Report Overview
Travel is roaring back. And with the return of business also comes with it an old set of challenges. “What’s our Google strategy” is once again a key question that every travel executive needs to be asking.
The online behemoth’s impact is felt far and wide in the travel industry. Skift Research published a deep dive into Google’s impact on the travel industry in February 2020. Just a few weeks later the world turned upside down as the true impact of the COVID-19 pandemic hit home.
Now, over two years later, as the travel industry rebuilds, we revisit this critical topic. We identified five big open questions about the role of Google in travel that arose before and during the pandemic.
The Key Questions for Google and Metasearch
- Can online travel agencies use the pandemic to reset their relationships with Google?
- Can travel metasearch diversify away from booking site advertising?
- Can Google bring hotel brands onto their metasearch platform?
- Can travel-specific metasearch beat back Google?
- What is the future of online travel in a Google world?
With 2022 the year of travel’s recovery, Skift Research believes we can start to answer these questions. This report will delve into more detail on each question, but in short, we believe that Google’s influence on the travel industry has only expanded during the pandemic and the search platform is now firmly entrenched at the top of the travel marketing funnel. The last decade saw fierce battles for market share and user growth. But now we believe the metasearch wars are ending; Google has won.
What You'll Learn From This Report
- How much the travel industry spends on Google.
- How Google Travel’s share of user traffic has evolved during the pandemic.
- The different approaches that Expedia, Booking, and Airbnb are taking to spending on Google.
- The influence that Google Travel has on hotel and airline bookings.
- Why we believe that the online travel industry needs to redesign its consumer value proposition.
Executive Summary
Google is the single most impactful advertising partner for the travel industry.
To wit, Skift Research estimates that the travel industry spent $8.9B on Google performance ads in 2021, up 60% from $5.6B in 2020. Companies are returning to the platform so quickly that the search engine cited travel as the second-largest driver of advertising revenue growth in the first quarter of 2022.
Beyond numbers this report seeks to understand the current state of play between Google and online travel websites. In particular, how the relationship between travel metasearch, Google Travel, and the end consumer evolved during COVID-19. Our conclusion: The metasearch wars are over, and Google won.
We identified five big open questions about the role of Google in travel that arose before and during the pandemic, discussion of which makes up the meat of this report.
Can online travel agencies use the pandemic to reset their relationships with Google? We believe most online booking sites will remain reliant on Google for top of the funnel marketing post-pandemic. Airbnb broke away, but it is the exception that proves the rule. Few others seem to be following in Airbnb’s footsteps and this sets up the search engine well to retain its dominant position in travel.
Can travel metasearch diversify away from booking site advertising? Data suggests the answer is no. Market participants are likely finding that Google provides higher traffic volume and better ROIs, which paired with constrained marketing budgets, is leading to a drop in travel-specific metasearch advertising. This leaves Google with more influence over the travel industry than it wielded pre-pandemic.
Can Google bring hotel brands onto its platform? Yes, unlike their other travel metasearch competitors. The bar to entry for these companies to participate on Google is quite low – free, in fact. Google has a size and scale that hotel brands (in fact any travel brand) cannot ignore. Google’s influence on consumer travel journeys seems to have grown during the pandemic. As travel booking journeys increasingly overlap with Google, it makes sense for hotels and other travel suppliers to participate on the platform.
Can travel-specific metasearch beat back Google? We think that travel-specific metasearch sites will struggle to beat back the advances that Google has made into the travel sector. It is likely in our view that travel metasearch sites will struggle to regain the market share they once held pre-pandemic as things stand now. An exception might be made in the case of greater regulatory intervention at Google.
What is the future of online travel in a Google world? In our view, online booking sites, both metasearch and travel agencies, rely too heavily on inventory and discounted prices in their marketing. With Google set to emerge from the pandemic as an even larger force in travel, these value propositions are losing their marketing edge. Instead, we believe that the future of online travel will come from following a new roadmap that embraces a wider and more complex set of consumer value propositions such as: differentiated travel advice, convenience/anxiety relief, exclusive listings, enhanced metadata, and niche Expertise.
Can Online Travel Agencies use the Pandemic to Reset their Relationships with Google?
Online travel agencies are the largest advertisers in the travel industry. With Google the largest digital advertising player in the world – it receives nearly one in every three digital ad dollars globally per eMarketer – this means that the search engine is most OTAs’ single largest marketing partner.
The relationship between Google and the booking sites can be a double-edged sword in that it provides customers but at great expense. Making Google work in a sustainable and profitable way is key to the success of OTAs as they emerge from the pandemic.
We believed that this crisis held the potential for online travel agencies to reset their relationship with Google and restructure it in a more profitable way. In this section we will look at how Expedia Group and Booking Holding’s relationship with Google changed during the pandemic. And how their approach differed from the path that Airbnb chose.
Between Expedia Group and Booking Holdings, the two spent a combined $10 billion on marketing and $6.8 billion on advertising in 2019. Marketing includes all promotional activity whereas Advertising is a subset spent on paid media across third-party sites (e.g. Google). No other travel company can even come close to that level of spend in either category.
In fact, few other brands in any industry can match that. Booking Holdings and Expedia are usually among the top ten for advertising dollar spend out of all companies in the S&P 500 index. On a relative basis, these outlays are extreme as well. Even large companies typically spend 10% of revenue or less on advertising, whereas in 2019 Expedia and Booking spent nearly 30% of their combined revenues on advertising.
These huge advertising budgets create an edge for the online booking sites relative to their hotel and airline suppliers. Expedia and Booking act as consolidators of, and clearinghouses for, marketing dollars throughout the travel space. This creates a scale advantage that few other travel suppliers can match and makes the booking sites critical partners for hotels and airlines, which can not otherwise afford to secure consumer traffic without being listed on a booking site.
While this model worked well in the early 2000s, even before the pandemic cracks were beginning to show. The big two online travel agency groups found themselves bidding for advertising space not against hotels and other suppliers, but against one another. This created a downward spiral where each tried to outspend the other, cutting into profit margins and lowering the returns for each dollar invested into ads.
This contest played out primarily on Google, much to the delight of its Silicon Valley executives. Expedia and Booking wound up relying on Google for traffic, ironically in much the same way that independent hotels were in turn relying upon the big booking sites.
In our view, for Expedia and Booking to grow long-term profits they need to cut their dependence on Google. And we believe that the pandemic offered a unique opportunity for these companies to do just that.
During the pandemic we have seen Expedia, Booking, and others cut their marketing spend to near nil. COVID-19 was a once-in-a-lifetime opportunity for a hard reset of Google advertising spend. OTA execs could build back up their marketing budgets in new and unique ways that reset their relationship with Google in a more productive way.
So, has that happened? Simply put: No.
Instead, with the rapid recovery of travel over the last six months, the floodgates of advertising spend have been thrown wide open again. We estimate that Expedia and Booking spent a combined $5 billion on advertising in 2021, up 98% vs. 2020 and 75% recovered vs. 2019.
The main reason that ad spending is not fully recovered is because OTA gross bookings and room nights sold have not yet returned to their pre-pandemic pace. But in common size terms relative to online travel revenue generated, the booking sites are back to their pre-pandemic levels of spending. Expedia spent 34% of revenue on advertising in 2021 (vs. 33% in 2019) and Booking spent 23% of revenue on ads (vs. 24% in 2019).
We take the fact that advertising as a share of revenue is the same today as it was pre-pandemic as a signal that Booking and Expedia are mostly going back to their old playbooks and we can expect marketing dollars to continue to grow in line with the OTAs’ revenue recovery.
We dug further into the online travel agencies’ advertising mix to explore how many of those dollars are flowing to Google. We started with Expedia Group and Booking Holdings’ disclosed marketing and advertising spend. We combined this with company filings from other metasearch companies, historical performance, and expert-informed assumptions to estimate how performance ad dollars are allocated at these sites. We found that Google’s importance to these two booking sites has increased during the pandemic. Details are discussed in the “How Big is Google Travel” section of this report.
We estimate that Expedia and Booking spent a combined $2.9 billion on Google performance advertising in 2021. That is 92% recovered vs the $3.1B of estimated Google ad spend in 2019.
However, as discussed above, the “big 2” OTA advertising budgets are not recovered relative to 2019. So for Google advertising to be so close to being fully recovered means that spend on the search platform has grown as a share of Expedia and Booking’s marketing budgets during the pandemic.
By our estimate, Google now accounts for 65% of performance advertising budgets, up from 53% pre-pandemic.
Data from SimilarWeb suggest that this growth in advertising is following the same tit-for-tat pattern that existed pre-COVID. Their analysis shows that Expedia and Booking both sharply accelerated spend on Google paid per click advertisements in the U.S. starting in spring of 2021. Expedia seems to have led the charge and Booking rapidly followed.
Rather than use the pandemic to wean themselves away from Google, it would seem the pandemic had the opposite effect. Expedia and Booking are more dependent on Google today than they were pre-pandemic.
This failure to capitalize on this opportunity is reinforced by the opposite actions of Airbnb. We estimate that at the short-term rental booking giant performance spend made up 57% of its total marketing budget pre-pandemic but has fallen to just 13% of its marketing budget today. Google was the primary recipient of Airbnb’s performance advertising spend. See our “How Big is Google in Travel” section below for more details.
Airbnb shows that it was possible to use the pandemic to rethink its customer acquisition strategy and to significantly cut reliance on Google, and performance advertising as a whole. In that context, the fact that Expedia and Booking saw the share of their budgets dedicated to Google grow during the crisis is all the more striking.
Let’s return to the initial question of this section: Can online travel agencies use the pandemic to reset their relationships with Google? To us, Airbnb is the exception that proves the rule. Few others seem to be following in Airbnb’s footsteps and we believe most online booking sites will remain reliant on Google for top of the funnel marketing post-pandemic. This sets up the search engine well to retain its dominant position in travel.
Can Travel Metasearch Diversify away from Booking Site Advertising?
In this next section we ask about the health of travel-specific metasearch platforms like Trivago and Tripadvisor. While this is a Google report, we feel it is important to examine the state of its key competitors in our sector. If these businesses are growing, they can offer effective competition against Google and reduce its overall impact on the travel industry.
However, that is not what we find. The key challenge facing the travel-specific metasearch sites has been how to attract a broad range of travel advertisers. Historically most metasearch marketplaces were dominated by online travel agencies affiliated with either Expedia Group or Booking Holdings.
Trivago discloses how much of its metasearch revenue comes from these two online travel giants, giving us insight into how its marketplace changed during the pandemic. What we see is that the big two OTA groups – Expedia and Booking – were trending at ~75% of Trivago’s revenue pre-crisis and into the first year of COVID. But in 2021 as the industry recovered, the big two OTAs’ share grew by nine percentage points to make up 82% of Trivago’s platform.
Hotels and smaller OTAs have dropped out of Trivago’s metasearch auctions due to the pandemic. A marketplace with just two bidders is not a well-functioning exchange. Adding insult to injury, Trivago’s revenue is still 57% below 2019 levels. This means that Trivago is exiting the pandemic with both a smaller and less dynamic metasearch platform than the one it had in 2019.
We don’t mean to pick on Trivago here. We believe that this data directly speaks to a drop in dynamism across nearly all travel-only metasearch platforms.
Tripadvisor, due to the nature of its review platform, attracts a higher baseline of independent hotels to its auctions. Despite efforts to diversify, Tripadvisor is dependent on the big two OTAs for advertising. We estimate that 68% of ad dollars on the Tripadvisor hotel metasearch platform came from either Booking or Expedia in 2021. That is little changed from the 66% share they held in 2019 or the 70% share in 2018.
Yes, there was a dip in 2020 as OTAs cut metasearch spending. But given the bounce back to pre-pandemic levels of OTA concentration in 2021, we don’t believe that the Tripadvisor meta story has changed much. And similar to Trivago, Tripadvisor’s metasearch business is 42% lower than it was in 2019.
We don’t have granular market data for Kayak or Skyscanner, since each are subsidiaries of far larger parent corporations. And while these two platforms are airline focused, we don’t think the trends are all that different, especially as the airline industry is far more consolidated than the hotel sector. While each travel metasearch site may be coming from a different baseline of OTA concentration, we believe that the trend line is running in the same direction for most.
Can travel metasearch diversify away from booking site advertising? It would appear the answer is no. Market participants are likely finding that Google provides higher traffic volume and better ROIs, which paired with constrained marketing budgets, is leading to a drop in travel-specific metasearch advertising. This leaves Google with more influence over the travel industry than it wielded pre-pandemic.
Can Google Bring Hotel Brands onto Its Platform?
We have established that travel-specific metasearch is struggling to bring hotel brands and other individual suppliers onto their platforms. Is Google having the same issues? Our answer is less definitive, but we believe that Google is making slow but steady inroads into adding branded and independent travel advertisers onto its platform, thus diversifying their dependence on a few large online travel agencies.
Cost is a major factor. Google has evolved its product offering to make it easier for suppliers to participate. The company has been slowly dropping costs for hotels to list their properties. In March of 2021 it began offering free booking links within its Google Hotels metasearch module. Don’t write this off as just a pandemic-era PR play either. In March 2022 this initiative was expanded to make hotel booking listings free in both Google Search and Maps. And Google long-ago ended booking charges for airlines, dropping those fees in January 2020.
That means that suppliers of both flights and hotel rooms can now place free direct booking links alongside OTA and metasearch listings (which are similarly unpaid). Not only that, but direct booking links get an “official site” badge that helps them stand out against third-party resellers. “Free” is a very strong value proposition, and one that other metasearch sites will struggle to match.
But that is not to say hotels, airlines, and other travel companies don’t spend on Google. There are still promoted hotel listings, and of course, good old fashioned search engine marketing via blue links. Youtube too, but that is a conversation outside the scope of this report.
Further, we see evidence from web traffic data that indicates Google is growing as a critical source of user referrals for travel brands.
SimilarWeb shows that outbound referrals from Google Hotels on desktop has increased 3x or more over the last year at several major brands. Hilton was the largest source of Google Hotel referrals in February 2022, seeing 600k visits in the month, up from ~150k the prior year. Marriott, IHG, Hyatt, Wyndham and others have experienced a similar boost.
A separate SimilarWeb study looks at overlaps in user visits to the Google Travel module and major travel brands within a given year. It found significant overlap in usage between Google and travel brands and a sharp increase from pre-COVID levels.
For instance, in the first two months of 2022, 76% of users that visited an IHG website also visited Google Travel. This study is not directional, so we do not know if users started on Google and ended on IHG or the other way around. All we know is that both websites were visited at some point within the month. Perhaps a user began their travel booking journey on IHG and then moved to Google Flights to find an air ticket. But in our view it is just as likely, if not even more common, that many of these users began their journey on Google, found a travel brand that they wanted to work with, and shifted over to the branded direct website via paid or organic search results.
Not a single major travel brand in the 2022 iteration of the SimilarWeb study had less than 60% of their users overlap Google. And the three companies with users most closely tied to Google were all hotel brands, not online booking sites.
At a bare minimum this data tells us that there is an extremely high level of crossover between Google Travel and the branded travel brand ecosystem. Another plausible interpretation of this data, though a less strict reading, is that Google controls a significant portion of top of the funnel travel intent for most U.S. travel brands, including hotels and airlines.
Another powerful telltale from this dataset is the dramatic increase in overlap from 2019 to 2022. Across the board – be it hotel, airline, OTA, or metasearch – the influence of Google on travel users has doubled or even trebled. In our view, this data puts to rest the notion that Google has simply maintained its pre-COVID status quo. This is clear evidence to us that the pandemic has served to boost Google’s impact on the travel industry and further entrenched its powerful position within the industry.
Can Google Bring Hotel Brands onto its Platform? Yes, unlike their other travel metasearch competitors. The bar to entry for these companies to participate on Google is quite low – free, in fact. Google has a size and scale that hotel brands (in fact any travel brand) cannot ignore. Google’s influence on consumer travel journeys seems to have grown during the pandemic. As travel booking journeys increasingly overlap with Google, it makes sense for hotels and other travel suppliers to participate on the platform.
Can Travel-Specific Metasearch Beat Back Google?
The first three questions of this report are helpful context to start answering this question. To recap: the big two online travel agencies have fully returned to Google advertising but are holding off on other metasearch players. We see evidence that hotel and airline brands have dropped out of non-Google metasearch auctions while overlap between visitors to Google Travel and travel brands has increased two to three times. It would seem that travel metasearch is struggling to gain share against Google travel.
Looking closer into the competitive dynamics of the metasearch market, we analyzed SimilarWeb data from the five most prominent metasearch sites in the travel industry: Google Travel, Trivago, Kayak, Tripadvisor, and Skyscanner. This data also supports the hypothesis that Google is now an even larger part of most consumers’ travel journey than it was before the pandemic.
We collected daily web traffic data for each site, aggregated the page views, and then calculated a share of web traffic for each site.
In January and February of 2020, Google Travel (only the metasearch modules, not search results) owned 52% of web traffic going to these five metasearch sites. We believe that this stands as a good benchmark for pre-pandemic trends. We found that Google Travel website saw a dramatic increase in web traffic share as a result of the pandemic. Revisiting the numbers for the same timeframe in 2022, Google had gained 11 points of share to average 62% of all traffic.
Analyzing this same data in absolute traffic figures reveals a crucial differentiator for Google. Google Travel was the only metasearch website to see a post-pandemic increase in user traffic, up 7% in 2022 vs 2020. All other major metasearch options are exiting the pandemic with less web traffic than when the crisis began.
By charting the Google Travel web traffic share as time series data, we can see that this is not just a matter of cherry-picking data. Google’s relative traffic share growth has been two years in the making. The Google platform has been holding a 60%+ metasearch web traffic share since August 2021 and continues to do so into April 2022.
Our conclusion from this data is clear: Google has an overwhelming traffic advantage over other metasearch sites. The reasons for this are many-fold and include Google’s wide range of non-travel offerings, ongoing travel-specific Google product changes, and consumer desire to search for more information than ever before when planning a trip due to COVID-induced uncertainty.
We think that travel-specific metasearch sites will struggle to beat back the advances that Google has made into the travel sector. It is likely in our view that travel metasearch sites will struggle to regain the market share they once held pre-pandemic as things stand now. An exception might be made in the case of greater regulatory intervention at Google.
What is the Future of Online Travel in a Google World?
Our answers to the above suggest that there are many players in the online travel space anticipating a return to a pre-COVID status quo that may never happen. Though travelers will return to pre-COVID levels, the “Google Tax” on travel is set to grow even greater than it has ever been. We believe that the core value proposition that online travel has delivered for the last 20 years is under attack and needs to be re-evaluated at many brands to succeed in this transformed landscape.
Research from Morgan Stanley draws a striking conclusion about Google’s ownership of the online travel consumer. It finds that in the U.S. Google is the most popular first website visited both when users are researching travel online and comparing prices across providers. Even when a traveler has made up their mind and knows the exact trip to book, they are still just as likely to begin booking on Google as they are on Expedia or Booking.
The same study also suggests that Google’s influence is likely to grow as younger American travelers have higher levels of trust in Google. While on the whole, 39% of Americans start their travel research on Google. For those under the age of 44, the figure rises above 40%. Just 29% of those over 65 start their research on the search engine. As these cohorts age, Google’s influence will grow alongside them.
Skift Research believes that addressing these challenges will require online travel to reevaluate the core selling propositions that they offer consumers.
In the past, online travel booking sites (both OTAs and Metas) largely positioned themselves to the traveling public as delivering two main benefits:
- Hotel/Flight Discovery
- Inventory: What hotels/flights are available in a market
- Price Comparison: How do rates compare across a given market
- Deals: Saving money relative to a property’s/airline’s own listed rates
The challenge is that the first value offering is about providing simple market data — for a given location, how many rooms are available, where are they located, and at what price. We don’t want to discount the challenge of bringing hotel inventory online, especially in emerging markets. But let’s face it, after 20 years of progress in North America and Europe, a lot of this data has become a commodity.
In most developed markets, there is such overlap in inventory across booking and metasearch sites that it is very rare to offer any property exclusively. So rather than offer unique listings, the challenge becomes how to serve up the most comprehensive dataset in the most compelling way.
Remember that Google’s mission is to “organize the world’s information and make it universally accessible and useful.” The travel industry is trying to out-do the biggest big-data company in the world on its home turf. And Google has the in-built advantage of not just being able to offer organized information about travel but about most every other topic imaginable.
With Google eating into this competitive edge, hotel/flight discovery just doesn’t offer the same value-add to the end consumer that it once did.
And what about deals? We believe that metasearch and online travel agencies offer fewer discounts than they did in the past. In the U.S. in particular, the Airline industry is tightly consolidated and has been fighting hard to regain control over distributing its fares. And in the hotel space, a similar trend towards consolidation is playing out which brings along with it a strong emphasis on rate parity.
The big, branded hotels are training consumers that they can find the best deals booking direct. And they are punishing distribution partners that they believe are undercutting their rates, no matter how much volume those channels deliver.
For instance, Marriott gave Expedia Group an exclusive deal to distribute wholesale rates worldwide. In exchange for agreeing to act as Marriott’s rate police, Expedia was able to disintermediate even the largest bedbank groups, like Hotelbeds, who now have to interface with Expedia directly. IHG recently inked a similar deal naming Expedia its preferred wholesale distribution partner. This suggests that the pandemic has not much altered the rate parity trajectory of the big brands.
Even smaller, independent hotels can now control their rate parity as channel management software moves closer to being a ‘standard issue’ piece of hotel distribution tech. Through Skift Research’s Hotel Tech Benchmarking initiative, we estimate that nearly a third of hotels globally have some form of channel management software. This market share will be larger in North America and Europe and is growing worldwide.
The widespread adoption of channel managers at independent hotels and the consolidation of branded properties all make it increasingly harder to find deals on metasearch and OTA websites. They also make it easier to list across many websites, making inventory less of an OTA/Meta competitive advantage.
This is not to say that there are no deals to be found on booking sites. But they are a lot harder to find these days, especially with the branded hotel groups.
Research from Bernstein backs this up. It ran a rate parity study on 335 hotels and found that Google is most commonly offering the cheapest rate online and the direct price is the cheapest at nearly a quarter of all properties. The direct site is the cheapest option at more than twice the rate of any booking site other than Hopper.
This doesn’t tell the full story though. As when digging into the Google results, most commonly the cheapest price was being offered by the direct website. So even though Google often had the cheapest rates available in the first exhibit, most of those rates were in fact tied back to the direct first-party channel.
All of this only underscores the power of Google, its ability to attract hotels to its platform, and the challenges that booking sites are facing in relying on discounted rates as their main selling proposition.
In our view, online booking sites, both metasearch and travel agencies, rely too heavily on inventory and discounted prices in their marketing. With Google set to emerge from the pandemic as an even larger force in travel, these value propositions are losing their marketing edge.
Instead we believe that the future of online travel will come from following a new roadmap that embraces a wider and more complex set of consumer value propositions such as:
The Old Online Travel Value Proposition
Hotel/Flight Discovery: Data is becoming a commodity that Google can win at by leveraging its user traffic volume advantage.Deals: Brand consolidation and channel management software is making it easier for suppliers to enforce rate parity and train their customers that direct has the best deals.
A New Way Forward for Online Travel to Offer Value in a Google World
- Differentiated Travel Advice: Ironically, we believe that online travel agencies need to follow the same path that they drove the offline travel agents down. Travel agents rebranded to travel advisors as they shifted to offer more bespoke itineraries. Perhaps it is time for OTA to stand for online travel advisor as well? In our view, online booking sites should shift their design and booking flow to emphasize providing advice, inspiration, and a full-service travel experience. Google has a reputation for terrible customer service. Precisely because it does such a good job attracting millions (billions!?) of users, Google cannot afford to offer personalized support. So in true Judo fashion, use your opponent’s size against them. Offer creative and individualized travel planning, shopping, and in-person experiences. Tripadvisor’s Reco initiative to connect travel advisors with its users for a fee is a prime case of an online travel platform driving in this direction. Another example is Airbnb which redesigned its homepage to make it easier for undecided travelers to find inspiration without a destination or time frame in mind. This de-commoditizes its data and instead of just serving up a database of rates and availability, Airbnb can suggest more interesting trips and accommodations that a traveler might not have searched for without this subtle nudge.
- Convenience/Anxiety Relief: Online booking platforms have a reputation for causing customer service headaches. And that was before the uncertainty injected by COVID-19. This needs to change. Hopper has succeeded in a crowded field by offering “fintech” products that, for instance, allow consumers to lock in their air fares and fight the anxiety that comes with shopping for a large trip. These offerings are now the majority of Hopper’s revenue. COVID-19 was a health crisis, not a financial crisis. We believe that consumers today put more value on peace-of-mind and reliability when they travel than on deals and savings. Online travel sites need to embrace a more hands-on approach to customer service and move beyond offering a simple room and rate (or fare and route).
- Exclusive Listings: Airbnb has succeeded in large part because many of its homes are unique and available nowhere else in the world. This gives it the leverage to reject Google’s short-term rental overtures. Kayak has been experimenting with this as it launches its own collection of Kayak-branded hotels. Hostelworld has a comprehensive set of group accommodations available in few other places. This won’t work for everyone but where possible, online travel sites need to place an emphasis on finding creative ways to source unique inventory.
- Enhanced Metadata: Can your platform generate proprietary data that no other website has? This can be a Herculean effort but that’s what makes it hard to replicate, after all. For instance, halalbooking.com provides detailed information on hotel layouts, service offerings, and amenities that matter to Muslim travelers. This creates a customer acquisition edge that few will be willing to go through the work of replicating.
- Niche Expertise: Regional specialist booking sites have been able to beat back multi-national competitors by understanding their niche market better than anyone else. MakeMyTrip offers 12 different local Indian languages while Despegar offers currency hedged booking options that matter to its Latin American customer base burnt by past forex devaluations. Booking sites need to evolve to act like local agents, even if they are in fact multinational corporations.
How Big is Google in Travel?
We’ve talked about just how impactful Google is to the world of travel and that this is mainly felt through the impact of a “Google tax” that marketers pay to drive traffic to their respective brands. But just how big is that figure in dollar terms?
We estimate that the travel industry spent nearly nine billion dollars in performance advertising on Google in 2021 worldwide. This includes search engine marketing and the Google Travel metasearch platform. But it excludes spending on YouTube, Google Cloud, or search engine optimization. Including these costs would likely bring the total industry Google bill above the ten billion dollar mark.
In our estimates, the $8.9B in 2021 Google performance ad spend is up 60% from $5.6B in 2020 but down -29% from $12.5B in 2019.
Caveat emptor – we had to make many assumptions to reach this figure. And these embedded assumptions create a high degree of uncertainty in our final estimate. But we believe that the process of coming to this figure is instructive. We would argue that going through the exercise of estimating the travel industry’s spend on Google is more informative than the actual end number. So please read on to understand our process.
To arrive at a figure for travel’s spend on Google we started by estimating a baseline of performance spending for the big two online travel players, Expedia Group and Booking Holdings. This was based on their most recent filings combined with historical data on the share of performance advertising spend and marketing benchmarks across the industry. This gave us a combined performance advertising budget of $4.6B in 2021.
We worked backwards, attempting to estimate all other non-Google performance ad partners. We started with spending on Trivago and Tripadvisor. As discussed above, we can estimate this with high confidence based on filings from the metasearch sites themselves. We rounded out what we called spending on “core meta” by adding in an estimate for Kayak which we believe to be similar to the other two sites. Then we made an assumption that other performance advertising platforms, primarily Facebook, were likely 15% of performance budgets.
By chipping away all other sources of performance ad spend from our baseline budget, we were left with an estimated spend on Google, $2.9B in 2021.
Up next was the third major online travel advertiser, Airbnb. The vacation rental company discloses its annual advertising spend but won’t break out how much of this is invested in performance vs. brand campaigns. Thankfully, we have some clues. It was reported that Airbnb slashed its performance advertising budget by $540M in 2020. And in its 2021 annual filings the company reported that performance advertising spend declined even further below 2020 levels.
Combining these clues with the available figures we believe that performance spend has gone from accounting for 90% of Airbnb’s advertising dollars 2019 – in line with Booking’s historical performance ad share – to just 18% of its advertising budget in 2021.
We apply one final assumption that Google makes up 80% of Airbnb’s performance advertising budgets. We assign Google a higher share of performance ad spend than the 50-60% it has at Expedia and Booking because there are no major metasearch players in the short-term rental sector.
Based on this we estimate that Airbnb has cut its performance advertising spend on Google from $519M in 2019 to just $78M in 2021. Though this conclusion is shocking, we believe it is justifiable and in line with public statements from both companies and the very high share of unpaid and direct traffic that Airbnb engenders. Airbnb has boosted its PR and branded advertising spend and some of this will come back to Google in the form of Youtube advertisements. However Youtube is outside the scope of this analysis.
We add Airbnb’s spend together with Expedia Group and Booking Holdings to arrive at a “big three” booking site spend of $3B in 2021. Our next goal is to expand this to account for all online travel agency spend with Google search. We pulled sales and marketing spend at all major publicly traded booking sites for the past three years to get a sense for how much of the total market these big three firms controlled.
We believe that the big three combination of Booking, Expedia, and Airbnb made up 71% of all online travel agency sales and marketing spend in 2021.
If we exclude Trip.com (formerly CTrip), since Google is not available in China, that share rises to 75% in 2021. Though sales and marketing does not perfectly correlate with performance advertising, we think that this is as good a benchmark as we will get.
If the big three’s $3B in Google performance advertising is about 75% of the market, then it is implied that the rest of the global long-tail OTA market spent $1B on Google in 2021.
To round out our online travel estimate, we need to account for travel metasearch sites on Google. We believe that a high percentage of these sites’ marketing takes place on Google. Based on public marketing spend disclosures at Tripadvisor and Trivago, and extrapolating to other similar sites, we believe that Metasearch spent just shy $700M on Google performance ads in 2021.
Adding all of these figures together yields an estimate of $4.7B in performance advertising spending on Google by the global online travel industry in 2021, down 35% from $7.2B in 2019. Today we believe that 62% of online travel spending on Google comes from Expedia Group and Booking Holdings, up from a 44% share in 2019.
Unfortunately, we don’t have anywhere near as granular data on advertising spend for other travel sectors. Hotels, airlines, and other parts of travel are far less consolidated than the online travel space and so even where we do have data, each individual number is less informative given it is a smaller piece of the puzzle.
So rather than build each other sector from the ground up, for our final step, we estimate the total share of Google’s performance advertising revenue that is derived from online travel. In the past, we had estimated that online travel made up 45% of all travel spending on Google. But for this update report we wanted to create a more robust basis for this key assumption, which ultimately led to upping this figure. In turn, online travel accounting for a higher share of all travel spending reduced the overall dollar estimate for Google.
We looked at disclosed marketing and advertising data for publicly traded hotel and airline companies. We combined these numbers with industry benchmark data to try to estimate total advertising (not just performance ads) for each sector. These figures are rough around the edges, but we believe that OTAs likely accounted for around $9B out of $16B in total travel industry advertising spend. This implies that advertising was 63% of total OTA marketing budgets and that the OTAs represented a 58% share of travel advertising dollars in 2021.
This is a global figure, but we believe that online travel has a smaller share on Google than this. This is to account for the outsized spend that online travel agencies put into travel metasearch sites relative to hotels and airlines, as discussed above. Since OTAs are 82% of Kayak and 68% of Tripadvisor spend, well above their global average of 58% in 2021, they must be slightly below this global average on other platforms.
Further, given the evidence we have seen that Google’s importance to hotels and other travel suppliers has increased during the pandemic, we believe that online travel is slowly seeing its share of Google search spending shrink.
Based on this analysis, we assume that online travel has steadily fallen from 58% of travel industry spend on Google in 2019 to 53% in 2021.
This finally brings us to our total estimate for how much the travel industry spends in performance advertising on Google worldwide. Using these shares implies that our industry spent $8.9B on search engine marketing and Google Travel metasearch in 2021 vs. $5.6B in 2020 and $12.5B in 2019.
However, we caution that this approach means that the share assigned to online travel relative to the whole of spending by the industry acts as a large multiplier to the final figure. Our estimate can be quite volatile and will change meaningfully if a different share is assumed.
To compensate for this, we provide a sensitivity table that shows how our estimate changes as this major assumption is shifted. It is better to think of our estimate not as a single point but instead as a range of dollar figures. We highlighted the mid-point that we believe to be our best estimate in green and give a broader, but still likely, range in orange.
Our final estimate for how much the travel industry spent on Google performance advertising in 2021 is $8.1-$9.8 billion with a mid-point of $8.9B. That is compared to a spend in 2019 of $11.5-13.7 billion with a mid-point of $12.5B.
One last thought: Google is growing in importance to the travel industry, but how much does travel matter to Google?
Google search revenue has grown from $98 billion in 2019 to $149 billion in 2021. While we believe that overall dollar spend has fallen, the sharp inflection that travel experienced in 2021 means that it is contributing a lot to Google’s growth last year.
Google began calling out travel as a “strong” source of year-on-year advertising growth on its earnings calls in the first quarter of 2021 and continued to mention the category throughout the year.
While our numbers only go to 2021, commentary from Google suggests that the travel industry has accelerated the pace of its spending on the search engine as 2022 began. In its most recent earnings Google said that travel was the second-most impactful industry driving Google’s advertising growth in Q1 ’22. Google management reported that travel search volumes in Q1 ‘22 were above Q1 ‘19 pre-pandemic levels.
Still, Google has conceded on past calls that travel performance is “uneven” across regions as local lockdowns could severely impact activity. And while travel is driving a large share of year-over-year growth, we suspect that is being somewhat biased by the low base that travel companies are returning from. It is also possible that a sizable share of the growth being highlighted by Google’s management is coming in the form of Youtube ads, not performance ads via search engine marketing or Google Travel’s metasearch module.
Despite travel’s contribution to Google’s growth, in overall dollar terms the sector has likely declined in prominence. We believe that Travel was 13% of search revenue in 2019, likely making it one of Google’s largest verticals. But today travel is just about 6% of search revenues. Even if travel recovered to 2019 levels and Google search did not grow, it would only come back up to 8% of segment revenues. That is still big, but not not even breaking double digits. That the travel industry could return to full pre-pandemic levels of ad spend on Google and still find itself a smaller client in the grand scheme of things speaks to the power dynamics between the two.
What is Google’s Impact on ____ Sector?
This last segment is a simple tearaway sheet. We know that Google matters to every part of the travel world. But its prominence and impact varies by subsector. Here we rank and summarize our views on the impact of Google on each travel sector.
Sector | Google’s Impact | Notes |
Metasearch | VERY LARGE | The metasearch wars are drawing to a close, and Google is winning. The viability of independent travel metasearch in the U.S. and Europe is at risk in our view. Metasearch players are struggling to grow their organic audience, attract non-OTA advertisers, and provide differentiated service versus what Google offers. |
Online Travel Agencies | LARGE | Google appears to have little desire to become an OTA, so direct competition, as happened in meta, is unlikely. However, Google’s dominance in meta means that OTAs will continue to rely heavily on Google as their primary source of traffic, driving large advertising bills. Plus, Google’s hotel search is making it easier for hotels to market directly, which will indirectly put pressure on OTA commissions and inventory access. |
Hotels | MEDIUM | Google is creating a viable alternative to OTAs. This is especially true for branded hotels, but independents are also learning how to participate effectively in the Google hotel module. Google shifting to emphasize organic placements and free booking links can be powerful, but so is the ability to buy ads on a cost per reservation, net of cancellation, basis. Today many hoteliers are just happy to have an alternative to OTAs. However, caution is needed as the “Google tax” to be competitive in both organic paid search results can easily rack up and become costlier than the booking site equivalent. |
Vacation Rentals | SMALL (for now…) | Google metasearch in vacation rental has not succeeded as well as its efforts in hotels, despite many similarities between these two segments. The online travel agencies, having been burnt by Google hotels and flights, have refused to participate in Google meta for this category. Most notable are Airbnb and Vrbo. And unlike hotels, vacation rental properties are tightly integrated into their respective OTA platforms for calendars, bookings, and distribution. As the VR space begins to develop its own brands (e.g. Sonder) that want to pursue first party distribution, we see the potential for cracks to form in the OTA boycott of Google vacation rentals. But for now, vacation rental brands remain a small part of the marketplace; alternative booking sites hold most of the cards and they are not playing them on Google. |
Airlines | SMALL | While Google flights has been wildly successful in terms of user adoption and traffic, it has been difficult to monetize. In fact, our understanding is that Flights is entirely non-monetized. We saw very little participation of meta or OTA players and believe that nearly all booking options are free links directly to airline booking sites. Remember that this market is small despite the size of the airline industry, as ticket commissions are 5-10x less than those earned for hotel rooms. We believe the consolidated nature of the airlines relative to accommodations has allowed the sector to present a united front in pushing back against Google and other 3rd party ticket distributors. Plus, the extreme anxiety that many customers have when booking airfares (which is often far greater than a similarly priced hotel room) seems to drive a need for a broader range of search websites. And in fact, we see some evidence that airline-focused metasearch sites, like Kayak, are performing better than their hotel-focused peers. This injects stronger competition into the airline meta market. |
Tours & Activities | TINY | Google’s tour offering is still quite fledgling. It doesn’t have its own standalone modules or webpages and only appears in sidebar widgets on certain specific searches. This means it requires either a lot of effort or luck on the part of the consumer to even find Google’s ‘things to do’ offering. No doubt Google’s efforts are being hampered by the extremely offline and custom nature of this business, which makes it difficult for any metasearch player to scrape fares, let alone pull mass data from an API. We believe that as the tours sector brings more of its inventory online, Google’s influence in this space will rise. But for now, its impact is tiny. |