Currently, 96% of people travelling for leisure purposes start their travel planning with an online search. Over the past years, showing up high up in those searches has become a priority, and Google is a popular distribution channel for hotels.
As a result, both hotels and OTAs have been bidding money to show up for certain keywords on search engine result pages. Side note: we recently wrote an article on Google Hotel Ads if you’re keen to learn more.
In the last few months of 2019 however, Google has started becoming more aggressive with its advertising tactics by pushing down free search listings to make room for more paid results. This has led to already costly ads becoming even more competitive, and the online travel industry is now facing customer acquisition cost problems.
As Google continues to disrupt the online travel market, how will it affect OTAs and, most importantly, what does this mean for independent hotels?
It might just be time to re-think the hotel distribution channel strategy as we know it.
Google wants a bigger slice of the pie
There’s no denying it: Google dominates online search. They own at least three-quarters of the search market, and, together with Facebook, Google receives 71% of all online advertising revenue.
But Google is not a company you’d expect to stand still. Always ahead of the curve, they have now started implementing new advertising tactics – with ripple effects for OTAs and hotels.
So what exactly has Google done that’s shaken up the industry to such an extent? Until recently, SEO (search engine optimisation) has done a fairly good job at helping hotels show up in Google search results. And the best part, if a hotel does its SEO right, it will rank for free.
And while SEO still plays a big role, Google has recently started introducing more and more paid ads above free listings. As a result, these listings are starting to see lower click-through rates, and those advertising on Google are noticing an increase in the average cost per click.
Much more significantly, though, the search engine giant has now made it possible for people to book their holidays directly through Google. By booking with them, people can now easily fill out reservation forms using pre-stored information from their Google Accounts and pay using Google Pay.
This is making the booking journey much faster and doesn’t require customers to go to any other websites to complete the booking. Good news for Google, bad news for OTA booking platforms.
What does this mean for OTAs?
Over the last few years, OTAs like Booking.com and Expedia have grown massively by relying on Google to drive new customers and bookings. And with massive advertising budgets to spend on the search network (think billions of USD), they have been able to drive a vast amount of traffic to themselves.
But particularly because they rely so heavily on Google, OTAs found themselves in a bit of a pickle when the search giant started changing the way it displayed advertising in its listings.
To quote Pedro Colaco, CEO at GuestCentric Systems, “Expedia Group fell the most in 14 years, and TripAdvisor dropped the most in two years after both companies reported dismal third-quarter results and laid the blame on Google. Booking.com’s shares also plummeted by 8%, wiping out a combined market value of over USD13 billion from all three OTAs.”
In order to keep up, OTAs will be forced to shell out even more advertising money, which could lead to a bidding war between them. This is, of course, in Google’s favour because the higher everyone bids, the more money Google will generate.
Unfortunately, this is bad news for hotels themselves. Not only are their chances of showing up on search engines diminishing quickly, but they could also experience an increase of OTA commission rates.
You see, OTAs have billions of advertising dollars available to them precisely because hotel owners pay commission on bookings made through them. That’s why some experts are now predicting that, if OTAs are forced to pay even more to compete for traffic, we could be seeing “an era of unprecedented distribution cost inflation, particularly in Europe.”
Hotel owners will need to take the extra money for increased commission costs from somewhere too, though. So ultimately, the cost inflation will likely have one impact: it will increase room rates for guests.
As a result, many business owners are now looking towards other distribution channels to drive those sought after hotel bookings.
Time to change your hotel distribution strategy?
At present, 87% of guests will visit a hotel’s own website at least once before making a reservation. And Phocuswright predicts that by the year 2022, direct bookings will grow to a 50% share.
In a few years time, we might look back at Google’s bold moves and see them as the start of an era that allowed accommodation providers to take back more control through direct hotel bookings
It’s thus essential for hoteliers to implement an online sales and marketing strategy to drive bookings. Investing in an attractive website, improving online guest experience and optimising pages for bookings are just a few places to start:
- Invest in an attractive website
Your website should be your most profitable channel, so making it as attractive as possible is key. Make sure it contains high-quality images, is easy to navigate and provides all the answers to your guests’ questions.Try adding a search bar to your website – that way you can track what people look for on your site, and create new content should you be missing any answers. Have a read of how to get more visitors to your hotel website for more. - Improve the online guest experience
Is your website designed for optimal user experience (UX)? Are you providing complete, accurate content and search locators for your hotel? And most importantly, is your hotel website responsive on mobile?
A total of 45% of travellers would switch mobile sites if it takes too many steps to book or get the desired information, so mobile guest experience is key. Try eliminating any unnecessary steps a traveller has to take on mobile by implementing one-click functionality, pre-filling any forms or providing additional ways of finishing the transaction, such as a phone number to get in touch should something go wrong! Here’s some more information on how to make your hotel website mobile-friendly. - Optimise pages for bookings
Is your booking process clear, compares different room types and accessible from any page? Bookings are your ultimate goal, so make it as easy as possible for people to find your bookings page.
We advise hotels to incorporate their own booking engine as it gives people the freedom to self-serve (by checking rooms, availability and rates) as well as make secure payments directly on your site. Intrigued? Have a read of how to choose the best booking engine in the marketplace to learn more.
If you need a little helping hand, download our free Marketing for Hoteliers guide to learn how digital marketing will help you raise brand awareness, engage with customers online and generate booking enquiries.
Besides attracting more direct bookings, hoteliers should also review the possibilities of the GDS, short for Global Distribution System. Despite generating billions of dollars in sales year on year, we’ve heard many hoteliers refer to the GDS booking engine as “dying”, “outdated” and “disappearing.”
Considering that over 600,000 travel agents use the GDS to book flights, hotel rooms, car rentals and destination activities every single day, this assumption is by no means accurate.
GDS production continues to grow year on year up to 10% worldwide and experienced a record year in 2018 with over 75 million generated reservations.
The GDS presents a perfect opportunity for hoteliers to reach overseas travellers and to generate more corporate bookings. Plus, thanks to a channel manager, it gives them greater control over the brand image that end consumers see.
At HotelREZ, we help our member hotels ensure their GDS distribution is working in their favour, represent them with revenue growth and business development programmes and make sure their marketing is helping them improve their brand image.
For more information, read about why the GDS is still as important as ever for hotels, download our free GDS guide or get in touch with us today.
About HotelREZ
HotelREZ Hotels & Resorts was founded in 2004 by Mark Lewis, an experienced hospitality industry professional and entrepreneur. Over the course of over a decade, the company has grown to be one of the leading hotel representation companies dedicated to marketing and connecting independent properties with bookers worldwide. HotelREZ now provides distribution, revenue, sales consultancy and marketing services and support to more than 1,500 hotels, apartments and hotel groups in over 100 countries including private label GDS chain code solutions. HotelREZ Hotels & Resorts is a SAAS company.
HotelREZ manages the brand Best Loved Hotels, a collection of unique global individual properties, with a dedicated GDS Programme, together with a Website and printed Directory, aimed at the high-end leisure agency and traveller. HotelREZ also incorporates the global World Rainbow Hotels, the world’s only GDS enabled LGBT global hotel consortia representing some 1200 hotels in 230 destinations across the globe.