Javier Delgado Muerza
Former Head of Google Travel Vertical Search
Javier is a leading travel executive with experience across the whole travel value chain. He started his career at Iberia, the flag carrier of Spain, before moving to Expedia in 2003 where he spent 8 years leading the Southern European Affiliate Network. Javier then joined Google as Head of Travel in Spain before moving to Lead Travel within the Vertical Search team where he was in the team building Google Flights and HotelAds. Javier is now the Chief Commercial Officer at Iberostar, a Spanish chain with over 1,200 hotels globally, where he is responsible for marketing and distribution. Read moreView Profile Page
Maybe to kick off, Javier, if you could open up and share what you are seeing, in the industry today, due to the Covid disruption.
What we are seeing today is something completely unprecedented. I’ve been in the travel industry since the late 90s, and I’ve never, ever seen anything like this. In our case, I’m currently working as a C-level executive, in a hotel company. We’ve closed down all of our operations, which means 100% of our 120 hotels. This is something unheard of. We are seeing almost all the airlines in the world grounded, which is something, again, unheard of. All the cruise lines completely moored. The travel world has come to a complete standstill. I participate in some of the think tanks that the World Travel and Tourism Council organize and we were discussing these issues for the industry.
In the short term, we’re looking at losing 75 million jobs in the travel and tourism industry and think about the impact that this will have, in many societies. It is difficult to gauge the economic loss, but some numbers are pointing to over a two trillion figure, which is difficult amount to understand. In countries where tourism and travel plays a substantial role within GDP – think about Greece, Italy, France, Spain or even the US – this is going to make a dent in all of those economies. I used to be vice president of the World Tourism Organization, and I’m still invited to some of their think tanks. The other day, we were looking at some numbers with them and, actually, the volumes of travelers are going to slide back eight years, to the volumes that we had in 2012, roughly. All of this has happened in almost no time.
It is true that we knew about the virus that had started in China, towards the end of last year, around the Western Christmas period, but it was a bit of a blur and a bit of a China thing. No one was really paying too much attention, until it really hit Italy and then things became serious. Since the end of February, to the second, third week of March, literally in three weeks, we saw over 180 countries in the world, taking extreme measures. The measures were to various degrees, but all of them were extreme, with some of them closing their borders completely.
People usually reference a crisis such as this, to things such as wars or epidemics, in the past. This is something that is completely unprecedented. We are all in uncharted waters, which makes it especially difficult. I was in a discussion today, with PricewaterhouseCoopers, trying to see if we can put in place a medical passport, for Covid-19, to make that a standard in Europe, for the outgoing and inbound countries. Again, what we are seeing, is something completely new, which is going to require tremendous efforts, to get back on track, but I’m certain that we will get back on track. The problem is, how long will that take?
What is your outlook on occupancy for the industry, in 2021 or 18 months’ time? Do you think we can get back to 60%, 65% occupancy levels, in 18 months?
I hope so, but it’s difficult to say. If we look at it from the position of a bottle that is half full or half empty, the approach is the following. Q2 is completely wiped out, so we’ve lost all of the business for Q2. It is true that we were hit by the virus around the start of March and then all of the figures and the occupancy rates, went down the drains, quite quickly. As a company, we are now considering that May is completely lost; we have closed sales and we are not accepting any bookings. Most of the countries – not even hotel chains, I’m talking about countries and home destinations – are operating in the same manner. For June, it remains to be seen. We are revising the policies and the sales activity, on a day by day basis.
The interesting piece is, when you look to Q3, the numbers are still pretty stable. By stable, I mean, we haven’t seen a massive wash of business going away, just yet. It is true that the wash that we saw in Q2 came in different waves, as the virus hit different countries and moving from the East to the West. But Q3, surprisingly, in our books and in talking with colleagues from all over the world, they are still pretty stable. We have seen some erosion of the occupancy rates, but in our case, we are seeing around 30% occupancy rates, for July and August. This is a relatively good number, because we haven’t lost a lot of the bookings that we already had.
If you compare that with previous years, it’s a bad number, because we should be at a higher level by now, but if you consider that we are now five, six, seven weeks into the crisis, we haven’t seen a massive erosion just yet. It doesn’t mean that it won’t happen later; it might well do. But it hasn’t yet happened. This gives a ray of hope. If we look at Q4, we’re actually seeing positive pick up. Pick up is when we see new business and the cancellations, net net, there’s a pick up. That’s positive for Q4. We are seeing pretty good numbers for Mexico, we’re seeing numbers come back for the Canary Islands, which is an important destination for Europeans. By that standard, there should be some hope.
To your question, how long is it going to take, to regain pre-crisis levels? It will probably take 24 months, from the time that the virus is declared as being controlled. Either because there is a vaccine in place or because the authorities decide or announce that things are now under control and the epidemic is controlled. But I think it will take time to recover.
Another important aspect we need to look at is, how things have changed through time. Take 9/11. 9/11 has a massive impact on travel and tourism and for society, in general. It took a long time to recover from that tragic event. The different terrible attacks that we’ve seen happen, through time, in the last 20 years since then, society and travel, as an industry, has been able to recover faster and faster. It doesn’t mean that events are not tragic. A life is a life and terrorism is always a terrible thing to happen, but if we look at the Paris events, a few years back, which were massive attacks, hundreds of people killed in the streets, we saw Paris come back two, three, four weeks later. We’ve seen the same in Turkey. So terrorism, unfortunately, has become the new normal.
This is a new event; it’s an epidemic and it’s a virus coming into society. It will take time for people to adapt and to find the new norms and new standards to be followed and observed. But eventually, we will get back to normal life.
How have you changed your marketing strategy and spend, during this time? Given what you’ve just said about demand, how are you thinking about changing marketing spend?
In two ways. First of all, we’ve stopped completely, the so-called non-performance marketing. We have a very clear separation between performance and non-performance. The non-performance has been stopped, because we wanted to understand, because we saw that things were deteriorating very fast. We wanted to see where the bottom was. We’re not yet seeing the bottom, but at least, things are starting to calm down a bit, from a medical perspective. We’re going to continue doing campaigns, but we’re changing the tone, the messaging, the copy, even the platforms on which we are communicating. That’s one thing that we’ve changed.
On the more performance marketing spend, the distribution marketing, if you will, we’ve changed, for example, the CPC models, to pure success-based models. This means that we are not doing any campaigns on Google, for which we pay for a CPC that we then need to track if it becomes a conversion which, eventually, becomes a stay, so we can deduct the ROI from that campaign or that click, specifically, and see how efficient or inefficient it is. We’ve shut that down completely and we have activated risk-free bookings, which means we only pay, not at the time of booking, but post-stay. The different partners with whom we work, metasearches, like Google Hotel Ads or Skyscanner, or even some affiliation platforms, we’re saying, continue selling; we’re happy for you to sell, but we won’t be paying you until the customer has checked out. This puts us in a very comfortable position, because it’s risk free. We don’t want to kill the business that’s coming in, those bookings, as I just mentioned, for Q4. We want to stimulate that demand, as much as we can, but in a logical and smart way.
So those metasearch engines, such as Google, they’ve been pretty flexible in adapting their model, in that sense?
They already had these models in place, such as the commission program for Google Hotel Ads; that was launched a few years back. Some of them have adapted quickly, to cater for or bring new solutions to this space. There’s another interesting aspect. I was looking, yesterday, at overall CPC costs and so forth. For our perimeter, meaning the markets in which we operate and advertise and the audience to which we advertise, the CPC costs have plummeted, by over 60%, in the last four weeks, which is logical, because there are less people advertising. This means there is less pressure on the auction and, as a result, that traffic is cheaper, which probably opens an opportunity to generate new bookings. We will probably be doing that in the short term. We have moved to a completely risk-free model, but we might be coming back to the CPC. Even though we know that some of the reservations that are going to be made might be cancelled down the line, because of the volatility is almost 100%, we prefer to stimulate bookings and receive those bookings, in order to keep the wheel turning and hope turning and try to find the new normal, as soon as possible.
CPMs and CPCs have both been declining but, also, the conversion is still pretty weak, as well, because people are not actually buying, because they are uncertain, but there is that potential to spend on cheaper traffic to, potentially, have that booking?
There is, overall, much less traffic, which is a problem. The only good side is that the traffic that there is, is slightly cheaper. We are also changing the way we measure success. So from a pure, complete booking, which is the traditional way of really measuring the conversion rate, we are looking, in some cases, at micro-conversions. For example, we are trying to direct as much traffic as we can to our contact centers. We’ve got contact centers in the Americas and in Europe. We are seeing extraordinary results from voice interaction, which is obviously more expensive. But we are also seeing higher ticket prices and better ability to convert. In these times of uncertainty, people want to know things. They ask a lot of questions which maybe could be answered on the web, but if there is a human at the other end of the line, people prefer to interact with a human. We are considering a conversion, a call that has been provoked by an original click and, not necessarily, a conversion with a credit card on the website. We see that as one factor of converting; either we are calling them back or they are calling us at a contact center. We are altering our measures, slightly, to make sure that we capture everything possible, out there.