(webinar transcription) Metasearch and rising costs of guest acquisition

Here's the transcription of my speech about metasearch and rising costs of guest acquisition for the webinar organised by ReviewPro yesterday. 
You can download the webinar video and the full presentation on ReviewPro Site.


Today I am going to tell you a little more about metasearch sites and the rising cost of client acquisition.
As some of you may know, in WIHP we launched a metasearch-channel-manager in 2014 called Meta I/O and we’re studying results and collecting data since then.
Before we start talking about metasearch I would like to show you how the on-line search for hotels changed during the past 10 years.

vertical search

What you’re looking at now, is a screenshot from Google trend, a tool that shows how often a particular term is searched online when compared to global search volume.
This slide, in particular, is for the query “HOTELS IN PARIS”.
As you can see the volume dropped and is still dropping, but this doesn’t mean that users are not searching for hotels in Paris anymore, on the contrary, online bookings are increasing year after year.
It may sound like a paradox, and to understand it we need to compare this graph with another one.

vertical search simone puorto

In this case the terms used are TripAdvisor (in green), Trivago (in red), Kayak (in blu) and SkyScanner (in yellow), some of the most famous metasearch sites.
Do you see the difference?
The trend is going to the opposite direction, with a dramatic increase of search volume over the last decade.
So, how can we explain this phenomenon?
Travellers are shifting from classic search engines (like Google or Yahoo or Bing) to metasearch sites because they offer a better user experience.
Actually not only travellers: consider that 30% of product-search is made on Amazon and not Google! 
Travellers can easily compare rates and other features from multiple sources, cutting down the number of sites to visit and saving time.
Remember how it was to book a hotel online 10 years ago?
You had to type “hotel in whatever city” and then you had to open site by site, compare rates, check location, etc. It was very frustrating.
Now you have filter for almost anything on Booking.com: 
I want a hotel in the center of the city between 100 and 120 euro per night with free breakfast and free wi-fi that accept small dogs.
I have a list of these hotels in a few seconds. 10 years ago I needed hours if not days to collect all these info. 
This type of search in usually called “Vertical”.
Now, according to PhocusWright, 36% of leisure travellers use metasearch sites for travel shopping.But what is exactly a metasearch?
A Metasearch is a search engine that queries other search engines and show its own results.
We can think of metasearch as a “search engine for search engines” or, as I wrote on this slide, “Search Engine Squared”.
And, of course, in hospitality, metasearch sites aggregate travel-related channels: OTAs, airlines and, very very important, booking engines.
Yes, booking engines.
Because hotels can actually work directly with metasearch sites to drive direct bookings, by connecting their own booking engine to metasearch sites.
Anyway just a few hotels are doing it. 
Today, metasearch sites are dominated by OTAs and resellers.
So, OTAs dominate metasearch, but this a great opportunity for hotels to acquire guests directly.
Distance between hotels and their guests was never so little, and metasearch sites can really cut all the middle-men, who played a big role in the past.
Moreover, metasearch sites are based on a cost-per-click model.
And this model, as compared to the commission model of OTAs, represents an opportunity to decrease costs for client acquisition.
the risk of loosing control and overspending with metasearch advertising is high, and thought it’s a powerful tool, it has to be used carefully and with the due know-how.
There are many variables involved that can affect ROI: room inventory, price disparity, speed of the booking engine, speed of the provider, markets where you should or shouldn’t advertise, etc.
A web-agency with experience in the field can really help you maximising your return on investment and avoid overspending.
A weak strategy on metasearch can be truly disappointing.
Please remember that metasearch sites are NOT the holy grail of direct bookings, they are not good nor evil, they’re just tools, that you need to understand and use correctly.
And, of course, you need to have full control of room inventory, providing different stocks of room to your distribution channel and using OTAs for billboard effect.
Having full control of your distribution channels will avoid price dispersion too, with resellers publishing better rates on metasearch sites. 
I am sure a lot of the participants today have parity issues with Amoma.com or Olotels, or Otels, etc.
This is a common scenario, and it can drastically reduce ROI of your metasearch campaigns.
The question is easy: why should I book on the official site if it’s cheaper on a OTA?
Better rates on OTAs or resellers is the first reason of low ROI for metasearch.
Another important aspect:
A good metasearch strategy can help you diversifying your sales too and this is crucial, especially today.
Being stick with just one or two channels is risky.
You could give all your rooms in allotment to Booking.com and let him do all the sales.
It’s easy, but it’s a risky strategy.
It’s not rare that I meet hotels where Booking.com is doing 60% of their online revenue (and I speak of Booking.com because it’s big in Europe, but I have similar situations with Expedia in the US, for example), and with this BookingSuite project coming out, the situation could get even worse in 2015.
To diversify can be hard and it requires specific skills, but the alternative is to give all your distribution to one or two channels with all the risks involved.
Again, if you need help, ask professional agencies.
It’s our job to solve these kind of problems and, as Daniel Craig always says, hotels should focus on what they do best: "taking care of guests".
So, cost of acquisition.
It’s true: average cost of guest acquisition for hotels is very high, between 15 and 25%.
To see things in proportion: airlines cost is between 5 and 10%, and they are two very similar business.
If you look at this graph you’ll see how expenses for guest acquisition and guest retention are rising twice the rate of revenue growth.
A good website, SEO strategy, SEA, brand protection, metasearch, etc.
It’s full of costs, hidden or not. 
I know you miss the old days when you only needed a brochure, don’t you?
Jason Price from HEBS used to call this pre-web moment “romantic” in a article and it sounds pretty good!
Good news is that is the same for OTAs.
Last year Priceline spent. $1 billion and half on Google and it will probably spend more on 2015.
That’s more than twice what a “small” company like Apple spent…
So, today more than ever, you need to be only where it’s needed, not everywhere.
You simply cannot be everywhere anymore. Live with that.
Let OTAs buy secondary keywords on Google (like “hotel in Barcelona” or “Best Hotel in Paris”) and focus on brand protection and long tail keywords to target niche markets with higher ROI.
Look at this slide: a MICE organiser looking for a conference hotel with a SPA will more likely start the search on Google instead of Booking.com.
This is a battle you can win and a battle worth fighting.
Always focus on ROI when it comes to advertising, not on volume.
Another very effective type of advertising is retargeting.
You can use it to beat competitors and OTAs and to promote opaque rates or special offer.
I do it all the time for my clients: it’s way cheaper than secondary keywords ads and way more effective, because the ads are shown to users that already visited your site and manifested interest in your property. They just need a little push!
And of course, whatever strategy you have, you must closely monitor ROI for each campaign, each market, location, volume and conversion rate.
Remember that the market with the highest volume is NOT always the one that generates revenue!
I had a similar case just last month.
A client came to us because he was doing brand-protection with a very low ROI.
It’s on Mendoza, a fantastic place in Argentina.
Now, brand-protection is usually the campaign with the highest return on investment.
When I analysed what they were doing, it turned out that 80% of the clicks came from local users, but this hotel had no local guests at all!
Conversion for the campaign they were doing in Argentina was 0,02% but they were spending almost all the budget in that market.
I stopped the campaign in Argentina and reallocated that budget for other markets.
Result? Their ROI tripled in one month.
Bottom line is: you really need to know how to read the results of your campaigns, because, as a Martin Soler always says, “if you cannot track results, then it is not marketing, it’s just PR”.
Moreover some of these tools are free, like Google Analytics. Otherwise you can choose pro-tools provided by your web agency.
Ok, I think we covered it all.
I’d like give the word back to Daniel with this quote from Cinty Estis Green, co-founder of Kalibri Labs that is very close to my viewpoint.
To sum-up: you cannot and you should not be everywhere, but only where it counts in terms of ROI.
Test different strategies and ask for professional help when needed.
Thank you for you time.