Tech giants like Google and Amazon, with their vast resources and large data reservoirs are venturing into the travel domain, changing dramatically how consumers will choose to book trips in the future. Their presence in the online travel sector is sure to pose a threat for online travel agencies (OTAs), the original digital travel disruptors, who still need to rely on the search engine giant for traffic generation.
Online travel agencies (OTAs), who are still reeling under Covid’s impact, are the first to take a blow as the very space that gave these OTAs the opportunity to identify and reach unmet travelers’ needs, is threatening to be their undoing.
Last year, Google came in second to Expedia as the one-stop shop travelers choose to go to, according to the Portrait of American Travelers study by travel and hospitality marketing firm MMGY Global.
According to GlobalData, in 2020, the OTA market value decreased by 60.4 per cent year-on-year (YoY), to $190 billion. Google’s continued foray into online travel, and the fact it is still needed and will continue to be needed by OTAs, as they look to recover from the impact of the pandemic, represents a real threat to this sector.
Ralph Hollister, Travel and Tourism Analyst at GlobalData, comments: “Google’s growing presence in online travel will be ominous for OTAs that have no choice but to rely on the search engine for web traffic. Regulators are starting to control Google’s practices, but the company has to be treated differently due to its position as a dominant search engine, as well as the fact that it is not offering directly competing services. Low competition can lead to rising prices, so it is vital for all travelers that the right balance is achieved.”
Laura Petrone, Thematic Analyst at GlobalData added: “Google certainly has a huge responsibility when it comes to competitivity. Google has a monopoly over internet searches, and it has been accused many times of violating competition law to preserve this monopoly.
“Digital platforms like Google can use data generated knowledge from one market and taking advantage of their scale, they can expand their services to new markets. However, they need to be careful: in doing so they end up attracting even more regulatory scrutiny, as they are viewed as data monopolies in whichever sector they move into.”
Google made its first step into the online travel space in 2011 with the launch of its hotel finder and since then its focus on the market has only grown. In 2019, Google launched its travel hub, added flight check-in and hotel booking abilities to Google Assistant, attached lodging listings to its maps function and created a search site for hotel availability by destination.
From 2015 to 2019, the OTA market was seeing growth of 9.4 per cent compound annual growth rate (CAGR), reaching $480.3 billion. This rapid growth rate and future growth potential intensified Google’s focus on online travel.
By 2019, the OTA market was already blaming weakened visibility in Google search results for poor third quarter earnings. Expedia Group’s net income fell by 22 per cent YoY in Q3 2019, which it partially blamed on changes to Google’s algorithm, resulting in lost visibility.
Hollister continued: “Google really ramped up its activity in online travel prior to the pandemic. When looking at 2019 alone, Google launched its Travel Hub, added flight check-in and hotel booking abilities to Google Assistant, attached lodging listings to its Maps function, created a search site for hotel availability by destination, and Alphabet even launched its own ride hailing app.
“Google clearly has both the business model and capital needed to better weather an event like Covid-19: by 2020, Alphabet’s (Google parent company) revenue was over 15 times the amount of Booking’s and Expedia’s combined. Struggling OTAs will rely more and more heavily on Google Search traffic as they look to recover from the impact of the pandemic. Google will have to be mindful not to expand or act too aggressively in the short-term, or it will face more frequent anti-competitive claims, lawsuits, and fines.”
In March 2021, Google announced the launch of its hotel free booking links program. This program aims to give hotels more visibility, with a chance to participate in metasearch without the ad spend requirement, taking away further from OTAs. This allows hoteliers to include a link to their direct booking engine in the Google metasearch results with no cost per click. The free links usually show below the paid OTA links, so shoppers might need to click “View more rates” to see them, but sometimes they do appear in the top four links.
The launch will help to create a more level playing field in the online lodging market, but is sure to disgruntle owners of OTAs.
As with most digital upstarts, it is clearly time for OTAs to disrupt again or risk being disrupted.
This could be by fine tuning their use of paid search or switch to become one-stop online travel shops who provide full-service travel planning, including tours, activities, and theater/sporting tickets etc, which means better margins on returns and eventually better customer loyalty.
The ability to reach out to the customer, provide that human connect and become an advisor to the client, is a capability that Google will never be able to offer today’s savvy traveler.