The Elephant in the Room we are all ignoring…
We are all concerned about the level of commission we are paying the OTA’s; adhering to rate parity; the impact OTA cancellations have on our revenue; availability parity – never mind out-bidding us on Google by using our brand names and IP. But is all of that a narrow vision of the industry? Should we not all be watching the other ‘elephant in the room’ and that is Google.
I don’t very often use or quote statistics from other blogs but this week I read a really interesting article on Skift (one of the industries best blog sites) and it certainly left me with food for thought.
The question they raised was, ‘When will Google tie up all of their loose strings and become a Travel Agency?’. So lets look at the evidence and we all know that in our world, evidence comes down to commercials.
Skift estimates that Google will make $12.2 billion (yes I said billion!) from travel advertisers alone in 2016 (and by that I mean the revenue they get from companies using their Pay Per Click advertising to reach those top spots on Goolgle search). Is anyone else shocked by that? More shocking still is that $6.2 billion will come from 4 companies – being Priceline (who own booking.com) / Expedia / TripAdvisor and Airbnb. And in real terms Googles travel business is already TWICE that of Expedia.
If you compare this to the actual projected total trading from the publicly traded companies (so excluding Airbnb), it is estimated that in 2016 Priceline will trade at $9.2 billion / Expedia at $6.7 billion / Ctrip at $1.6 billion and TripAdvisor at $1.5billion.
So Google’s existing revenue from travel advertisers is already considerably larger than that of the Priceline Group; is roughly twice the size of Expedia’s, and Google generates more travel-advertising revenue than the total traded revenue of Expedia, Ctrip, and TripAdvisor combined. Then if you look at the profit margins achieved in the travel space, you can easily see that Google earn a lot more profit on advertising for a lot less work than any of these third party agents.
If Google is therefore generating all of this revenue from advertising why on earth would it want to rock the boat and enter the travel space? On paper, it looks like a no-brainer. Why risk all of that advertising spend by competing with travel brands in an already ‘noisy’ space? Well, lets look at the facts. There are certain companies like TripAdvisor that are already throwing their toys of the pram at Google but the bottom line is, where on earth else do they advertise? Google has become part of all of our lives and like using the word hoover instead of vacuum, we all ‘Google it’ instead of purely ‘searching for it’. So the third party channels have little choice than to swim with the sharks and keep paying for space.
Google has what looks like most of the pieces of the puzzle but what it doesn’t have is people. They have recently commented that they want to be a travel facilitator but not a travel provider. But what does that actually mean for us and our hotels?
Do me a favour and type into Google, hotels in Paris, hotels in New York or hotels in London. What you get of course is the OTA channels bidding on those expensive long tail terms (i.e. they are not brand specific so cost more as the clicks are too grey and not brand or hotel specific). There is now less advertising space so therefore less chance to be seen on the first page. Then the next third of the page is dominated by Google Maps and their chosen hotels, again dictated by how much they are paying to be in this space). Then finally if you keep scrolling and don’t forget you will have lost most people at this stage, you will see the organic links or websites that Google deem fit to be there.
In real terms for us, this means that we need to be bidding for that top space. If you aren’t bidding at all on Google then perhaps it is time you consider a digital campaign. If you are then for goodness sake make sure you are bidding on your own brand name! Gone are the days when poor marketers felt they shouldn’t have to as they should by right appear first. Do not rest on your laurels. If you aren’t bidding on your brand name, then trust me someone else is and if you haven’t learnt from past blogs that customers don’t think when they are online and often just click on the first choice, then please for goodness sake learn that now.
You also need to ensure that the information that Google is displaying about your property is correct. Please check that today.
Add in to the mix Google Flights – Book on Google – Google Trips – Google Maps and you will see that no matter what is happening right now, Google will increase their dominance in your space.
My predictions – Google is here to stay. Booking.com and Expedia will be less dominant players in two years time.
We should be watching what Google are doing and you need to consider an online marketing campaign. Please don’t ignore that Elephant in the Room, it might be sleeping right now but it won’t be for long…