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A Deep Dive Into the Google Travel Ecosystem 2018

by Luke Bujarski, Seth Borko + Skift Team - Dec 2017

Skift Research Take

Believe it or not, these are still early days for Google in travel. Without question, the company will continue to grow its multi-billion dollar advertising business by securing stronger direct relationships with both the supplier and the traveler.

Report Overview

Google has always played a pivotal role in travel, since the early days of search. Now, travel ad spend accounts for a significant portion of the company’s total ad revenue, about 12 percent according to Skift estimates. More recently, the company has upped its sophistication in facilitating various travel functions including hotel and air search (and book) but also in-destination activities, reviews, and ground transport. Numerous successful pivots to mobile proved crucial in positioning the company as an all-purpose travel platform. This transition over to product has also put Google in more direct competition with OTAs, other metasearch players, as well as the suppliers all vying for ownership of the customer. While we expect Google to capture significant market share, this shift will prove gradual. Currently, global hotel chains acquire under 10 percent of their bookings through Google AdWords and Hotel Ads. The rest comes from OTAs, direct marketing, and other channels including group bookings and rates negotiated over the phone. Hotel spend on Google is expected to increase through 2018. Some see the company as an OTA killer. Our sensitivity tests show that it makes little business sense for Google to proactively seek to displace its largest advertising partners. Short of completely upending them, Google’s position will continue to push existing players to evolve new and blended business models that combine distribution with other value-add functions for suppliers.

What You'll Learn From This Report

  • How the Google ecosystem complements and competes with other players in the market
  • What Google’s expansion into ad-driven travel apps means for hotels and airlines
  • Baseline economics and corporate structure of Alphabet Inc.
  • Differences between hotel direct and indirect customer acquisition strategies
  • 2017–18 data on hotel distribution mix for branded and independent hotels
  • Evolving online travel agency (OTA) strategies as a hedge against the rise of Google Hotel Ads
  • What Google’s growth in travel means for other metasearch players out there
  • Breakdown of Google ad revenue and why the company is NOT trying to become an OTA
  • The nuts and bolts of running a Google Hotel Ads campaign

List of Figures

  • What does your current distribution mix look like? Results from Skift’s State of Hotel Direct Booking Survey 2017
  • Over the next 24 months, will your spend on the following channels increase, decrease, or stay the same? Results from Skift’s State of Hotel Direct Booking Survey 2017
  • Google Ad Revenue from Large Hotel Brands. Skift Estimates
  • What channel do you typically use to book a hotel? Results from Skift’s U.S. Experiential Traveler Survey 2017
  • Through which channel do you normally get the best prices for travel services? Results from Skift’s U.S. Experiential Traveler Survey 2017
  • New/ Lost Google Revenue from Hypothetical OTA. Skift Estimates
  • Approximately what share of your total bookings come direct through your airline website? Results from Skift’s 2017 Airline Survey on Leadership in Ancillary, Revenue Management and Marketing
  • Approximately what share of your bookings come from loyalty member customers? Results from Skift’s 2017 Airline Survey on Leadership in Ancillary, Revenue Management and Marketing
  • Google Maps overall ranking in the U.S. iOS app store
  • Travel searches on YouTube have tripled over the last five years
  • Top 1,000 Travel Queries