Is Google sucking all the profitability out of the travel space?

“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.

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Google announced a series of design changes in hotel metasearch and most of the tweaks were for 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 “The vast majority of clicks within the hotel search unit are free. 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.”

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

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.

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.

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.

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. We don’t see a lot of cannibalization.”

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 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.

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.”

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 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.”

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

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.

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

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.”