Deep Dive Into Google’s Travel Ambitions

by Dennis Schaal + Skift Team - Nov 2015

Skift Research Take

Weighing in at three times the size of our standard reports, this expanded trends report offers exclusive insight into new Google travel products launched on November 19, 2015, as well as exclusive interviews conducted at Google's headquarters in Mountain View, California this fall. In addition, it includes industry analyst notes that are otherwise only available to clients and banks.

Report Overview

Google is already the dominant player in travel advertising but now, after four years of acquisitions and product development, the search giant is finally integrating its flight and hotel products. It is also ramping up Book on Google with the goal of making Google a go-to venue for travel transactions.

This report provides a first look at a new Google feature: its integration of flight and hotel products, along with restaurants, into vacation-destination search on smartphones. Contrary to industry speculation, a Google exec says it does not want to become an online travel agency like Expedia or Booking.com, but it wouldn’t mind it if the percentage of travelers, currently 60 percent, who begin their trip-planning with Google, rises in coming years.

This report features an exclusive, in-depth interview with Oliver Heckmann, Google’s vice president of travel, who details Google’s strategy, describes changes in user behavior that Google is addressing, and responds to criticism about the dominance of Google AdWords and Google’s own products at the top of the fold in search results pages.

This report, which includes the perspectives of online travel figures such as Kayak co-founders Steve Hafner and Paul English, a Starwood executive and the former distribution head of Northwest Airlines, as well as public statements about Google and the rise of metasearch booking from the CEOs of Expedia Inc. and the Priceline Group, features a raging debate about whether Google will eventually dominate online travel or whether Google’s strategy is fatally flawed.

The report also features UBS analysts Eric Sheridan and Robin Farley interviewing hotel digital-marketing expert Max Starkov, who argues that Book on Google is a “non-event” for the hotel industry because Google approaches travel retailing as a “side show” and its volumes are a fraction of TripAdvisor’s. This UBS interview was previously only available to UBS clients.

In addition to providing the exclusive interview with Google’s Heckmann from Google’s Mountain View, California, headquarters and a first look at Google’s new travel features, the report outlines a key business model difference between Book on Google and TripAdvisor Instant Booking, a difference that is widely misunderstood in the industry.

The report, which examines Google’s new vacation-destination search, Book on Google, the new Hotel Ads Commission Program2, Google Hotel Ads and Google Flights, also provides in-depth insights and best practices about participating in Hotel Ads from metasearch-auction optimization platform Koddi.

Of Google’s strategy, Heckmann says: “It’s a bit different than what the industry is doing, to exactly focus on the needs of the consumers, in particular, with this type of micro-moments world that we’re living in. Hotels and flights fits seamlessly into that [the new destination search]. I think that will convince you that we’re taking this very seriously. It’s just not copying what the industry is doing. That’s not a Google strategy. It’s also not our goal because we don’t want to become an OTA [online travel agency] or anything like that.”

Executive Summary

Google is already the dominant player in travel advertising but now, after four years of acquisitions and product development, the search giant is finally integrating its flight and hotel products. It is also ramping up Book on Google with the goal of making Google a go-to venue for travel transactions.

This report provides a first look at a new Google feature: its integration of flight and hotel products, along with restaurants, into vacation-destination search on smartphones. Contrary to industry speculation, a Google exec says it does not want to become an online travel agency like Expedia or Booking.com, but it wouldn’t mind it if the percentage of travelers, currently 60 percent, who begin their trip-planning with Google, rises in coming years.

This report features an exclusive, in-depth interview with Oliver Heckmann, Google’s vice president of travel, who details Google’s strategy, describes changes in user behavior that Google is addressing, and responds to criticism about the dominance of Google AdWords and Google’s own products at the top of the fold in search results pages.

This report, which includes the perspectives of online travel figures such as Kayak co-founders Steve Hafner and Paul English, a Starwood executive and the former distribution head of Northwest Airlines, as well as public statements about Google and the rise of metasearch booking from the CEOs of Expedia Inc. and the Priceline Group, features a raging debate about whether Google will eventually dominate online travel or whether Google’s strategy is fatally flawed.

The report also features UBS analysts Eric Sheridan and Robin Farley interviewing hotel digital-marketing expert Max Starkov, who argues that Book on Google is a “non-event” for the hotel industry because Google approaches travel retailing as a “side show” and its volumes are a fraction of TripAdvisor’s. This UBS interview was previously only available to UBS clients.

In addition to providing the exclusive interview with Google’s Heckmann from Google’s Mountain View, California, headquarters and a first look at Google’s new travel features, the report outlines a key business model difference between Book on Google and TripAdvisor Instant Booking, a difference that is widely misunderstood in the industry.

The report, which examines Google’s new vacation-destination search, Book on Google, the new Hotel Ads Commission Program2, Google Hotel Ads and Google Flights, also provides in-depth insights and best practices about participating in Hotel Ads from metasearch-auction optimization platform Koddi.

Of Google’s strategy, Heckmann says: “It’s a bit different than what the industry is doing, to exactly focus on the needs of the consumers, in particular, with this type of micro-moments world that we’re living in. Hotels and flights fits seamlessly into that [the new destination search]. I think that will convince you that we’re taking this very seriously. It’s just not copying what the industry is doing. That’s not a Google strategy. It’s also not our goal because we don’t want to become an OTA [online travel agency] or anything like that.”


Introduction

Four years after Google acquired ITA Software as the foundation for Google Flights and launched Google Hotel Finder, running them as separate entities, Google is finally putting the two entities together, but is doing so in a quintessentially Google way.

Don’t look for T-shirts branded Google Travel, a marketing campaign or a special domain to find Google’s integrated travel products. Instead, consumers will find the integration of Google flights and hotels on their smartphones as part of destination searches in response to queries in English around the world.

Here’s the first look at Google’s new vacation-destination search:

Search for “vacations in Italy” on a smartphone and you’ll find high-quality images and videos about things to do in Rome, Venice and Florence; side-by-side comparisons of destinations by interests; temperature and precipitation data by month; indications of the most-popular months to travel based on location data; and editorial content about these tourism destinations from the team of scribes that joined Google when it acquired Zagat in 2011 and Frommer’s digital assets in 2012.

From a travel-booking standpoint, though, the feature in destination search that will draw the most interest from the travel industry is “Plan a trip on Google,” located on a smartphone underneath photos and ratings of the top sights in Florence, for example.

Putting flights, hotels and restaurants together in this manner for the first time, the trip-planning feature displays links to:

  • 14-hour flights around $1,550
  • 3-star hotels average $80, 5-stars $260
  • Restaurants in Florence

topsights_planatrip

In this way, leisure travelers with flexible plans can gauge the total trip cost and the optimal time to travel to a destination and find a hotel. Tapping on the links brings users to Google Hotel Ads and Google Flights, which has new filters to search by interests and flexible dates.

As the dominant search engine in North America, South America and Europe, in particular, Google is leveraging Big Data to make smart recommendations based on traveler intent, location data, travelers’ itineraries mined through Gmail, and real-time flight and hotel pricing.

When Google announced it would acquire ITA Software for $700 million in 2010, a contributing factor was that Microsoft had acquired airfare prediction site Farecast a couple of years prior and was rebuilding a travel product after having spun out Expedia nearly a decade earlier.

Oliver Heckmann, Google’s vice president, travel, points out that Google’s new flight and hotel recommendations aren’t based on mere predictions from historical data.

“This is not some price averaging that is done or historically you pay this or that,” Heckmann tells Skift in an exclusive interview [see full interview below] prior to the rollout of the new vacation-destination search. “This is really in the back-end. We pulled the data currently out of Google Flight Search and hotel search of what’s available that you can book now. What’s the best flight? What’s a good hotel? All of the stuff we have is the actual available stuff. If there’s a fare happening in that week you’ve selected or expressed, it’s taken into account. If there’s a hotel that isn’t available anymore, it’s taken into account.”

Google’s travel aspirations aren’t limited to the new travel destination search. As it is doing in Google Shopping and other verticals, Google is intensifying its efforts to be seen by consumers as a booking and payment destination in itself in the form of Book on Google. In ways that are similar — but not identical — to TripAdvisor Instant Booking, Google is collecting travelers’ credit card information and facilitating the booking of hotels and flights on Google.com and in its apps while the hotel, airline or online travel agency remains the merchant of record and handles the customer service.

Google, of course, is already a major player in travel through Google AdWords. eMarketer estimates1 that the U.S. travel industry spent $4.85 billion on digital advertising in 2015, with online travel agencies, including Expedia and Booking.com, dominating the spend, and Google the leading recipient.

But will Google’s plan to take things to the next level in travel via destination search and Book on Google really work without Google trying to build a specific travel brand and identity?

In an interview [see below] that had previously only been available to UBS clients, Max Starkov, the CEO of hotel-marketing strategy company HeBS Digital, dismisses Book on Google, in particular, as a “non-event” for the hotel industry and “a side business” for Google because Google will be reluctant to alienate its large travel advertisers and won’t go about trying to convince consumers in an aggressive way that Google is a trustworthy place to spend their vacation budgets.

“It didn’t happen over the last four years since Google Hotel Finder was launched,” Starkov told UBS clients in early October. “I don’t see it happening anytime soon. And then again, so in this sense for all practical purposes, Book on Google is a non-event. Because it’s just a side business. It’s a small amount of clicks, a small amount of eyeballs. It’s not the major, major, major channel in hospitality.”


Google’s Strategy

Heckmann counters that argument, saying Google is investing ample resources into travel-planning features and it doesn’t have to — or want to — become an Expedia or Booking.com because Google, as a search engine, is in the business of providing smart answers, and already has the consumer eyeballs. Google also has 850 employees working on travel products and that doesn’t include sales people.

“Sixty percent of users start their travel planning on Google, and we’re committed to give them the best possible experience, and we’re happy if this number goes up,” Heckmann says. “You’ll see a product [travel destination search with flights and hotels] actually now that we’re pouring significant resources into. You’ll see that we’re actually doing stuff.”

Book on Google is designed to ease bookings for travelers as mobile has produced relatively small screen sizes. Consumer trip-planning behavior has also transitioned toward what Heckmann calls “micro moments,” short bursts of travel planning, in a few seconds here, a couple of minutes there, spread out over weeks or even months.

Google has also debuted a Hotel Ads Commission program, enabling hotels that want to participate in Google’s hotel metasearch program or Book on Google to do so by paying commissions at rates that the hotel sets. This is especially useful for smaller hotels that aren’t sophisticated cost-per click (CPC) advertisers. Google converts their commission payments into clicks so they can compete in the metasearch auction.

In a further differentiator, and unlike TripAdvisor Instant Booking, hotels and airlines can participate in Book on Google via CPC bidding or paying commission. TripAdvisor Instant Booking is commission-only.

“It’s a bit different than what the industry is doing,” Heckmann says, referring to Google’s strategy. “To exactly focus on the needs of the consumers, in particular, with this type of micro-moments world that we’re living in. Hotels and flights fits seamlessly into that [the new destination search]. I think that will convince you that we’re taking this very seriously. It’s just not copying what the industry is doing. That’s not a Google strategy. It’s also not our goal because we don’t want to become an OTA [online travel agency] or anything like that.”

One of the reasons Google chose to integrate flights and hotels in search rather than branding a product or establishing a domain in a narrower approach is because of user behavior, Heckmann says.

“If you just think about general travel planning it’s much bigger an interest than just finding a flight or a hotel,” Heckmann says. “People end up using Google or other search engines as part of that planning. If you are going to Thailand you need a visa, you need vaccinations and other things. There are plenty of other questions that you end up using in search to figure out.”

There are a wide variety of opinions about the wisdom of Google’s strategy.

Steve Hafner, co-founder and CEO of Kayak, a competitor of Google’s in metasearch and booking features, hadn’t seen Google’s new destination search when he talked to Skift because it wasn’t live yet. However, basing his opinion on the description, Hafner said that he “highly doubted” it would be “super impactful.” Hafner doesn’t believe it would provide consumers with additional convenience or save them money because it doesn’t combine flights and hotels into packages.

It sounds “suboptimal and doesn’t change anything,” Hafner says.

On the other hand, Hafner takes issue with Starkov’s characterization of Book on Google as a non-event. “I would never describe anything Google does as a non-event,” Hafner says.

Separately, Kayak co-founder and former chief technology officer Paul English, who is co-founder of Boston travel-tech startup Blade, says he’s dubious about Google’s ability to create transactional loyalty in travel.

“I’m skeptical that millions of people would ever give Google their credit card for travel purchases — travel is too expensive and too-rarely used — to create brand affinity for a horizontal search engine to be trusted by travelers,” English says.

Nicholas Ward, co-founder and president of Fort Worth, Texas-based Koddi, a bid automation platform for metasearch publishers, thinks four trends — improvements in flight search, comprehensiveness in hotel search, the rollout of search by interests and insights through tapping into crowdsourcing and data — are converging within Google’s travel initiatives that will eventually create “a killer travel experience.”

Ward says Google’s “flight search has gotten extremely good. It’s lightweight, fast, nearly comprehensive, and just works. Hotel search is nearly ubiquitous. As a user, it’s passable and we know Google has five to 10 features they can add at any time because they used to exist on Hotel Finder. It’s just a UX [user experience] question and how it fits into the search results.”

Google’s contextual travel searches, meaning searches by interest such as beach destinations or romantic hotels, will “get good to great,” Ward says. Google is making strides in adding relevant destination content through crowdsourcing and leveraging “insights based off real-time data,” he says.

“When these four forces do converge, Google will have a killer travel experience,” Ward says. “They would have to work hard to brand individual travel products. When it’s a great seamless experience, that’s just Google being Google, and I think that platform will be more than enough to continue winning users.”

For now at least, though, Google doesn’t intend to brand individual travel products.

Al Lenza, former vice president of distribution and ecommerce for Northwest Airlines and currently and an advisor and consultant for online travel companies, also believes Google will become a huge force in the travel industry.

“I think it is just a matter of time before they [Google] emerge as a big player,” Lenza says. “It is a little like TripAdvisor. Their brand and customer awareness are huge. They are in a different playing field.”

Asked if Google will continue to approach travel in a less-than-rigorous manner to keep the peace with its travel advertisers, Lenza doesn’t think so. Lenza points to global distribution system Sabre, which had vowed not to compete with its travel agent customers and then launched Travelocity in 1996.

Google will find ways to minimize the fallout with advertisers, Lenza says, adding that the search engine is positioned to succeed when answering customers’ queries such as “I want to fly from here to there in July on any airline.”

“They have the technology to answer that question, they have the advertiser and consumer loyalty,” Lenza says. “The only thing holding them back is them. It is just a matter of time.”

A lot of people would argue that Google holds all the cards to succeed, including controlling the real estate of search results pages and giving preferential treatment to its own products, a phenomenon that has attracted antitrust probes in the U.S., now concluded, and Europe. If you type in “Chicago hotels” the search results page is dominated by travel ads, and the only organic results above the fold are from Embassy Suites by Hilton Chicago Downtown and Hilton Chicago and they appear within a Google 3-Pack unit. The 3-Pack, shown in part below, displays three hotel results in a box, along with the nightly rate, user-review ratings, the star rating and amenities’ information.

Google travel chicago hotels

Click on either of the two hotel results shown and users would navigate to a Google Hotels Ads page, replete with a map.

When consumers search Google for “flights from chicago to paris france,” then the search results are even more advertiser-heavy with the entire screen above the fold taken up by Google AdWords buyers and the sponsored Google Flights with airfares visible from Lufthansa and United.

Google Flights

Asked about the way Google is handling search results pages, Google’s Heckmann says: “If someone is searching for hotels, a lot of text is not the answer. That’s why we built this new [3-pack] unit where hotels are showing up in there because that’s a better way of selecting a hotel. You can go to a full-page experience, you have a map view of the situation because that’s often how you look at a hotel. Clicking through 10 or 20 blue links and trying to figure out where the hell are they, that’s just simply not going to cut it anymore. I would actually say that was never really a good user experience.”

“It’s even worse in a mobile environment,” Heckmann says. “That’s why we built that [3-pack] unit and we put it on top of organic because everything in there is ranked organically. You can’t bid your way up to the top of that unit. That’s the new way we show hotels. We also still show the 10 blue links but that is the future of what we do. And that’s consistent with what Google is doing.”

This search environment makes it really tough for travel startups without huge funding to compete in Google and even big-name travel companies can find the environment challenging.

Speaking during a CNBC interview3 on November 5, Expedia Inc. CEO Dara Khosrowshahi essentially said that Google will play its cards and it’s up to Expedia and others to compete harder and faster.

“I don’t think you can hold Google in check one way or the other,” Khosrowshahi said. “You just have to move faster than the industry and competition. And to some extent Google is a great partner of ours. We advertise our brands very aggressively on Google and we get a lot of business from them. And at the same time you gotta stay competitive with them.

“We’re very confident that with the innovation we’re driving, the investments we are making in technology, the speed of our sites, we can be more than competitive with Google. And can see with the volumes – our room night volume, our air ticket volume – our growth are at records so obviously, you know, we’re growing, Google can grow. This is a trillion-dollar industry so we think there can be a lot of winners.”


Interview: Oliver Heckmann, Google’s Vice President, Travel, On What Sets Google’s Strategy Apart From Competitors

Oliver Heckmann, a Google vet of nine years, previously was vice president of engineering for YouTube in Zurich. A year ago he took the helm of the 850-person Google Flights and Hotel Ads product teams. Heckmann gave an exclusive interview to Skift from Google’s Mountain View, California headquarters prior to the launch of Google’s new vacation-destination search. The new feature integrates flight and hotel recommendations on smartphones in a way that Google hasn’t done before. Heckmann detailed Google’s travel strategy, including for its new Book on Google functionality and Hotel Ads Commission Program.

Skift: What’s ahead for Google Travel? As you know, you guys are already Google but does upper management say to you, “Hey, let’s take this thing forward. We want to be the next Booking.com or the next Expedia in travel?”

Heckmann: No, it’s quite different than that. We have a couple of things coming together nicely now. I mean Google flight search, Google hotel search and Hotel Ads. Those are kind of the basic building blocks that we’ve been working on in the last year, so we’re very happy with how they’ve turned out. Flight search is still doubling [its] user base every year for years in a row. We’re working with our partners so, we’ve increased the number of clicks that we send to partners by 250 percent in the last year.

Skift: When you say you’re doubling the user base…

Heckmann: The number of monthly active users, for example.

Skift: Right, but it’s still relatively small in the ecosystem.

Heckmann: It has become quite significant in the ecosystem. When we talk to airlines, they take us seriously now. We have some numbers that make us quite proud.

Skift: What has made the numbers increase? Is it just the quality of what you’re doing or something else?

Heckmann: The flight search team has a strong focus on what’s good for the user. It is one of the strongest user-focused teams that we have. We’re doing a number of things differently than the rest of the industry. First of all it’s easy to use, tremendously fast, we put an insane amount of effort in making it comprehensive and having the best possible data set that we can have in there. There have been a number of technical innovations that we’ve been driving. Some of them were needed to make it really fast, but we’re also basically trying to predict what users would normally do and want and execute, all of that.

We automatically search within a number of days of where you’re looking for, we have a flex date feature where we help you search over a longer period. And even if you don’t even need to express that just by clicking on the calendar, and then the calendar goes up. Just a calendar going up will immediately show you two months and all the prices for those two months. Immediately you’ll see, “Oh look, if I’m actually going later in August, which I can completely do, I’ll actually be saving significant money.” You can see all of that without having to actually query anything.

Skift: The data you have to determine what users want comes from Google search, right? From people typing in “Los Angeles to Paris flights?”

Heckmann: Yes. And on hotel search, we’ve launched a new user interface. It’s nicer; it’s more consistent with the rest of the Google look. Searching for a hotel you get a consistent experience as if you’re searching for a restaurant, for example.

Skift: So hotel search results appear in a three-pack now?

Heckmann: Yes and it leads into a beautiful, immersive experience when you expand it. With maps integrated, you see the prices in maps so that you can actually determine the typical trade-off between location and price. You can zoom, you can scroll, as you’re used to with the maps.

Skift: What has been the impact of decommissioning Google Hotel Finder as a distinct entity?

Heckmann: There’s been a shift in metrics. By and large, the user metrics went up. The partner metrics also improved with that change, otherwise we wouldn’t have done it. In the hotel space, it’s also interesting to mention that the Google way of CPC is not how the industry works. If you’re a large player in the industry, yes, you have enough data and you can deal with CPC and convert that, but it’s just different than the industry thinks. So it’s not the optimal way of…

Skift: In terms of commissions?

Heckmann: Yes. So we’ve actually launched the Hotel Ads Commission Program. We have the first significant number of partners using it, suppliers using it, and we’re extending and adding more.

Skift: Can you tell me a little bit about that? Where does it stand?

Heckmann: You’re really paying commission. You’re not paying per click.

Skift: What is the standard commission?

Heckmann: People give a commission.

Skift: Oh, they provide the commission amount?

Heckmann: And then we basically convert that into a click because you might be competing with someone in the auction who’s actually using the CPC model, and we do all of that work for the supplier.

Skift: So if the supplier says, “OK have a 10 percent commission…”

Heckmann: “Sir, I give you 10 percent commission for this item.”

Skift: And then they’re competing in the metasearch auction?

Heckmann: They might be competing with someone who says, “I’m giving you 10 cents per click.” And then we do the heavy lifting and number crunching and then rank the two against each other.

Skift: Some people have put forth the theory that it would probably bring a better return on investment for a hotel or for a large online travel agency to compete in metasearch rather than your Book on Google program because their effective commission using CPC is probably a lot lower than if they would agree to pay in a set commission.

Heckmann: You mention Book on Google; that’s an orthogonal [at right angles] thing. That doesn’t have to do with the commission program. It’s an additional feature so we’re mixing two things here. If you’re used to thinking in terms of commission, you can just give us the commission. You don’t have to figure out what’s the likely click-through rate for this property and for that type of user. And now what’s the cancellation rate and how do I convert all of that into a click and maintain the CPCs? So that’s a simplification on that side where also we then actually are responsible for making sure all that number crunching happens correctly. It has nothing to do with Book on Google.

Skift: What’s the latest on Book on Google? How is that progressing?

Heckmann: Book on Google is actually a big and important thing. So if you take a step back, one trend that we see across all of Google when we look back across all verticals, including travel, but not exclusively to travel, is a shift to mobile. Everybody is on his or her phone all the time. Whether they’re standing in the supermarket, they’re sitting at their sofa at home, in a restaurant, in the bathroom, wherever. People are on their phone all the time so there are multiple changes.

The obvious change was screen sizes are small, it’s harder to type stuff. The not-so-obvious thing is actually the session lengths have changed. In the past I might have done travel planning at home in front of my desktop computer the whole evening, or a full day on the weekend to plan everything. That’s happening less and less. It’s increasingly happening in what we call micro moments, small moments of time in between. There are many more of them, naturally, but they’re so much shorter.

Skift: Are these micro moments stretched out over more days?

Heckmann: It’s stretched out over many months. It depends exactly on the trip, not necessarily if I have to fly next week on a business trip, then it’s not going to be stretched out over months. We see micro sessions continuing on the same macro tasks over more than two months, for example. So that’s an effect and it’s a big change. It’s also a great opportunity because there are so many of these micro moments where an advertiser can kind of reach a user at the right time.

The small screen sizes don’t lend themselves to having 20 tabs open and explore all the flexibility that at least a leisure traveler typically has when traveling. “Oh I could go first week of August, I could fly on Monday, and I could fly on Friday, Saturday, and Sunday,” all of that is possible. On a desktop you might have opened 20 tabs and explored the small subset. On a phone that’s very hard to do.

Second of all you’re not even sitting there and spending your Sunday evening doing all of that. It’s much more likely you’re pulling it up and saying, “It’s raining, what about a quick trip to Italy? I lived in Europe for a long time. What about a quick trip, it’s neither raining in California, nor would I fly to Italy? What about a quick trip to Los Angeles for the weekend? Let’s just quickly pull that up.” Then you’re not going to be systematically opening 20 pages and checking 40 different dates. So smaller moments, less time; it has to go smoothly.

Let’s assume you do that and you find something. Now you want to book the ticket. I’m a leisure traveler. I don’t remember the password I needed two years ago when I flew with JetBlue. You have to sign up for that, recover the password, and figure out how copy and paste works on the device. Go to the email program, copy the temporary password there, set up the new one. I’m pretty sure many users will be lost and not convert in that moment.

That’s why we introduced Book on Google for flights and hotels, and as the micro moment spins so we’re doing this in other areas as well. For example, in Shopping it’s called Buy on Google but it’s the same thing. We allow you to basically convert directly on Google, saving you clicks. The additional advantage is you’re more likely to actually have your payment credentials set up with Google. On an Android phone you set it up as you were buying in the Google Play store, or you used it because you signed up for Google Shopping and you bought something there. So you’re more likely to convert.

The key difference, and that’s important to stress, we’re actually not the merchant or the seller. We’re really facilitating the transaction. We want the airline, or the hotel, or the online travel agency to own the customer relationship. They’ll be sending the email to the user, they get the email address, credit card information and all of it. They own the customer relationship. The difference is the conversion happens on a Google-hosted page instead of a seller-hosted page, and the advantage of that is it’s easier to convert. Fewer clicks, more likelihood of payment with entry setup.

Skift: What is the difference between Book on Google and Book on TripAdvisor? Is it the same thing in terms of the way it works and the partner branding? In Expedia’s third quarter earnings call, the CEO said he wants to test Book on Google because, for one reason, he thinks that it will provide better branding for Expedia than in Book on TripAdvisor. Then he’s going to let the data tell him what to actually do, but he’s very open to Book on Google.

Heckmann: I don’t want to speak on TripAdvisor’s behalf, but our philosophy is really: We’re in the travel space, we’re a search engine, we have users who are interested in travel. We want to be a really good in assisting the user, we want to partner with the industry for that. We have no ambition, no plans to become an online travel agency or an airline or a hotel or any of that. So we want good partnerships with the industry; it has worked very well for us. We’re proud of our hotel and flights product. We’re only able to build it because we had these great partnerships.

Skift: But can you tell me how Book on Google works?

Heckmann: For example, the Book on Google page will actually have the branding of the company you are buying from as well as the Google branding so that I know that I am in a Google space. I can trust this page.

Skift: Is Book on Google all with commissions?

Heckmann: Book on Google has nothing to do with commissions. You can say I’m going to bid with CPCs or on a paid commission.

Skift: I think that is indeed different than Book on TripAdvisor. I think Book on TripAdvisor is just done through two basic commission levels.

OK, so you want to be a good partner to the travel industry. You want to provide good answers for consumers in search. You know, there are a lot of people in the travel industry who are mad at you. For example, if I type in “Las Vegas hotels,” then basically the whole page of results is Google AdWords. Above the fold you also have the three-pack of hotel results, which you say is organic but it leads you right into the Google Hotel Ads program. Then the first really organic result that happens, below the fold is for the Westgate Hotel in Las Vegas, which TripAdvisor ranked as something like 146th out of 269 hotels in Las Vegas. One person even said to me, “Oh, Google is putting up a lousy results in order to discourage organic search.”

Heckmann: That’s not true.

Skift: So you want to provide the best answers, but a lot of times you’re not providing the best answers. Results from TripAdvisor or Expedia results, some of the most popular travel websites in the world, they’re not necessarily high up in organic results. I interviewed Priceline.com CEO Paul Hennessy at the Skift Global Forum in October. He said basically that digital marketing these days is a paid world. Priceline.com is going to play in a paid world and the implication was — he didn’t use these words – that SEO (search engine optimization) is kind of, if not dead, it is way down there now.

Heckmann: It’s the shift that actually comes back to the micro moments. You’re on mobile, you spend a shorter and shorter time. Also, with the whole shift to mobile and to user apps like Uber and so on expect to basically have more power than in the past within a short session. Be able to transact and finish everything and it should just take a minute or two. And we’ve been saying that for a long time across all verticals, that 10 blue links are just not going to cut it in that world.

If someone is searching for hotels, a lot of text is not the answer. That’s why we built this new [3-pack] unit where hotels are showing up in there because that’s a better way of selecting a hotel. You can go to a full-page experience, you have a map view of the situation because that’s often how you look at a hotel. Clicking through 10 or 20 blue links and trying to figure out where the hell are they, that’s just simply not going to cut it anymore. I would actually say that was never really a good user experience.

It’s even worse in a mobile environment. That’s why we built that (3-pack) unit and we put it on top of organic because everything in there is ranked organically. You can’t bid your way up to the top of that unit. That’s the new way we show hotels. We also still show the 10 blue links but that is the future of what we do. And that’s consistent with what Google is doing.

Skift: So you can’t bid your way up to the top of it and the commercial relationship has no impact?

Heckmann: Yes, it’s a purely organic unit. That’s also where we put in a lot of effort and we will be improving that unit of course. That’s what the Hotel Ads team is working on.

Skift: Which would you say is the more important development to Google or the travel industry, is it the commission program or Book on Google?

Heckmann: Both of them are important. They are orthogonal, as I said earlier. Book on Google spans the whole space versus the commission that is largely relevant more for suppliers than for OTAs (online travel agencies). They [commissions] are also more attractive for the smaller people [i.e. hotels] than the larger ones because the larger you are the more natural you would be converting to CPC.

Skift: So where does Book on Google stand now? You’re testing it?

Heckmann: It’s in early stages. We see very good conversion rates when suppliers use it.

Skift: Is Book on Google live now?

Heckmann: It’s live, yes.

Skift: Is it just in a couple of markets in the U.S.?

Heckmann: Partners can opt into it; it’s a pure opt-in thing. We’re talking to partners. We’re offering it to them. Actually, hotels is U.S.-only. For flights, we have partners in Europe.

Skift: What about Expedia and Book on Google? For months they’ve been saying we want to test it, we want to test it.

Heckmann: We’re talking to them.

Skift: How about Booking.com? Do they want to want to test with you as well?

Heckmann: I can’t comment.

Skift: In an interview [see below] for UBS’ institutional investors, Max Starkov of HeBS Digital argues that Book on Google is a non-event for the hotel industry because — you’ve heard this argument before — Google Flights has been around now four years. Google Hotels Ads has been around a few years and that Google has never really gone for it and been impactful. He says that TripAdvisor’s metasearch volumes for hotels are seven or eight times larger than Google Hotel Ads because Google doesn’t want to anger your best advertisers, and that you’re never really going to focus and make a big thing in the competitive landscape out of your travel program. Why is he wrong?

Heckmann: Sixty percent of users start their travel planning on Google, and we’re committed to give them the best possible experience, and we’re happy if this number goes up. You’ll see a product [destination search with flight, hotel and restaurant recommendations] now that we’re pouring significant resources into. You’ll see that we’re actually doing stuff.

It’s a bit different than what the industry is doing. To exactly focus on the needs of the consumers, in particular, with this type of micro-moments world that we’re living in. Hotels and flights fits seamlessly into that. I think that will convince you that we’re taking this very seriously. It’s just not copying what the industry is doing. That’s not a Google strategy. It’s also not our goal because we don’t want to become an OTA [online travel agency] or anything like that.


Destination Search With Flights and Hotels Mixed In

They come, therefore we will build it.

That kind of thinking is in play at Google, which has built out its vacation-destination search results on smartphones, integrating flights, hotels and restaurants for the first time and lots of other content because some 60 percent of travelers start their trip-planning with Google.

The following is the first public look at Google’s new vacation-destination search.

Google had always offered plenty of information about cities and other destinations but now its focus in answering travel queries is to use its tremendous amount of knowledge about traveler intent, itineraries from Gmail and global-positioning system data to show them as tourism destinations and to make smart recommendations based on its insights, travelers’ interests and flexible dates.

In a mobile search for “vacations in Italy,” for example, you’ll find high-quality images and videos about things to do in Rome, Venice and Florence; side-by-side comparisons of destinations by interests; temperature, precipitation and popularity data by month; editorial descriptions, and even recommended weeks to travel when flexibility about dates are indicated.

The following image shows how users view photos and concise side by side comparisons of the most popular vacation destinations in Italy by interests. Naples is noteworthy for “Pizza, art & the Royal Palace of Naples” while Milan gets high marks for “Fashion, ‘The Last Supper’ & the Duomo,” for example.

comparator

The user interface on smartphones is designed for what Google’s Heckmann describes as “micro moments,” the change in user behavior that has travelers doing their trip-planning in short bursts of focus extended out over weeks or even months on a train, in a supermarket, even in the bathroom.

Previously, users would “explore those four different dates in January on your phone in a micro moment,” Heckmann says. “You stop dreaming, it gets very hard. You get pain in your thumb from all that typing, right?”

The following image of a “Florence” search result shows editorial content, which Google engineers say is getting higher engagement than they envisioned, and high-quality images of top sights in the city. Google believes these images as very important, noting that in tests one in 10 users click through the image viewer and swipe through more than 10 images.

florence

The following image is the money shot in vacation-destination search where Google for the first time integrates its flights and hotel tools, along with restaurants, in such a way. And it comes via vacation-destination search results rather than a new branded travel product or a distinct domain combining Google Flights and Google Hotels Ads. Will this be enough to take things to a new level for Google? Google, and others, are confident it will while there are legions of doubters.

In this smartphone image of a Florence search result, underneath images, ratings and the specified main interests for the top sights in Florence, users see the invitation to “Plan a trip on Google.”

Putting flights, hotels and restaurants together in this manner for the first time, the trip-planning feature displays links to “14-hour flights around $1,550,” “3-star hotels average $80, 5-stars $260” and “Restaurants in Florence.”

The flight and hotel pricing isn’t based on predictions from historical data or averaging but comes from real fares and rates in the market, sourced from Google Flights and hotel partners, Heckmann says.

topsights_planatrip

In this way, Google has taken a lot of the time and pain out of search for consumers in their many micro moments of dreaming and trip-planning. Users can get a much better and quicker idea on a small screen about the total trip cost and begin the process of booking their flights and hotels. Tapping on the links brings users into Google Flights, which has new filters to search by interests and flexible dates, and Google Hotel Ads.

Users that tap over to Google Flights view recommendations by default on the best dates to fly to the destination. The user may not have yet indicated to Google when they want to fly but Google is giving them insights from its data on when are the optimum dates to fly to Florence, for example.

Very importantly, Google is also starting to pull flight and hotel information together so users can view the total trip cost. Following that, users can shop for flights and hotels in detail, indicating dates and whether they are flexible, nonstop flights or those with stops, and the purpose of the trip such as one for an anniversary.

In the following image of a search result for Florence, Google shows how it uses its gold mine of data to give travelers information on when to travel. The results show the temperature, chance of precipitation and popularity of Florence by month, and specify the peak time to travel, mid-June to mid-September. There are videos of Florence from The New York Times and ItalyGuides.it.

wtv_videos


Book on Google

If Google’s travel search and booking competitors have been apprehensive about the day Google would integrate hotels and flights into a more-compelling product, the ramping up of Book on Google, which began on mobile in a modest way in 2013, is viewed by some competitors, perhaps in a somewhat alarmist manner, as being just short of the nuclear option. That latter option would be Google becoming an online travel agency. Google officials, however, have repeatedly rejected the notion of wanting to become another Expedia or Booking.com.

But Google has recently expanded Book on Google, the emergence of which the Department of Justice cited in September 2015 as a rising competitive force and a factor in not blocking Expedia’s acquisition of Orbitz on antitrust grounds. Book on Google for hotels is open to Hotel Ads participants. Google expanded Book on Google beyond mobile to desktops and tablets for hotel bookings, and it is live in the U.S. only. Book on Google for flights is live in the U.S. and Europe. Lufthansa Group airlines recently became the first airlines to directly integrate into Google Flights for Book on Google. The messaging in the booking path reads: “Book with Lufthansa on Google,” for example, and then when users click over to a travel.google.com URL they see, “You’re booking with Lufthansa.com.”

Google’s acceleration of Book on Google along with TripAdvisor’s similar, but not identical Instant Booking, represent a new stage in travel booking as metasearch sites take on increasingly important new roles in capturing bookings instead of just referring leads to online travel agencies, hotels and airlines. Metasearch sites such as Kayak, which was the first to do so, and Hipmunk have been taking facilitated bookings for years but now the dynamic will become really significant.

With Book on Google, the search engine — and now booking site — collects consumers’ credit card information and handles the booking on Google sites and apps, although the hotel, airline or online travel agency remains the merchant of record and handles customer service. While Book on Google has attracted intense interest and some apprehension from Google’s travel industry competitors, it is not just for travel. Seeking to improve conversion in mobile bookings especially, Google is rolling out Book on Google, or it’s called Buy on Google in some cases, in other verticals, including Google Shopping.

Here’s a desktop example of Book on Google for Lotte New York Palace hotel.

The page lists the hotel name and address, as well as review information. There is no hotel logo and users see the message, “You are booking with Lotte New York Palace on Google.” The messaging and branding has become a key issue as Booking.com, other Priceline Group brands and Expedia had balked at signing up for TripAdvisor Instant Booking, citing lack of prominent branding in the booking path as one of the roadblocks. The Priceline Group announced Oct.14 that it reversed course and would indeed join TripAdvisor Instant Booking4, and TripAdvisor saw its stock price climb 24.75 percent and tacked on some $3 billion to its market cap that day.5

When Google users navigate to the payment page for the Lotte New Palace hotel, they view the messages: “Complete booking your room. You are booking with Lotte New York Palace on Google,” and “Secured by Google Payments.” Also: “The hotel will charge our $1,244.00 for the room at checkout.”

Expedia’s Khosrowshahi said his company has refused to join TripAdvisor Instant Booking but is open to testing Book on Google, adding Google would provide better branding for Expedia than TripAdvisor would. This would make things clear to consumers that although they would be booking a hotel on Google, Expedia would be the merchant of record and provide customer service. The branding issue may be somewhat of a smokescreen, though, because TripAdvisor has made concessions to the Priceline Group on the issue and Google undoubtedly would make concessions to partners too. Khosrowshahi said the data that Expedia gathers from testing Book on Google and feedback from consumers will drive the decision on whether Expedia ultimately will participate in Book on Google6.

Google’s Heckmann said the company is in discussions with Expedia about participating in Book on Google but he declined to comment about the prospects of attracting Booking.com.

In a cryptic, although non-specific reference to Book on Google, Priceline Group CEO Darren Huston said during the company’s third quarter earnings call on November 9 that the company is open to participating in third-party booking initiatives beyond Book on TripAdvisor when the branding is adequate and ROIs are reasonable7.

“We will also work to make adjustments in a similar instant booking path we have at Kayak, and are willing to work with other media owners who adopt similar principles that allow both the media owner and the advertiser an opportunity to promote differentiation in their branded offerings and to grow their businesses,” Huston said.

Asked about the potential ROI from TripAdvisor Instant Booking and Book on Google, Huston said: “We are on margin ROI-agnostic across various sources of demand. Of course, there are types of demand that work well for us where we will get really healthy customer repeat [business] that we like the way that the channel’s working that we might lean-in a little bit more. And then other channels where we may be getting customers, but we don’t like the nature of the customer or they’re not repeating in the right fashion, then we’ll lean back from that. So we’re agnostic in that sense.”

“I think the TripAssist execution is one that we would like to use across other partners,” Huston said. “We will make some changes on Kayak. We have been working very closely with Google, with Trivago, other players. And I don’t think it’s going to enhance our lives. I don’t think it will bleed away from our lives, and we’re going to have to watch as these things come together and we really get used to the consumer behavior, and whether or not this is a channel we will lean into or lean back from. But overall, we always try to earn money on every transaction regardless, and this will be a net positive from a cash flow standpoint for us, although not extremely material given kind of the size and scale of our business today.”

The Priceline Group’s participation in TripAdvisor Instant Booking or Book on Google, if it eventually joins, may not be a material factor for the $66 billion Priceline Group at this juncture, but Wall Street sees third-party booking as a threat to online travel agencies.

In a research note to investors in September, UBS analyst Eric Sheridan wrote that “Book on Google and TripAdvisor Instant Booking could create competitive/share headwinds for the OTAs longer term,” although it is “currently manageable.” There also could be “potential pressures” on the commissions that online travel agencies receive from hotels if Book on Google and TripAdvisor Instant Booking “turn out to be lower cost offerings” for hotels, Sheridan added.


Google Hotel Ads Commission Program

It is important to note that Book on Google and its Hotel Ads program, on the one hand, and TripAdvisor’s Instant Booking and TripAdvisor’s hotel metasearch, on the other, use business models that differ from one another.

Google introduced a Hotel Ads Commission Program in September geared mostly for non-chain hotels that enables hotels to participate both in Book on Google or Google Hotel Ads by paying commission. The Hotel Ads program previously had been available by cost-per click bidding only, and that was the norm for mostly large, sophisticated hotels that are savvy and experienced in using CPC auctions.

But what isn’t widely known is that Google is now allowing hotels to set their own commission rates and to participate in the Hotel Ads CPC bidding or Book on Google either by paying commissions or using CPC bidding. In the case of Hotel Ads in particular, the hotel sets the commission rate and Google does the calculations and turns the commission into CPC bids. The idea is to make Hotel Ads more accessible to smaller hotels used to paying commissions and that might have little experience in CPC bidding.

This is a big difference compared with Book on TripAdvisor, which is commission-only and comes with 12 and 15 percent commission plans for independent hotels. Meanwhile, TripAdvisor metasearch operates solely via CPC bidding.

A Google spokesperson explains that “with the Google Hotel Ads Commission Program, hotels opt into a model they know well (i.e. pay for actual guest stays on a commission basis) as an alternative to the cost-per-click model. Separately, eligible hotel partners can choose to integrate with Book on Google to offer an easier checkout option to their customers and help drive better conversion. Book on Google is an option for partners regardless of whether they pay on commission basis or on a CPC basis.”

Nicholas Ward of Koddi, the metasearch auction automation company, likes Google’s strategy.

“This is an astute move by Google,” Ward argues, referring to Google’s commission program. “It strengthens the auction, creates more options for users, and gives advertisers a way to participate with less risk. There’s an important flip side to this, as well, in that at the exact same time, Google has given better targeting tools to advertisers. So while they are mitigating risk for less-sophisticated advertisers, they are also enabling advanced advertisers to drive higher volume and better efficiencies than ever.”

Google is ramping up its Hotel Ads Commission Program in partnership with third-party hotel tech companies that already have access to hotels’ commission payments. These partners include DerbySoft, Fastbooking, Sabre Hospitality Solutions, Seekda, TravelClick, and Trust International. Google plans on signing on additional aggregators soon.


Google Hotel Ads

Google’s hotel-search products have evolved since it introduced Google Hotel Finder in July 2011 and retired it in September 20158. During the time between the rise and fall of Hotel Finder, Google developed Hotel Ads right within Google search and recently redesigned the user interface to make it more consistent with other Google search features. Google Hotel Finder and Google Hotel Ads in search were similar in many ways but Google didn’t need a separate hotel path through the Hotel Finder domain when it could deliver the goods right within Google search.

That’s a major advantage for Google over competitors: Users are already researching hotels in Google search and don’t need to open a separate metasearch product or navigate to a different URL to shop for hotels. In addition, Google Hotel Ads is now integrated into Google’s destination searches as consumers are planning their trips to vacation locales.

The following chart from Koddi, which optimizes bidding for clients in Google Hotel Ads and other metasearch platforms, shows the growth trajectory of Hotel Ads for its clients, especially on smartphones and tablets. For competitive reasons, the chart doesn’t specify the actual numbers but depicts the relative growth.

GrowthofGoogle

“All devices have driven growth but you can see mobile has been a rocket ship,” says Ward, referring to the chart. “We have some campaigns that drive more mobile bookings than desktop bookings.”

Today, when users search for “hotels in Barcelona,” they view a Google 3-pack of local hotel results that Google says is triggered organically. Google has modified these ad units, transitioning from an initial 7-pack to a 4-pack in November 2014 and then into a 3-pack in September 20159. Only one or two results from this unit appear above the fold and Google AdWords results surround the 3-Pack. As Heckmann explained, the 3-pack is organic in nature and that hotels can’t bid to appear in it.

Hotels near barcelona

However, when users select one of the hotel results, such as the Hotel Catalonia Barcelona Plaza for $91 per night, Hotel España for $118, or Hotel Barcelona Princess for $78, they navigate to a Google Hotel Ads page with a map, star ratings, reviews, a hotel description, directions and a link to the hotel website.

hoteladsbarcelona

The Hotel Catalonia Barcelona Plaza Hotel Ad shows booking options from advertisers Agoda (“Book from $91”) and sister company Booking.com (“Book from $93”). Selecting “View more rates” triggers different room options at the hotel from Agoda and Booking.com. Google added hotel amenities’ information to these Hotel Ads this year and “callouts,” which are merchandising opportunities for advertisers. For example, Agoda’s ad says, “Verified Hotel Reviews. Over 725,000 Hotels.”

Google will increasingly be adding Book on Google options for advertisers as more choose to participate in this booking program.

“The story with Google’s Hotel Ads experiments this year has been two-fold,” Ward says. “There are more experiments being deployed more broadly. It used to be that we’d see a small feature tested only in the U.S. If successful it would be rolled out globally many months later. Today, we’re seeing experiments launch globally, run for a short period of time, and then rolled out to all users globally. Just in the last two months we’ve seen callouts, a new Maps experience, and deeper room data being exposed.”


Starwood Tests Commissions and CPC

All of Starwood Hotels & Resorts’ 10 brands, ranging from Element and Aloft to Sheraton and St. Regis, participate in Google Hotel Ads.

“We have seen steady growth from the channel over the past few years,” says Julie Atkinson, Starwood’s senior vice president of global digital. “The volume has increased more dramatically over the past few months as Google tests changes to the placement of this product.”

The lack of merchandising opportunities for hotels and airlines participating in travel metasearch has been a consistent gripe for years.

Referring to Hotel Ads’ increased merchandising opportunities through features such as callouts, Atkinson said Starwood “would love to continue to see this product evolve and feature additional content that is specific to our brands. We always look for ways to merchandise the benefits of booking directly and we are optimistic that this channel will offer some of those merchandising capabilities.”

Starwood’s brands aren’t yet participating in Book on Google but have experimented with participating in the Hotel Ads auction by paying commission in addition to CPC bidding, Atkinson says.

“We continually test and optimize the traffic that Google drives as a referring domain,” Atkinson says. “We have researched and participated in both the CPA [cost per acquisition/commission] and CPC model to understand the best path forward in the long term for a big chain like Starwood.”


African Booking Site Jovago Likes Conversion Metrics in Hotel Ads

Jovago is a Nairobi, Kenya-based online travel agency that has participated in Google Hotel Ads since late September 2015 and is getting “great traction” within it, says chief marketing officer Guido Mancassola.

Mancassola says Jovago has found that its conversion in Google Hotel Ads is two times that of other meta channels and the bounce rate is 35 percent lower. “The lower bounce rate is a quite strong indicator on how Google Hotel Ads’ users like the UX [user experience] on the platform and have clear access to information they value for choosing their hotel, which is good for advertisers as at Jovago we pay to acquire visitors very deep in the funnel.”

Jovago, which offers 20,000 to 25,000 hotels in Africa, says bidding strategies in Google Hotel Ads can be more advanced than other channels, adding that advertisers can bid on a combination of CPC and “a percentage of the checkout value of the reservation,” namely a commission, Mancassola says. “This is clearly advantageous for advertisers to meet their ROI targets.”

In looking recently at Google Hotel Ads for Mvuli House B&B in Nairobi, Kayak occupied the top slot with an $85 per night rate but Jovago, which bid its way into the second slot, offered a lower nightly rate, $71.

Jovago CEO Paul Midy says the online travel agency can sometimes find lower rates from hotels than competitors because rate parity doesn’t apply in Africa and lots of rate negotiations take place in face-to-face meetings with the hotel manager.

“We have retail relationships with the hotel manager and we can negotiate a better price,” Midy says. “We are fighting every day to give the best available rate.”

Jovago doesn’t always beat larger U.S.- and European-based competitors on price but it can’t hurt its Google Hotel Ads’ presence when it does. However, as in the case of the Mvuli House B&B in Nairobi, Jovago got outbid by Kayak in Hotel Ads. Such is the nature of bidding that Kayak got the top position in Google Hotel Ads even though Jovago had the lower rate.


Interview: Max Starkov, HeBS Digital on Why Book on Google Is A ‘Non-Event’

As part of the UBS Online Travel Expert Call Series for institutional investors on Oct. 1, 2015, UBS Internet analyst Eric Sheridan and UBS lodging analyst Robin Farley interviewed Max Starkov, CEO of HeBS Digital, about Google Travel, TripAdvisor Instant Booking, and the implications for online travel agencies and hotels. An edited version of the interview is reprinted with permission; the talk was previously only available to UBS clients.

Eric Sheridan: So, Max, we’ve gotten a lot of investor interest and client questions over the last week about what Google announced last week [a commission program for hotels]. Maybe you could bring us up to speed from where you sit in the marketing world about what Google actually announced and what it means now for instant booking as the platforms are developed.

Max Starkov: Well, basically Google transformed its purely advertising cost per click platform, which was Google Hotel Ads and Google Hotel Finder into a purely OTA type, or online travel agency type, of a commission-based product10. And so that’s why the hospitality industry is, I would, say very agitated, as we speak. And there are a lot of conflicting opinions. But generally speaking, the sense is that Google has joined the dark side by becoming a commission-based service, commission-based submission channel, the same, as you know, many others.

So, for example, Kayak.com has the service for many years and TripAdvisor’s Instant Booking, or Book on TripAdvisor, is another example of this moving to the dark side where an advertising format becomes a distribution channel format and it deprives hoteliers from opportunities to manage the direct online channel. And it diminishes the direct online channel.

So that’s the overall sense in the industry. As for Google, basically Google Hotel Finder is disappearing. It was in beta since 2011. They had beta within the beta with this commission- based new product, Book on Google. And now all of the pricing ads on Google will be converted into a purely OTA-type of a functionality where people will book and stay within the Google environment. And then on the back end this pricing information is being pushed to Google. And, conversely, when somebody books on Google, this information is passed down to the hotel, similar to what’s happening on Expedia, on Booking.com and so forth.

Sheridan: So when you think about how these platforms are going to develop, there will be the Book on TripAdvisor and the Book on Google side of the equation, but there’s still going to be a meta component to both TripAdvisor and Google, as well. How do you think clients will look at that as the landscape sits now? And how do you think both sides of the equation for the likes of TripAdvisor and Google will develop both from an inventory perspective and an ROI perspective over the next sort of six, 12, 18 months?

Starkov: There are two perspectives here. Let’s see the hospitality industry and the OTAs. Right now all the OTAs benefit from Google, of course. They are one of the biggest advertisers on Google. They bid very heavily on hotel-branded terms, which are the hotel name. For example, Ambassador Hotel Indianapolis is such a branded term. And the OTAs generally speaking take advantage of hoteliers being asleep at the wheel. And investing in the digital initiatives and so forth. Expedia and Booking.com are one of the top advertisers on Google period in Google AdWords. And again, the CPC model works for them because the OTAs are extremely good at managing their cost of acquisition.

Now all of the sudden all of this disappears and they have to share their commission. Let’s say somebody goes to Google and identifies a property, and Expedia works with Google and is part of the Book on Google program. Expedia has to share its commission with Google. And this is what I believe the major OTAs will evaluate whether sharing a commission with Google — for example, paying Google 10 percent from the 22 or 23 percent commission that Expedia gets — with 10 or 12 percent going to Google. Is this more expensive than the average cost per click that I am generating until now on Google Hotel Ads?

And I believe that the answer will be yes, it will be more expensive. And again, the main reason is that the OTAs have become masters of managing their cost of acquisition. And right now there’s nothing to manage there. Because if you’re part of the program, people book, you pay Google a set commission without any opportunity for you to become more efficient, to have a more efficient presence there, and so forth.

So from the OTA perspective I believe that if they participate they’ll be extremely reluctant. And second they will think twice and they will do their analysis big-time before they even join the program.

On the other hand, in hospitality we see that many of our hotel clients generate much higher return on ads spent from the CPCs, which doesn’t justify paying a commission of let’s say 12 to 15 percent to Google in this new program. So basically they will be paying more to Google if they join the program as opposed to currently under the cost per click Google Hotel Ads and Google Hotel Finder scenario.

So the hospitality industry again will be doing the math and will not be joining in. There won’t be the avalanche that Google expects. And the main reason is that hoteliers will be thinking price, they’ll be doing the analysis, and will be redirecting their attention to cheaper distribution channels.

So I would say there are mixed feelings in the industry regarding this. There’s a sadness because one of the only few remaining direct online channel marketing initiatives is being converted into an OTA-type of initiative and that’s what the industry doesn’t like. So as far as our lives are concerned, let’s put it this way: 15 percent commission is equal to 600-and-change percent return on ads spent, which is the typical advertising industry way of measuring success. So we have the average across our client portfolio for Google Hotel Ads, for example, is 715 percent. But we have many clients that exceed it depending on their brand recognition and so forth, and it exceeds 1,000 percent, 1,500 percent. So if they joined Book on Google, the new functionality, they will be paying twice or three times more in the form of cost of acquisition compared to now. So that’s the ROI component to it.

Sheridan: The OTAs themselves in their public statements have been reluctant to adopt TripAdvisor’s Instant Booking product11. But in statements that have been made prior to Book on Google there was more of an openness maybe from the OTAs to embrace an instant booking-like product if it was branded differently, if it had a different customer relationship component to it at Google from some of the statements Expedia and Priceline had made.

How do you think the OTAs will look at the two different products and the two different platforms on a going-forward basis?

Starkov: Well, let’s put it this way: There’s a major, major difference between Book on TripAdvisor and Book on Google, and the reason is volume. The reason is traffic. TripAdvisor generates seven to eight times more relevant traffic through their Instant Booking functionality, the Book on TripAdvisor, and the metasearch functionality than Google via the Google Hotel Finder or Google Hotel Ads and so forth.

So Google’s new entry into this whole OTA-type of a product is a side business for Google. It’s insignificant as far as traffic is concerned. So the OTAs are looking at Google as a whole and say, “OK, so we will consider to advertise on Google as far as Google AdWords, as far as display advertising on the Google display network, advertise in YouTube, we will do all of the new Google formats …” There are five or six different advertising formats on Google outside of display, YouTube, and Google AdWords. “And, yes, because Book on Google is such an insignificant side business that Google doesn’t even promote it, yes, we will participate so as not to antagonize Google.”

But as soon as Google starts to promote Book on Google on national television in some format, believe me there will be a major backlash on behalf of the OTAs. Simply because — and I believe that Google will not do that — Google wouldn’t want to alienate their major advertisers, which are the OTAs. Since 2011 until today Google has not advertised Google Hotel finder, Google Hotel Ads in any shape or form and has relied on organic word of mouth- type promotion and the results are that this a very side, very insignificant side of Google.

And the main reason is that Google is known as the main librarian of the universe. You go to Google to find the most relevant information. You don’t go to Google to book a hotel. Or to buy a book. Or to reserve a restaurant table. You go to Marriott or to Expedia to book a hotel. You go to OpenTable to book a restaurant table. Or you go to Amazon to buy a book or any ecommerce activity. And the main thing is that Google Hotel Finder and now Book on Google inserts itself into the last mile of the travel decision and hotel-booking process without belonging there in the minds of the online travel consumers. So Google has to do a lot of convincing, which means promotions, advertising and publicity to convince the traveling public that when you think about booking a hotel come to Google.

That’s not happening. It didn’t happen over the last four years since Google Hotel Finder was launched. I don’t see it happening anytime soon. And then again, so in this sense for all practical purposes, Book on Google is a non-event. Because it’s just a side business. It’s a small amount of clicks, a small amount of eyeballs. It’s not the major, major, major channel in hospitality.

TripAdvisor, on the other side, is the largest hotel website on planet earth. It’s bigger than Marriott, it’s bigger than Hilton, it’s bigger than Starwood, it’s bigger than all of the public, mega hotel chain companies combined. And it’s bigger than Expedia. So the fear among the OTAs is that by converting itself into a OTA, TripAdvisor would be a humongous competitor with a very sticky audience that now has to be trained to start accepting TripAdvisor as a booking destination, as well.

Robin Farley: So, Max, I wonder if you could give us a little bit of color and walk us through how the economics are different for hotels. You mentioned that it is significantly more expensive for them. But can you talk specifically about commission levels paid to the OTAs versus commission levels paid to TripAdvisor?

Starkov: First of all, in talking about hotels we have to differentiate between branded hotels, the major hotel brands, and independents. So the major hotel brands like Marriott, Hilton, Starwood, and so forth, their commission levels with Expedia are between 13.5 and 15 percent. And their commission levels with Booking.com are let’s say between 12 and 14 percent. While independents typically with Booking.com is 18 percent, Expedia is 25 percent.

TripAdvisor Instant Booking starts at 12 percent but most of the people that join are pushed one way or another to join at the 15 percent level. Because TripAdvisor has this very weird formula as to impression share. When you join TripAdvisor, if you want your property to be featured at least 50 percent of the time, then you have to pay 15 percent commission. I’m talking about independents here now. When a major brand joins TripAdvisor the commission is 10 percent or below.

Farley: OK so your commentary about it being more expensive was not for the hotel brands? It sounds like for the hotels it’s not more expensive to go through TripAdvisor?

Starkov: Generally speaking, it’s more expensive. Again, let’s compare apples to apples. If you are on TripAdvisor and you’re an advertiser in the metasearch, the cost per click on TripAdvisor — you can achieve higher returns on ad spend — basically translates into 5 percent commission, 6 percent commission, 7 percent commission, or 8 percent commission. So when you replace advertising on metasearch with being part of Book on TripAdvisor as an OTA channel, then you immediately jump from this level to a minimum of 12 percent and let’s say a maximum percent12.

Farley: In addition to those different commission levels what are the other puts and takes for a hotel in deciding between the two? Why go from advertising for the metasearch to the direct booking if it just … do you think it would be all incremental? Why do it?

Starkov: Let’s put it this way: Why didn’t Marriott join TripAdvisor Instant Booking six months ago [Marriott joined in June 2015]? Or a year ago when it was announced? Marriott was adamantly opposed to it. Followed by Hilton. Followed by Starwood. Why? Because they’re losing a viable direct online distribution initiative, advertising initiative. Because in their minds they should be dealing with less OTA distribution and more direct distribution. So now, on the other hand, TripAdvisor has claimed, and the same with Book on Google by the way, that this is a direct booking with a hotel, which is very false advertising.

Because look at it from the travel consumer perspective. You go to TripAdvisor, select a hotel, you see the booking widget there, you book with TripAdvisor, which asks you for your first name, last name, address, credit card information and email. You receive a confirmation page that tells you thank you for booking TripAdvisor. Now how is it different than booking on Expedia? Or Booking.com? It’s exactly the same. The experience of the travel consumer on Book on Google or Book on TripAdvisor is exactly the same as the experience on Expedia or Booking.com. So what I mean is that all of this claim that this is a direct with the hotel booking is, in my view, false advertising. And the main reason is that TripAdvisor and Google insert themselves between the supplier of the goods and services — which is the hotel — and the travel consumers. And this, again, this is the very definition of what a direct booking or direct purchase or direct channel or direct interaction is all about. So in this sense, for practical purposes, this is an OTA type of a distribution channel.

Farley: So then why, in your view, do the hotels get around to using TripAdvisor?

Starkov: The main reason is consolidation in the OTA business. That’s why. If, for example, today we continue to have Travelocity as an independent business, Orbitz as an independent business, Expedia and Booking.com, then Marriott would not have joined Book on TripAdvisor. They did it only after Travelocity first and then Orbitz were acquired by Expedia. After the consolidation in the marketplace. Because they’re losing leverage over the big OTAs.

In the past when Marriott and Expedia sit in the same room and negotiate, these are two 800- pound gorillas negotiating. Now when Marriott sits with Expedia, one is a 1200-pound gorilla, the other one is still an 800-pound gorilla. And that’s why Marriott needed another leverage — which in this case is TripAdvisor — so that when they sit with Expedia and say, “By the way guys, of course we want to lower your commission because do you know that our commissions with TripAdvisor, which is the largest travel website in the world and we’re seeing tremendous results from our participation in Instant Booking. Our commission stays less than 10 percent. So why would we pay you 14 percent? Why?” That’s why they joined. No other reason.


Google Flights Is Sending More Clicks to Airlines

Google introduced flight metasearcher Google Flights at Google.com/flights in 201113, about a year after it acquired ITA Software for $700 million. The feature primarily links to airline websites but also presents advertisements from online travel agency partners at the bottom of its first search results pages.

googleflightswithimages

Google Flights, which is now available in about 17 countries, is also accessible through Google search and also newly integrated into vacation-destination search in particular. Google’s Heckmann says Google Flights’ monthly active users have been doubling consistently over the past few years and that Google Flights has been sending advertisers 250 percent more clicks year over year.

“It has become quite significant in the ecosystem,” Heckmann says. “When we talk to airlines, they take us seriously now. We have some numbers that make us quite proud.”

Unlike Google’s organic 3-pack unit of Local results for hotels, flight-search results in Google search are labeled “Sponsored” with the proviso, “Based on your search query, we think you are trying to find a flight. Clicking in this box will show you results from providers that can fulfill your request. Google may be compensated by some of these providers.”

flightsfromnytoparis

When searching “new york flights to paris” and after selecting nonstop flights from American Airlines, users can filter options by price, times and connecting airports. Given Google’s computing power and other factors, the search results arrive in an extremely fast manner. Alongside an option for a $1,013 roundtrip, a Date tip appears: “Save $250 if you leave on Wed, Nov. 25, and return on Mon, Nov. 30. Depart 2 days earlier, return 1 day earlier..”

When the user selects an outbound New York (JFK) to Paris (CDG) flight, Google informs users “Average legroom (31”), Overnight flight, Often delayed by 30+ min, 7h 15m, Some seats with power, No Wi-Fi.” The power and Wi-Fi information comes from Routehappy.

After selecting an outbound flight and then “Book with American,” users navigate to AA.com for booking.

Google has been adding lots of new features to Google flights, including its integration along with Hotel Ads into vacation-destination search. There are filter views, the ability to search flights by interest, flight-date recommendations based on Google’s insights about the best week or season to fly.

For example, when users search flights according to their “winter sports” preference, Google might recommend places near Zurich Airport or Vancouver Airport. In this way, Google is tying together destination activities based on interests with airports.

When it comes to flexible dates for flying, Google has launched a price graph. For example, users can choose to look for flights over eight- or nine-day spans and Google will display the airfares over that time period, showing the pricing peaks and troughs.

Google expects Book on Google to get traction in flights. Under this scenario, consumers might be able to book a Virgin Atlantic flight on Google through its partnership with BookIt or a flight from Lufthansa, which has become the first airline partner to directly integrate into Book on Google.


A Veteran Airline Distribution Guy is Concerned About Google’s Rise

Al Lenza, formerly vice president of distribution and ecommerce for Northwest Airlines and currently and an advisor and consultant for online travel companies, says Google Flights is generally considered as being an airline-friendly model today as it emphasizes referrals to airline websites over online travel agency advertisers. Some airlines pay for these leads and some don’t, Lenza says.

Unlike some analysts who downplay Google’s moves in travel, Lenza says a majority of travelers start their trip-planning with Google, and he has little doubt that within a few years Google will transition into becoming a powerful force in flight and hotel booking.

“There is no question Google Flights is growing,” Lenza says, adding that it isn’t much of a threat these days to airlines that prefer direct sales on their websites without a go-between such as Google, Kayak or Skyscanner, for example.

“I think they [Google] are getting some traction and being supplier-friendly is a way to gain traction,” Lenza says. Lenza says Google controls search results and travel advertisers, and he and other observers point out that Google has a tremendous amount of data to work with about travel intent, and can even mine Gmail for access to travelers’ flight and hotel itineraries.

“Google controls the search results and controls the advertising, Lenza says. “That is very powerful.”

Lenza cautions that working with Google might seem like a sensible strategy today but warns that the balance of power will change when Book on Google gets traction. “What will they (Google) be doing when they have all those customers?”


Insights and Strategies

The following best practices about Google Hotel Ads are from Koddi:

Start with great location data. Without it, your ads will never show, or in rare cases will show when users are searching for the wrong properties. Great location data is accurate, kept up to date, and accessible so that corrections and optimizations can be made to it easily.

Choose the right program. The commission program is great for less-sophisticated advertisers to get into the channel, or even for more sophisticated advertisers to put certain markets on autopilot. The trade off is competitiveness. The CPC program gives advertisers more powerful tools to maximize performance and target the exact bookings they want.

In addition to measuring campaign performance and marketing KPIs, the most effective advertisers keep their Match Rate; Price Accuracy; Price and Itinerary Coverage; and Competitive Rates values as high as possible at all times. They measure these values and improve them proactively.

Plan to optimize your landing pages. Google has some particular nuances around what dates and rates are shown to users; the best advertisers treat these scenarios differently with the right landing experience based on performance. We tell clients anything less than six landing page tests per year is too few.

Know your portfolio, but be open to learning something new. Google traffic behaves differently than other channels, sometimes drastically for the better and sometimes not. We always recommend launching with a ground-up approach and often find pockets of performance that surprise our clients. It is particularly powerful for an advertiser to have a sense of where they have a pricing advantage and where they don’t since this impacts click volume, CPC, and conversion rate.

Create sanity checks for the campaign. One of the most powerful tools in Google is a setting called ‘Max CPC,’ which allows an advertiser to opt out of very expensive clicks. When launching a new client, we always look back at their most expensive click. The highest CPC we’ve seen in a pre-Koddi campaign was over $250. Max CPC prevents this from happening. Every campaign should have this set up, and it takes 30 seconds to enable.

Use all the multipliers available in Google. In Hotel Ads, advertisers can bid by User Country, Stay Length, Check In Day of Week, Hotel Price, User Device, Google Site (where the ad shows), and Advanced Booking Window. There are even more options for especially clever advertisers. A large number of advertisers still don’t use these bidding levers at all, meaning they are over paying for traffic they don’t want and are not competitive for traffic they do want.

Track call data on mobile campaigns. Most advertisers today aren’t doing this, and they are missing out on huge mobile volumes as a result. Some of our advertisers get more bookings from mobile than desktop ads now, and this composition moves more towards mobile every month.

Integrate internal tracking and profit data. The pixels offered by publishers are beneficial but are also extremely generous in their attribution. We often see metasearch users click on many ads before booking. Using internal data ensures that bookings aren’t over-reported across multiple channels.

From Jovago, an online travel agency based in Sabo Yaba, Lagos State, Nigeria:

After testing different approaches in clustering hotels for bidding (we adapt a bidding strategy based on clusters), it has proven to be highly effective to define these clusters based on price competitiveness (price competitiveness of Jovago versus other online travel agencies).


Endnotes and Further Reading

  1. http://www.emarketer.com/Article/Mobile-Ad-Spend-Takes-Off-Slowly-Travel-Industry/1012537
  2. http://adwords.blogspot.com/2015/09/google-hotel-ads-makes-it-easier-for.html
  3. http://video.cnbc.com/gallery/?video=3000445684
  4. http://skift.com/2015/10/14/booking-com-finally-joins-major-hotel-chains-in-book-on-tripadvisor/
  5. http://skift.com/2015/10/19/interview-priceline-com-ceo-explains-the-tripadvisor-deal/
  6. http://skift.com/2015/10/29/expedia-lauches-direct-hotel-booking-on-trivago-in-response-to-tripadvisor-priceline-partnership/
  7. http://skift.com/2015/11/09/priceline-group-leaves-door-open-for-booking-through-google/
  8. http://www.geomarketing.com/google-retires-hotel-finder-migrates-all-old-features-and-new-ones-to-maps
  9. http://searchenginewatch.com/sew/opinion/2425874/google-3-pack-shake-up-5-ways-to-adjust-local-seo
  10. Actually, although it isn’t widely understood, hotels and online travel agencies can now participate in Google Hotel Ads and Book on Google by paying commissions and/or bidding on CPCs.
  11. This interview took place before the Priceline Group agreed to participate in TripAdvisor Instant Booking.
  12. In reference to the 5 to 8 percent commissions, UBS sent a clarifying note to clients after the Starkov talk: “Our expert indicated that for a subset of hoteliers, using meta-search sites (on a CPC basis) to generate direct bookings can lead to effective commissions as low as ~8% – 12.5% (and for some, as low as 5%) when these hoteliers are not attempting to compete for the top slots, where the OTAs typically bid CPCs to much higher levels. This suggests that ~10% IB commissions (est. for large brands) would sit below the ~12-15% OTA commissions paid by brands, but potentially higher (for some hoteliers) than paying for clicks and taking the booking directly (albeit potentially offset by mix shifts).”
  13. http://www.tnooz.com/article/google-launches-flight-search/