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Will Google take on hotel distribution?
January 31 2011

It’s enough to strike fear in the hearts of OTAs worldwide—if Google enters the hotel booking game, what will the resulting merchant landscape look like? Don’t worry about it too much because the scenario is not likely, according to industry experts.

Highlights
  • Google not likely to enter hotel bookings space, say industry players.
  • OTAs will have to respond to Google search changes.
  • Google wants to work with those who have the consumer data, not buy a company in the hotel space, according to Tim Unwin at Pegasus Solutions.

It’s enough to strike fear in the hearts of OTAs worldwide—if Google enters the hotel booking game, what will the resulting merchant landscape look like? Don’t worry about it too much because the scenario is not likely, according to industry experts.

Despite buzz surrounding Google’s pending acquisition of ITA Software, there are no signs that Google plans to become a hotel room retailer, according to industry participants. In fact, many think Google’s increased interest in travel-related search results could be a benefit, with an important exception being the online travel agencies.

To be clear, ITA processes flight information so the acquisition by Google in itself does not affect hotels directly. What is likely to happen, however, is OTAs will respond to the changes and that will in some way affect hotels, according to Tim Unwin, senior VP, product management for Pegasus Solutions. 

 

Henry Harteveldt, Forrester Research

 

Google will likely take the combined capabilities of ITA and its existing platforms to the hotel search and discovery process, according to Henry Harteveldt, VP & principal analyst, Airline & Travel Research, Forrester Research.

“Google wants to take advantage of ITA’s capabilities to understand (consumer search) intent,” he said.

For some location searches, Google already is presenting Google Maps with an augmented display of specific hotel locations, rates and sometimes availability, Unwin said. “Whilst that is still an evolving service, there is a potential for that to become a customer source for shopping and booking,” he said. “But from my perspective, Google is important in search rather than the ultimate transaction.”

Google is being careful how they display hotel information, according to Chris Anderson, assistant professor at Cornell University’s School of Hotel Administration.

“Google is very conscious how they list those prices and where they put them,” he said. “They don’t want those consumers to go to that map and use that as their search base because that will reduce their revenue stream from general ads and sponsors links.”

The FairSearch movement
There is a movement afoot, called FairSearch.org, led by the big OTAs and other companies with interest in online search competition and transparency. Members include Microsoft; Expedia and its brands HotWire and TripAdvisor; Level.com (France); Farelogix; meta-search site KAYAK and its brand SideStep; vertical search engine Foundem; and Sabre Holdings and its brand Travelocity.

Google declined to comment on its work in the travel industry, except to deny the existence of “Google Travel.” Its corporate web pages refer to advertising and data opportunities in the travel space, rather than any consumer platforms.

Read more from Google about its planned ITA Software acquisition.

 

 

Max Starkov believes the controversy surrounding the Google-ITA deal is fueled by the OTAs.

“(The negative press is) a scare tactic by the OTAs to scare the bejesus out of everybody that Google will be monopolizing travel,” Starkov said. “Google is not in the business of transactions. They’re in the business of presenting information in the most intelligent way. … I think it’s an intentional distraction to try to the scare the industry that there’s a bigger enemy than us. It’s Google.”

Google will not turn themselves into a travel agency, the chief eBusiness strategist with Hospitality eBusiness Strategies said. They will present rates and from there people will go to the respective booking agents.

Starkov’s predictions for how Google could proceed with monetization of its capabilities:
• They can take a referral fee or cut of the booking.
• They can charge more on search ad revenue (hotel companies pay more to show up more prominently in search results).
• They can charge a fee just to have the website listed, or charge for every individual booking made through their search results. “Google will probably say if we bring you a booking, we should somehow be compensated for that,” he said.
• They could license ITA software to hotel companies as it has airlines and travel agencies.

What if Google did decide to enter the hotel transaction space? 

“It’s more difficult to envisage a single acquisition in the hotel space having a similar effect like what is likely to happen in airlines,” Unwin said. “There are still pieces of that picture that are evolving (for airlines).”

Google realizes it needs to talk to and work with the hotel chains and intermediaries, he said.

“They want to open up channels to allow access to the data they need to flow through to them,” Unwin said. “The one key thing is Google needs access to up-to-date and accurate information.”

They want to work with anyone who can contribute to the presentation of accurate information on inventory, but they don’t necessarily need to own anyone to get it, he added.

HotelNewsNow.com editor Patrick Mayock contributed to this report.

COMMENTS   Show All
Michael Keuntje
2/1/2011 10:50:00 AM
this same discussion is going on in Germany alike with one difference apparently: OTAs hereabouts seem quite convinced Google will not take on them regarding reservation and/or transaction. Henrys comment on the business Google is in resembles trying to read the tea leaves. I firmly believe that Google is in the business of generating profits and as far as I know any usage of the information (access) they provide is for free. Their efforts to generate a profit without a harm for user experience in search are visible - but who would rely on any eternal principle here? Differentiation between commission based business of agencies and performance based pricing for advertisement is academic. The industry has yet to come up with an open access property management standard: THAT would be Google like access to (availability) information: a free web based PMS would a) be efficient b) user friendly information access policy c) very nice for property managers HOWEVER counteract on all OTA efforts to differentiate. If you are in the industry compare your net profits and your Google ad spendings and then decide if Google is a competitor. Hereabouts the discussion went if Google would introduce a 'Book'-button on Google places. Whatever path Google will pursue it will most likely extend its share of profit on the path of customers finding their way to a hotel room. They might never exclude hotels from being found in search but I don't see any reason why they might not exclude OTAs from search results and/or extend link URLs to them with an affiliate id.
James Hawkins - Director Interactive Marketing Sage Hospitality
2/1/2011 9:51:00 AM
Google is indeed in the business of conducting transactions. From Google Checkout to their Adwords System, Google nets over 2 billion dollars a year from such transactions. With Google's ability to leverage their pay per click business coupled with sheer volume, the discounts they could offer would be substantial.
Fred Bean - CEO, REBEL Travel Corporation
2/1/2011 8:01:00 AM
Google has been exploring their options in hotel distribution for as long as the OTAs have been making a stink about ITA becoming a part of the Googleverse. Why wouldn't they look at hotels? The ability to serve up relevant hotel search results through Google Places and Maps, special rates with their Groupon knock-off, and merchant transactions through Google Checkout or more likely, a commission model with direct connections through an intermediary such as Pegasus, which today can be accomplished with zero heavy lifting. They don't even need an IATAN number or direct contracts with hotels. You could say that collection of commissions from hoteliers who are notorious for nonpayment could be an issue but who is in a better position than Google to ensure payment? One must also consider that with the reported decreases in travel ad revenue Google reported last year, how attractive the addition of a 10% commission on top of PPC revenues will look to their bottom line. The OTAs are starting to leverage versions of PPC models in addition to merchant margins and commissions as a way to generate incremental revenue on hotels. I'd be willing to bet that hotels would rather pay Google. Also consider that Google could be performing quite the rope-a-dope here. The OTAs are punching themselves out to protect their air transactions when the much more fragmented, lucrative, and broken hotel distribution model is ripe for the picking. How many times have you heard an OTA CEO talk about how they will focus on hotels due to the limited or declining revenues available in air? If the OTAs aren't careful, ala Foreman vs. Ali, they may just find out as their heads hit the canvas, that things are not as they seem. But as Dennis Miller says, that's just my opinion. I could be wrong.
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