Google versus Booking.com: Frenemies

On the question of the battle between OTAs and Google and frenemies, but largest customers. Do you think there is a risk that hoteliers can bypass OTAs and acquire traffic directly on Google, with the new offer they have? Or do you think that the OTAs are too vital to the ecosystem, at this point?

I think it is already happening. It is already possible for hoteliers to bypass OTAs, through Google, because Google Hotel Ads offer us a product where you, as a hotel chain or a hotelier, can offer your own feed of your rates, availability and all your rooms, etc. and advertise yourself. That’s already happening. The question is, why hasn’t it killed the OTAs yet?

If you look at hotel chains, those are the biggest ones, with the biggest bucks and the biggest teams, they’ve even thought, why don’t we build an OTA ourselves. So there’s a website called Roomkey, and it is actually a collaboration of the top six hotel chains in the world, that is trying to build their own OTA. The top six hotel chains collaborated there, and they thought, we’re going to build our own Booking.com, that only offers our own hotels. It didn’t fly.

I think, for one, they’re not tech companies; they’re core hospitality companies. That means that they can try to copy another website, but they can never keep up with the pace of development of that website. You will see that in usability, the way that they handle customer care, in the way they advertise their product on the web. If you are hotelier by yourself, you still need to be able to manage the spend on hotel ads, yourself. That’s a performance marketing game that hoteliers are not known for, that they’re not that good at. Technology you can outsource to one of those hotel reservation systems that just takes care of your connectivity. But managing it on performance, you can even outsource that, but then the user that you’re bidding for, you’re bidding on your own hotel. That user can go to your hotel page and book it, yes or no. But when you’re up against Booking or chains or huge OTAs, then your user can go to a website, they might book the hotel, they might not, but then they have other places to go and purchase. They can book any hotel on that website.

Alternatively, even if that user books the hotel that is advertising, then how much ancillary revenue can the hotel make and attribute it back to that click? While Booking, they will take the user, they will take the hotel reservation and then have Rentalcars.com, then they sell flights nowadays, as well. Do you need a restaurant? Great, we have our restaurant links on there. There are so many other options.

You mean that they can afford to pay more for that user, because they are selling other things?

Yes and I’m just talking about that one stay there. I’m not even talking about the future. If you have your LTV methods, if you know what the potential is, of getting more revenue in the future, then you can always invest more in that user, than any hotelier or hotel chain, for that matter.

What do you see as the biggest risks to someone like Booking.com? Clearly, it’s very difficult for those smaller, independent hotels to start performance marketing, at scale and compete with the conversion of Booking. But what do you think is the biggest challenge for the large OTAs, such as Expedia and Booking?