Is Google Killing Online Travel?

What They Said

Pranavi Agarwal on Google and OTAs: “The relationship between Google and the OTAs — it’s a symbiotic one. It’s a complex one. You could even say it’s a little bit abusive because Google knows that Booking, Expedia can’t stop spending ad dollars on Google because they have to. They dare not bite the hand that feeds them.”

Seth Borko on Google’s Competitive Advantage: “Google really is a black box. And having this huge data set kind of lets us sort of reverse engineer and get a peek into that black box.”

Sarah Kopit on Reliance on Google: “I think all of us in the information space would like to stop relying so much on Google, but here we are.”

Transcript

Sarah Kopit: Welcome back to the Skift Travel Podcast, everybody. I’m Skift’s Editor-in-Chief Sarah Kopit joined, as always, by Seth Borko, Skift’s Head of Research.

So it is said that talkies killed the silent film. And for those of us of a certain age, video killed the radio star. So today on the pod, we’re asking our industry’s disruptive technological question: Is Google killing online travel? In just a few short years, Google Hotels has become the largest and most comprehensive metasearch engine in travel. But it also attracts large numbers of consumers and drives hotel bookings.

It’s obliterating the very OTAs (that) are spending billions in advertising and Google every year. So here to help us sort through this and perhaps even answer that question is Skift’s Senior Research Analyst and author of a research series into Google Travel, Pranavi Agarwal. Hi, Pranavi.

Pranavi Agarwal: Hey, thanks for having me.

Kopit: So it’s so great to have you here with us today. Probably because at its core, Google remains a fairly black box. And so I am so curious how you and Skift Research were able to get in there and actually analyze all that data.

Agarwal: So look, I like working with data and really in this kind of dawn of AI that we’re living in, things like web scraping and analysis of big data sets has really become a lot easier. So really in an effort to kind of do some really cool analysis, some kind of unique analysis, I decided to create this proprietary database by web scraping thousands of hotels — more than 20,000 hotels that are listed on Google kind of on a global basis.

And what I did is for each hotel I scraped, which OTA site and which direct site are bidding for bookings and at what prices they’re bidding for those bookings. And I did this across two parts of Google. So the first part of Google I scraped was the sponsored results — the Google-sponsored results, which is where you have to pay to be featured.

And there are a maximum of full sponsored results for hotel. But then, I also scraped across Google’s organic search results, which is a new part of Google that they introduced a couple years ago. And this is the part of Google where you don’t have to pay. It’s free to list as long as you have a tech partner to enable that integration onto Google.

And there’s no limit to the number of sites that can bid for bookings. So in total, we were analyzing more than half a million data points across thousands of hotels. (That) really, really allowed us to come to some very interesting conclusions.

Borko: That’s really fascinating because like Sarah was saying, Google really is a black box. And having this huge data set kind of lets us sort of reverse engineer and get a peek into that black box. And it is so, so important to understand exactly how Google works. It is one of the largest partners — if not the largest player in terms of how travel industry companies acquire eyeballs.

We think the travel ecosystem as a whole is probably one of Google’s largest advertisers as far as the industry goes. I think we’ve done some estimates at Skift Research that the travel industry spends nearly 10 billion, if not more, every single year, just advertising on Google. Probably even more if you include YouTube, by the way.

And then of that, we think that the online travel agencies are some of the biggest spenders. And of those, the two largest online travel agencies in the U.S. and Europe — Booking and Expedia — we think that they’re some of Google’s single largest advertising clients. And we think they’re spending probably 3 billion plus a year annually. And that, a majority of their marketing spend at Expedia and Booking is being spent on Google.

So that’s what we thought in the past. Pranavi, when you did this — this web scraping result — did it back this up? Did you find that travel is large advertisers? And how did you find about Expedia and Booking?

Booking and Expedia’s Dominance

Agarwal: So yeah, the OTAs are very reliant on Google. If you look at the web scraping kind of analysis and the results specifically on the Google-sponsored results, you will see that Booking Holdings and Expedia Group — collectively through their subbrands — completely dominate Google-sponsored results.

For example, in the U.S., Booking, Expedia, they have 80% share of those sponsored results. And it’s really Booking.com, in particular, which is featuring the most often. So Booking.com is really paying the most in order to feature on those paid results.

Borko: So when you say 80% market share, that means that when I search for a hotel on Google, eight times out of 10, I’m going to see Booking or Expedia bid on the sponsored results for that hotel.

Agarwal: Yes, they do.

Borko: That’s a very high number. Were there any other interesting results that you saw? Like right off the bat in terms of the dynamics on the Google marketplace.

Agarwal: Yeah, I mean, if you just focus on the sponsored results. So I said Booking.com dominates. But if you actually look at which site is most likely to be top of that list, it’s actually Expedia. So it’s a literal clear bid that Expedia is actually paying to try and outcompete Booking on those sponsored results.

And I think I saw that across all the regions we looked at besides Europe, where Booking has a real stronghold. But if you look at the U.S., Asia, Middle East, Expedia is actually most likely to come top of that list. And it kind of gives a little bit of insight into marketing efficiencies as well.

And we kind of talk about this a little bit in the report how Booking and Expedia, though they spend so much money on Google, if you look at the actual share of room nights that they have and if you compare the two as a ratio, you can see that Booking is actually a lot more efficient than Expedia when it comes to Google-sponsored results.

Borko: So that’s interesting. Just to put that in context for some of our listeners who may not be as familiar with Google, what I think Pranavi is saying — I’m just restating it — is if Expedia is at the top of the list, and it means they paid more for that bid on that list that Booking did. Google’s holding a real time auction for every single click.

So Booking’s strategy seems to be “Get myself on sponsored listings” and Expedia’s strategy seems to be “Win the auction.” And one of those is a lot more expensive than the other, and it definitely shows up. It’s interesting to see that shows up in the financial statements as well.

Why Is Google So Powerful

Kopit: I’m curious if Google is crowding out all of these other travel metasearch companies like Tripadvisor and Trivago — we all remember, know and love the Trivago guy — they were once very vibrant hotel search platforms. But that’s not really the case anymore. Can you give us a little bit more insight into kind of what happened?

How did Google do this?

Agarwal: Yeah, I guess a few reasons why Google has become really so powerful in travel. I think firstly, it’s not just travel, right? Google is the biggest search engine in all aspects. It’s the biggest search engine in all aspects of our lives. So if you’re going to go to Google to search for things in life generally, why wouldn’t you do the same for travel, right?

“I’m going to Google. I’m going to Google it.” So what we’ve really seen is that Google has really risen to the top of that search funnel — not just in life, but also now in travel. Though you could argue that things like social media and Instagram and TikTok … they’re potentially usurping Google when it comes to that.

Who’s the top of the search funnel? And perhaps you can discuss that for another podcast. But it’s really that that Google is the main site that you go to to search for things. But I think it’s also that Google is Google, right? I think you gotta appreciate that Google has the better product, it has more data, and it has a more user-friendly site when you compare it to Tripadvisor or Trivago.

I mean, if you go on TripAdvisor right now, I think the website looks the same as it’s done over the last decade or more. And while Google on the other hand — it’s constantly tweaking its product, it’s constantly iterating its product offering. And I think that’s really what’s allowed it to become so powerful — as powerful as it is today.

Borko: That’s serious shots fired at TripAdvisor. I don’t know if they would agree with that. I don’t know if you said that to them, that they would agree with you.

Agarwal: I think they would agree with it because they are very clear that Google has completely outcompeted them. I think that is not new to anyone who has been looking at the travel industry.

Borko: Let me ask you a question. Has Google outcompeted them in part because they don’t need to make as much money? Google makes money from other platforms as well. They’re rich in cash, so they can afford to have more user-friendly features, whereas TripAdvisor needs to add a lot more metasearch and add options. Do you think that’s a piece of it?

Agarwal: Yeah, I mean, we can kind of discuss why is Google doing all this. Google …. they don’t even list travel in their financial statements. This is a very, very tiny piece of the pie for them. So why are Google doing this? I think it comes back to Google being that search engine in all aspects of our life.

They want to dominate everything that you might search for in your life. Travel is a small part of it. But, for us, it’s obviously a big box because we look at travel so much.

Borko: One of the things that I always think about with travel, and one of its biggest challenges, is that it is a very high ticket and very low-frequency purchase. And so it’s something that you do once or twice a year, and it’s really expensive and you spend a lot of time considering it. And so, therefore it’s really hard for a lot of these brands to kind of get those at bats with the consumer, so to speak with a lower ticket or a higher frequency purchase.

You’re willing to try other platforms. And I think that gives Google the advantage because you search on Google every single day. We’ve heard a couple of people sort of start to refer to Google as almost a tax on the ecosystem because Google has all those at bats because it has all those eyeballs. Companies need to pay the Google tax in order to rent Google’s eyeballs.

And we’re seeing whole companies restructure to try and avoid that tax. What do you make of those plays and those strategies?

Agarwal: Yeah. So we’ve already discussed how Booking and Expedia — they’re spending billions of performance marketing dollars on Google. And you can call that a tax that they’re paying to Google in order to get bookings. But ideally these OTAs … they don’t want to be reliant on Google, right? They don’t want to be reliant on any site for referrals to their website.

They want direct bookings. Everyone wants direct bookings. That’s really the holy grail in online travel. But but those direct bookings, they’re they’re hard to get. And I think more than anything, the OTAs want to stop spending money on Google. And they won’t admit that very often. But there’s actually a quote from Peter Kern, who’s the CEO of Expedia, who does admit that.

And I think we have a little clip from our global forum in 2021, where he does admit that they don’t want to be reliant on Google anymore.

Borko: Yeah, let’s listen to it.

Peter Kern: I think the days of trying to let us compete against ourselves and paying Google too much to compete with ourselves are over, I hope. And yeah, we’re going to the brands are going to work together for a common goal.

Dennis Schaal: You mean you prefer to spend money on a loyalty program than spend it with Google?

Kern: I prefer to spend money on almost anything with Google.

Schaal: I gotta ask you something about–

Kern: But yes, I’d rather give the money to the customer than to Google for sure.

Schaal: Yeah.

Google’s Organic Auction

Kopit: Wow. I would say they’re very prescient words with everything that Google has done — just even recently with their changes to their algorithm. I think all of us in the information space would like to stop relying so much on Google, but here we are.

So Pranavi, Google has introduced an organic auction. First, I want you to tell me what exactly that is and why Google’s doing it. What are their intentions with this organic auction?

Agarwal: OK. So yeah, a little bit of context. In 2021, in addition to Google-sponsored results, they introduced these organic results, which means that anyone could list for free as long as you have a tech partner in order to do that. And really, at the time, the head of Google Travel — he said that he was quoted as saying that they were doing this in order to drive more traffic for the ecosystem as a whole.

And I think that in itself kind of shows that perhaps kind of egotistical side of Google a little bit. Clearly Google thinks of itself as this higher power that’s really trying to improve its product offering for all of humanity that’s using the Google side. We kind of already touched on that a little bit. But look, I think it’s not altogether that altruistic.

Because let’s not forget, that like any other profit-making company, Google has a bottom line to maintain. It has shareholders to satisfy. So it really begs the question: why is Google doing this? Why have they introduced free listings? They’re not making any money off it. And I think it ultimately comes down to Google’s role within travel.

It’s not an OTA. It’s not trying to be an OTA. You can’t book hotel rooms on Google. It’s not trying to compete with Booking, Expedia. Google is a is a metasearch engine at the end of the day, and what is a value of a metasearch engine? I think it really comes from that being a very fragmented distribution environment …

So by allowing anyone to list for free through this organic search, Google is really facilitating this re-fragmentation of the distribution landscape. And actually by capping the sponsored results, the page results to only four results for hotel, I think that’s a very important and clever move because it really forces OTAs like Booking and Expedia to keep paying on those sponsored results in order to stand up.

So the whole strategy of the organic search results … it’s very clever, it’s very smart and yeah, hats off to Google for it. I think it’s a great move from them.

Kopit: Yeah. There is no altruism in capitalism. There we go.

Borko: Yeah. So I was going to ask this question about is a free search the end of the Google tax. But I think you’ve answered that quite well, which is that it’s really a ploy to get more traffic, to bring more people into the ecosystem and therefore make the sponsored results not called a ploy, but a strategy.

And it’s working. But these free results, you can still click on them. So people must be getting results from them. You can always just not click on the sponsored listing. And if there’s a brand I dislike, I sometimes click on the sponsored listing, and skip over and click on the free one.

So what is opening this up to the world for free sponsors, what has that done? You’ve written the report — you call it democratizing online travel. What do you mean by that?

Agarwal: Yeah. So what the web scraping kind of analysis showed is that unlike the sponsored results, which as we’ve already discussed, they’re dominated by Booking and Expedia. And that’s natural. They have the money to to do that, to spend all those billions of dollars on sponsored results. But if you look at the organic results, which remember, they’re free to list. I said it’s much more democratized because it’s free to list.

So a lot more companies and a lot more OTAs are listing. And the sponsored results are capped by full results. But the organic search is not capped. I’ve seen some hotels that have 40, 45 different sites — all hoping to get a booking through that organic search. So what it means is that it’s really allowed the smaller OTAs and the direct sites kind of more prominence on the Google site.

Agarwal: And that in itself is what you could call more democratic. It’s more of an accurate picture of this kind of tapestry of different distributors who are all bidding for bookings in the online travel space.

Borko: Let’s talk about that direct site a little bit, because so far, this whole conversation has really focused on the distributors, on the online travel agencies, in those third-party intermediaries. But with the direct site, hotels can list directly on Google. Historically, the selling point for Booking.com was that if you run a small hotel in Greece, it’s very hard for you to get eyeballs in Wisconsin for someone who wants to take a summer vacation there.

How are you going to do it without talking to Booking.com? But now that hotel in Greece can just go and buy a listing on Google. What’s going on with this? How does direct site play into this ecosystem?

Agarwal: I guess when I first published this report, some of the feedback I had was … OK, it’s more democratized. But no one’s going to book on these smaller OTA sites. I think brand recognition is a very important thing — particularly post-Covid, where consumers want to book on sites that they can trust. So the smaller sites might not get those increased bookings.

But what will is the direct site. And really one of the key conclusions from this web scraping work is that Google is actively prioritizing the direct site and pushing it to the top of the organic search list — even when it’s not the cheapest site.

Kopit: I was just going to say, during the pandemic, I won’t name names, but I booked a trip to Prague that I couldn’t go on. It wasn’t even that I had to cancel it. The world canceled it for me. I never got reimbursed for that.

Agarwal: So we really saw during Covid this kind of shift to direct bookings. People wanted to book directly because you can get the free cancellation perks like free Wi-Fi and free upgrades. And knowing that if things get canceled, you have a stress-free experience to get your money back. And that was really important. I think we can talk a little bit about why Google is doing this.

Why is Google on the side of the direct side? And I think the answer really lies if you look at what Google has said about it, if you look at the kind of blog posts they’ve posted on this and they say that … if you look at how they rank their results on the sponsored results, it’s ranked by however much money people are willing to pay.

And that’s how that defines that ranking. But if you look at the organic results, it’s ranked by quote, their utility to users. And that is a very clear quote which shows that Google believe and they understand that the direct site is the better site to book your hotel on. And I think it’s pretty telling.

Borko: Well, I think that’s also interesting because we like to blame. Not blame — I don’t want to use strong words. We sometimes find it easy to blame Google and say, “Oh my God, look what Google is doing to Expedia. Are they killing the online travel agencies?” But I think we’re kind of circling on this idea that sometimes the online travel agencies are not such a great user experience and you’re using them because you have to.

And what the folks at Google would probably argue as well, “We’ve democratized it. We’ve made it easier to book direct. And when they book direct, if people have the option to book direct, if they choose to book direct, that’s not Google’s fault that Expedia needs to pay more to be the sponsor.”

Listen, that’s Expedia’s fault is what they might what they might retort there.

Noticeable Findings From Scraping 20,000 Hotels

Kopit: I think that’s fair. Personally, I think that’s totally fair. So speaking of Prague, Seth and I are in New York. Pranavi, you are in London. I’m curious how Google works differently in markets like Europe and Asia. Did you find anything interesting out about how those regions kind of work differently for Google in your research?

Agarwal: Yeah, so we didn’t just scrape across the U.S. We scraped across Europe, Middle East and Africa, Asia Pacific. So in total, 20,000 hotels and there are a few differences if you look at just the underlying hotel market in each region. And those differences do explain the kind of variations we’re seeing in the web scraping results. So just kind of firstly, the further east you go, you will find that the hotel supply is less branded.

So that means there are more independent hotels, it’s more fragmented. And generally the higher the share of hotel supply that is held by independent hotels, the greater the reliance on OTAs for bookings. And that’s because the independent hotels are more likely to source their distribution from the OTAs than to get direct. If you compare that to the branded hotels, they have the loyalty programs, the tech budgets, the marketing in order to get those direct bookings.

So you’ll find that the market in Asia, it’s much more reliant on the OTAs than in the U.S. And that’s because the U.S. is much more branded than Asia. So what that means is that the direct site will actually feature a lot less often on Google’s organic search results in the East than in the West. And you’ll see that in the U.S., the direct site was featuring 80% results on the organic search results.

But in the Middle East and Africa, it was only 35% of the time. And just kind of bringing it back to Google prioritizing the direct site, what you’ll see is that even though the direct site might feature less often in the East than in the West, every time the direct site does feature, Google will push it to the top of the organic list nearly 100% of the time.

So really, the underlying region doesn’t even matter. Google will still prioritize the direct site. Another thing that we saw, which I think is quite interesting, is that the further east you go, you’ll find that the online distribution landscape is also more fragmented in the East compared to the West. And you’ll see other OTAs outside of booking Expedia featuring, and that might be local OTAs like Crypto.com.

And you’ll see that they have more prominence in the East — this kind of longer tail or smaller OTAs bidding for bookings in Asia and the Middle East. So those areas of the world are really more competitive. And these are the areas where Booking and Expedia are so dominant. They don’t have that stronghold. And that’s really the areas which we look at with interest.

Borko: So let’s kind of sum this up then. It’s such a fascinating look into this ecosystem that we don’t often get a lot of insights into. And we’ve got this interesting data set that lets us kind of examine in ways we couldn’t. What do you think that all of these changes and the rise of this Google ecosystem means? Like what does it mean for Google?

What does it mean for the suppliers in the hotels themselves? What do you see as kind of end game here?

Agarwal: Yeah, I think the relationship between Google and the OTAs — it’s a symbiotic one. It’s a complex one. You could even say it’s a little bit abusive because Google knows that Booking, Expedia can’t stop spending ad dollars on Google because they have to. They dare not bite the hand that feeds them. But at the same time, Google is really playing devil’s advocate a little bit.

It’s introducing more fragmentation into the industry, which for Google as a metasearch engine, it’s great because, metasearch thrives on this fragmented industry. But for the big legacy OTAs, Booking and Expedia, this fragmentation is bad because it means more competition. And Booking, Expedia would rather have a more consolidated space, which they lead as a duopoly, rather than seeing all this re-fragmentation in the industry.

So what you’re seeing is that I believe Google’s actions are hurting Booking, Expedia because they’ve introduced more competition. They’re aiding that shift back to direct bookings. But at the same time, Google are also still kind of reaping the rewards from the billions of ad dollars still coming in from Booking, Expedia.

So Google is really winning here whilst Booking and Expedia, I think, are kind of losing out on the direct side. The direct side is also winning.

The Verdict Is

Borko: So to answer the question from the jump, is Google killing the OTAs? Your answer is …

Agarwal: I’d say so. And just for kind of plugging a different report, I think we had Skift Research. We’re pretty bearish on the outlook for Booking, Expedia into the next decade. They saw this kind of golden era in the past decade. But those kind of tailwinds which really drove market share gains — those are really slowing into into the next decade.