Why the COVID crisis will increase Google's dominance in the hospitality industry
Back in January, before we knew the devastating impact coronavirus would have, I touched on the rise of Google as an online travel agency (OTA) but without the service and now, as we look to the "new normal" it's likely Google's dominance will step up a gear.
Google is one of the most trusted global brands so it's little surprise that in these unprecedented times hotel brands are increasingly turning to it for help to attract whatever demand is out there.
Unlike past downturns that have strengthened the OTAs' position, COVID-19 has forced virtually all travel to stop meaning they no longer have the marketing spend and clout that they enjoyed pre-pandemic. This means that when travellers are searching online, it's the Google's travel products that dominate the results and Google is determined to take as much ground as it can during the crisis.
Google was already hot on the heels of the OTAs before the pandemic. In 2018 it passed Kayak as a source of traffic to airlines. This year's unprecedented events and the release of new Google products for the hospitality sector look set to accelerate those gains.
In recent weeks, Google has made its "pay-per-stay" platform available to all Google Hotel Ads partners globally. This Cost Per Action approach finally gives hotels an easy, convenient, and risk-free ways of boosting their visibility.
The biggest benefit for hotels is that with pay-per-stay there's no commission paid when a guest cancels. With cancellation rife in the current climate Google's willingness to share the risk of cancellations with its hotel partners is a clear demonstration of its commitment to the hospitality sector and we expect there to be a significant shift from hotels to the platform.
What's more, pay-per-stay aligns with hotels' commission-per-stay philosophy so marketing teams don't need to see permission from their sales manager or finance manager to launch a campaign.
While the platform was launched in response to the pandemic, it's difficult to see why Google would roll this back once the current crisis has passed. From initial search to booking, all the way through to check-out Google's suite of tools is making it easy and cost-effective for hotels to run marketing campaigns and streamline guest's booking journey.
So, how can we measure this prediction?
Two critical areas that allow us to assess the accuracy of our assumption are first, monitoring the increase of supply on Google which is a result of direct relationships with hotels (suppliers), and secondly, tracking the decrease of other meta-search engines. The more hotels Google secures and traffic it attracts compared to its competitors the more dominant it will become.
One of the key drivers to Google winning inventory from hotels will be its CPA service. The crisis has seen teams decimated. The marketing teams who were managing Pay Per Click (PPC) activity are no longer there. As a result, hotels will move to a CPA approach which requires less direct input. CPA has a long way to go before it is perfect but it's certainly an attractive option for hotels right now.
We assume another driver will be Google Pay. The wealth of payment options, particularly ones catering for regional providers, offered by Google makes it an obvious option for guests looking to book a hotel room. If they book direct with the hotel, payment options are usually limited to the usual two or three providers.
Hotels have always had low conversions on their sites and now, without a marketing team to drive visitors things will only get worse. While we know that hotels will want to drive guests to view content on their website, particularly to provide reassurance on the special measures they are taking to ensure hygiene and safety standards, we continue to believe that there will be a move towards using Google Pay. We expect this to start with mobile and then grow to encompass all checkouts.
We believe that these two aspects combined - the CPA and Google Pay essentially positions Google as an OTA without the service element. With Google already working on some service elements it is positioning itself as a clear alternative to the world's largest OTAs. As Sanchit S. Rege at Hyatt said to me, change is now expedited - consumer and industry shifts which pre-COVID-19 would take five years or even a decade are now happening in months. He believes it won't be long before Google adds service elements such as having customer calls and messages responded to using AI chatbots.
This isn't the first time that we've seen Google blindside an industry and move to dominate it. We saw it first-hand, through our retail division, Goldenfeeds between 2009 and 2013, how Google annihilated the eCommerce price comparison engine landscape. A vibrant sector at the start of 2009 which boasted a range of successful sites such as Pricegrabber, Shopzilla, Shopping.com, Nexttag, and Pronto. A lot happened in these years, including Google shifting from a free model to a PPC model, but the shift was clear.
Now, we are already seeing Google make similar moves within the hospitality industry. Month after month, they have taken more and more of the search engine results page whether it's Maps, Hotel Finder, or paid results, they dominate the top half of the page - they only visible part that doesn't require others to scroll down.
There's no doubt that Google is on the rise. How quickly this will happen and what it will mean for the OTAs remains to be seen but we expect the likes of Tripadvisor and Trivago, already described by some as zombie companies, to be acquired or lifted within the next year.
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