of a walled garden – for example, software-based architecture that keeps the customer within the world of Google via browsing in Chrome and paying through Wallet. In case you think this is pie in the sky, consider that “10%-20% of all online- booked occupancy is driven by Google properties”, according to Evercore. My sense is customers will happily live within closed gardens because prices for most will be driven down, not least by Google taking a chunk of OTA revenues. This downward pressure on prices will
Google: 22 billion hotel searches per month
have two nasty knock-on effects – more opaque pricing via personalised offers and a steady move towards online forms of social stratification. Power will sit in the hands of marketers with lists of wealthy travellers on the right loyalty card lists and with the right credit scores.
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travelweekly.co.uk — 18 September 2014
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