Price comparison engines, better known as metasearch engines or simply metasearch, have been around since 1995. Remember websites like BargainFinder, NetBot and Nextag? In travel, price comparison sites have been in existence since the early 2000s. Early flight metasearch entrants were SkyScanner and Kayak, followed by Momondo and Google Flights. Hotel metasearch was also introduced in the early 2000s with early entrants such as Trip.com, SideStep.com (acquired by Kayak.com), and over the past 13 years Trivago, Momondo, TripAdvisor and Google Hotel Ads.
Price shopping, including flight and hotel metasearch, is needed by consumers only when there are hundreds of price choices but becomes completely irrelevant when there are only a handful of choices left.
There is a monumental difference between the business model of flight metasearch and hotel metasearch:
This leads us to ask the following question: what exactly are the hundreds of websites where hotel metasearch get their rates to compare? Expedia, Hotels.com, Orbitz and Travelocity offer the same user interface and rates and have no differentiating value proposition. It is clear that these sites are all part of the same entity.
The very promise to compare rates on hundreds of sites for the same hotel is what makes hotel metasearch inherently flawed. Back in 2003-2005 there were dozens of OTAs and hundreds of affiliate sites giving hotel metasearch relevance. The issue today is that many of those OTAs and affiliate sites are non-existent after many went out of business or were acquired by bigger OTAs. On top of that, hoteliers became more savvy revenue and channel managers and began to enforce rate parity across the board.
As a result, today there are only three websites worth travel shoppers' time when researching the best price for the hotel they have chosen: two OTA sites (Booking.com and Expedia) and the hotel's own website. What is there left to compare with only two OTAs left in much of the world?
A choice of three options does not warrant a price shopping service such as hotel metasearch. Hotel shoppers are very savvy at this point and see clearly through the fake choices offered by the hotel metasearch players. This is why Trivago and TripAdvisor are showing a decline in business and financial performance in recent years.
Recently, some of the hotel metasearch players like TripAdvisor are buying traffic by bidding on Google Hotel Ads. At an estimated 6x ROI from Google Hotel Ad (GHA) campaigns, there is no way the economics of meta-on-meta can work. In other words, TripAdvisor is losing money from every click and booking they generate from GHA. This is definitely an unsustainable way to buy traffic and position TripAdvisor as a booking channel, something TripAdvisor has not been able to convince the traveling public of after spending millions in advertising for the past 5 years. Travelers have already made up their mind about what the hotel booking channels are: the hotel website and the mega OTAs, Booking.com and Expedia.
At HEBS Digital, we have been running GHA campaigns since 2010 for thousands of our hotel clients, seeing ROIs of 6x - 12x. ROIs vary based on how appealing the rate is, the hotel location, and how well known the brand is. However, these ROIs are aided by the fact that travel consumers perceive direct hotel campaigns as the "official" presence of the owner of the inventory, in this case the hotel. TripAdvisor is perceived as an intermediary therefore their ROI is inevitably lower. Even if TripAdvisor's ROI from GHA is 8x, they are losing money from every GHA click. At an effective commission rate of 12% they make from Instant Booking, they would still be losing approximately $4 -$5 per booking. They need to be reaching ROIs of 10x - 12x and above to break even, but it is unlikely their ROIs even come close to what we are seeing from the hotels' official GHA campaigns.
I believe at this point it is too late for hotel metasearch players like Trivago and TripAdvisor to:
So, what is the future of hotel metasearch players? The answer can be found without looking far. Take online retail as an example. Has anyone ever heard of the top online retail price comparison/metasearch engines out there? The price comparison leaders in retail include Nextag and PriceGrabber, as well as Shopzilla, Shopping.com, and Pronto. Hardly well known, yet these are the top online retail metasearch engines, which are confined to a very niche status by Amazon.com and the extraordinary consolidation in the online retail space.
Due to the OTA consolidation in travel, the same is already happening in hospitality. Hotel shoppers looking to find the best price for the property they have chosen go to the hotel website, Booking.com or Expedia. Hotel shoppers looking to find the best hotel in the destination they are going go to Booking.com and Expedia.
As a single-category-focused hotel metasearch player, Trivago will be confined to the status of a niche player at best. As for TripAdvisor, which is the largest travel website on the planet and has a much broader business model and multitude of product lines, the site needs to refocus on monetization of its large amount of website traffic by revamping its media product while scaling its restaurant and experiences product lines.
TripAdvisor hurt metasearch advertising on its own website when it introduced Instant Booking a few years ago, a commission-based CPA (Cost-Per-Acquisition) model.
The much-promoted Instant Booking has been struggling ever since, mainly because travel consumers do not perceive TripAdvisor as a booking channel. A negative effect from Instant Booking came as most hotel advertisers abandoned metasearch advertising (Cost-Per-Click) and switched to the Instant Booking (Cost-Per-Acquisition) model thus treating TripAdvisor as just another OTA distribution channel.
Recommendations for hoteliers
Trivago is strong in Europe. If this is an important feeder market for your hotel, it is worth considering this metasearch site and its Express Booking CPA program.
Recommendations for hoteliers
Google Hotel Ads
Over the years, Google has become the most important direct booking channel in hospitality. Over 50% of hotel website bookings are direct referrals from Google: 30% from organic and 20% from paid initiatives.
Over the past several years, hotel advertising on Google has become increasingly complex, due to changes instituted by Google itself, changes in travel consumer planning behavior, and advancements in technology.
Based on all of these developments, hotel marketers must plan accordingly and understand that the Google Ecosystem has become a fully-integrated advertising platform where all advertising formats are intertwined and work together: Google Ads (formerly AdWords), Google Display Network (GDN), Google Hotel Ads (GHA), Google Admail, YouTube. User engagement in the upper funnel influences conversions in the lower funnel, and a campaign in one advertising format on Google influences the results from all other Google ad formats.
Treating Google as a fully-integrated advertising platform requires hoteliers to utilize all available advertising formats in the Google Ecosystem in order to reach travel consumers throughout the travel planning journey.
Recommendations for hoteliers
Contrary to industry lore, with its GHA program, Google is not trying to become an OTA. It does not have the OTA CRS technology, the deep industry distribution and revenue management expertise, the local sales force and offices needed to signup hotel supply, customer service or support.
Google cares only about providing the most relevant information to its users. There are four crucial pieces of information needed by any hotel shopper before making a booking decision: hotel location, hotel description (ex. a 4-star, 600-room branded hotel or a small, 5-star boutique hotel), customer reviews about the property, and price and availability. For many years, Google has been able to provide answers to the first three questions. Since the introduction of Google Hotel Ads in 2010, now Google is in a position to provide answers to the fourth question about price and availability.
This is why hoteliers must participate in GHA to take full advantage of the Google Ecosystem.
Quite often hotels are asking the question: 'Is GHA a digital marketing format or is it a distribution channel?'. The answer is very simple:
The situation is similar with a number of other metasearch players like Kayak.com, TripAdvisor's Instant Booking, Trivago's Express Booking.
In my view, the biggest mistake the hotel metasearch players are making is their inherently flawed business model that promised hotel shoppers to find the best price for the property they have chosen. They did not focus on teaching the traveling public to use their sites to find the best hotel in the destination they are traveling to. With only two viable OTA choices left in most of the world, Booking.com and Expedia (and Ctrip in China), what is left to metasearch?
This is the reason for the increasingly lackluster performance by the major hotel metasearch players, and the reason why they will be confined to the status of niche players at best.
About the Author: Max Starkov is a Founder & Director at HEBS Digital, a NextGuest Technologies Company.
NextGuest Digital (formerly HEBS Digital)
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New York, NY 10119
Founder & Director at NextGuest Digital. Recognized as a thought leader in digital marketing strategies in hospitality, Max is a frequent guest speaker at industry events and conferences. His expertise is sought after by a diverse client portfolio of top tier hotel brands, luxury and boutique hotel chains, hotel management companies, resort and casino companies, franchisees and independents, as well as major Wall Street investment banks and financial institutions. Under Max's leadership, HeBS Digital has pioneered many of the best practices in hotel digital marketing and direct online channel distribution, and has won many prestigious awards for its groundbreaking website design, technology, and digital marketing campaigns. Max received the HSMAI "Top 25 Most Extraordinary Minds in Sales and Marketing" honor for 2008. He has an MS in Economics of International Tourism and an MBA with Beta Gamma Sigma honors from Fordham University in New York.
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