Competition Among OTAs, Search Players Leaves Hotels with Options

Google has appeared more aggressive in the travel space lately, inserting itself into the competition between hotels and online travel agencies for primacy among consumers searching for a room. The search engine was a dominant topic of conversation among OTA executives at last month’s Phocuswright Conference.

The contest between Google and OTAs might intensify further in the future, depending on whether Google wants to become a full-fledged OTA. However, for hotels the underlying dynamics of distribution have not changed all that much.

Hoteliers still are best served trying to drive more customers to book directly with them. That’s been the theme of major advertising campaigns from Marriott, Hilton, Hyatt and others in 2016. Direct bookings generally have more favorable costs of acquisition and thus better profit margins, but no hotel can get 100 percent of its rooms filled through its call center and website directly.

For every hotel’s significant portion of business that comes indirectly, the property must choose where it makes sense to partner with an OTA, a search player like Google, or metasearch brands like Trivago or TripAdvisor. With Google and, to a lesser extent, Facebook emerging as new forces in hotel distribution, owners and brands will have more options among companies that are simultaneously collaborating and competing with one another to add value to the services they provide to travelers.

Google is making a push to sign up more partners for its Hotel Ads service, and given the recent stats Google has shared about its gains in search traffic, lodging companies and hotel owners might be wise to investigate it. According to Google, 58 percent of leisure travelers and 68 percent of business travelers begin their travel bookings with an online search every time. Hotel-related searches on Google increased 25 percent year-over-year in July 2016, compared with the same month a year earlier.

Of course, increased cooperation between hotels and OTAs could cut out even a middleman so ubiquitous as Google, if consumers have fewer reasons to leave one portal where they’re seeing the breadth of the OTAs’ offerings and specific brands’ loyalty rates or package deals.

Expedia’s highly publicized deal to be a white-label solution for Marriott Vacations is “just the start for us,” chief executive Dara Khosrowshahi said during the Phocuswright Conference in November. The OTA is monetizing its core technology stack by giving one piece of Marriott’s business access to it, and the arrangement would benefit both companies mutually, he said.

“To the extent that Expedia is improving, Marriott Vacations is improving as well,” Khosrowshahi said, “and they’ve seen very solid double-digit growth as a result of it. And we will be able to essentially open up our technology stack more and more to a number of partners on a global basis.”

During the same Phocuswright presentation, he characterized Google as worthwhile partner for Expedia, even as the search company continues to innovate new travel offerings that might siphon traffic from Expedia’s platform.

“Google keeps building different ways for us to interact with them, and we engage with them in a very constructive manner,” Khosrowshahi said. “We haven’t found any channels on Google where we can’t bid and we can’t be a significant share player.”

But rather than be too dependent on Google for referral traffic, Expedia also is looking to partner more with Facebook.

Expedia’s chief financial officer, Mark Okerstrom, remarked at a November investor conference that the OTA had spent little of its $2.7 billion marketing budget up to now with Facebook. But the two companies hope to develop more meaningful platforms together, he said. They’re currently working together on chat bots to serve travel bookers.

“We’ve got lots of marketing dollars to spend,” Okerstrom said, “and we’re looking for big channels that are growing quickly.”

The upshot for hotels in this relatively balanced three-way competition is they still have much of their distribution under their control. Beyond maximizing their occupancy coming from direct bookings, they can take advantage of whichever OTAs and metasearch players offer the most favorable commission structure for the most incremental guests.

The competitor of your competitor can make your ideal partner.