Googlemovesfromadvertisingtocommissionmodel:Whatitmeansforyour
business
Google’smoveintohotelbookinghasmadeheadlinesasapotentialdisruptorintheonlinebookingspace.But
tomany,itremainsunclearexactlywhatroletheBookonGooglecommission-earningmodelplaysinthehotel
ecosystem,whetheritspellsgoodorbadnewsforhotels,onlinetravelagencies,travelmanagementcompanies
andhowtheycantheyrespond.
WiththelaunchofBookonGoogle,theinternetgianthasaddedanewwaytoearnrevenue.Untilrecently,
hotelspaidperclickforadvertisingonGooglesearch-resultpages.NowGoogleofferstheoptionofplacinglive
linkstohotelcompanybookingengines.Forroomssoldthroughthoselinks,Googlemakesan“industrystandardcommission.”
ThisnewGooglemodelenableshotelcompaniestorebalancedistributionbetweentheirbrandedsitesand
onlinetravelagencies.Hotelspaycommissionsonlyonconfirmedbookings,whichismoreattractiveandeasier
tobudgetforthanpay-per-clickadvertisingbecausehotelsknowtheywillpay10percentonlyonroomsbooked
throughtheGooglelink.
SwitchingtoacommissionmodelmeansGoogleeffectivelyhasenteredthetravelindustryasanonlineagent.
SinceGoogleistheworld’smost-usedsearchengine,theimpactoneveryoneelseinthebusinesscouldbehuge.
ChargingcommissionsclearlymakesalotofsenseforGoogle.Itearnsmuchmorefromabookingthanfroman
ad-click,andupgradingfromasimple“look”toacomplete“bookandstay”furthersitsstrategyofdeliveringthe
mostcompleteandconvenientresponsetoanyquery.
InanageofincreasingtensionsbetweenhotelcompaniesandOTAsovertheirvaryingandsometimeshigh
commissionrates,GoogleoffersahybridofsortsbetweenOTAsandtraditionaltravelagenciesasanavenuefor
customerstobookdirectlyfromhotelbrandwebsitesatmoreconsistentindustry-standardtravelagency
commissionrates.
Butwhatabouttherestofthehoteldistributionchain?IfGoogle’snewstrategytakesoff,howwillitaffect
otherkeyplayersinthecorporatetravelindustry,andwhatcantheydoaboutit?
Whatitmeansforonlinetravelagencies
TheentryofGoogleintothecommissionsgamearguablyoffersthefirstmajorchallengetothepreviously
unstoppable,decades-longgrowthofOTAs,whichbuiltmuchoftheirsuccessthroughthedominationoforganic
(freeandunsponsored)searchonengineslikeGoogle.OTAshavegainedtheirpremiumlistingsonsuchsites
throughmassiveinvestmentinsearchengineoptimization,thesheervolumeoftheircontentandtrustintheir
brands.
NowGooglehasfoundawaytotapthosesameingredientsusingevengreatervolume,convenience,brand
reputationand,ofcourse,polepositiononitsownsearchpages.TheOTAssuddenlyfaceamassivecompetitor
thatcouldlowertheirmarketshareandovershadowtheirownbrandrecognition.
YetGoogleappearstobemovingcautiously,testingthewaterswithhotelchainswhiletryingtoavoidalienating
theOTAs.Infact,OTAsarestillamajorpartoftheequationastheytoocanpurchasespaceonBookonGoogle
thatofferconsumerslinkstotheirbookingengines.Booking.comhasbeenoneofthemostaggressiveplayersin
thisarena.
Whatitmeansforhotels
HotelshavelonghadacontentiousrelationshipwithOTAs,relyingonthemindowntimestosellsurplusrooms
whilecomplainingloudlyduringboomtimesabouttheirhighcommissioncosts,whichcansometimesreach
triplethe10percentindustrystandardpaidtobrick-and-mortaragenciesandTMCs.
HotelsalsocomplaintheyhavelostcontroloftheirbrandsanddistributionstrategytoOTAsascustomershave
becomelessbrandloyal,oftenturningtoOTAsandmetasearchsitestoshopforroomsratherthanbranded
hotelwebsites.Tocounterthatlossofcontrol,manyhotelbrandslaunchedaggressivecampaignslastyearto
rewardcustomersforbookingdirectlyontheirsitesratherthanthroughOTAs.
Google’sinitiativesdonotrestorethatcontrol.WhencustomersstarttheirsearchonGoogleinsteadofahotel’s
brandedwebsite,thehotelstillhastopayGoogleacommission,andhotelcompaniesstillrisklosingcontrolof
customersandtheirdistributionstrategiestoGoogle,abrandthatisevenmoredominantthanOTAs.Andwith
OTAsabletoalsopurchasespaceonBookonGoogle,consumersarestilllikelytoclickthroughtobookthrough
toanOTAratherthandirectlytothehotelcompany.
Ontheotherhand,whatOTAsandhotelcompaniesalikemightseeasanewthreatfromGooglecouldalso
provetobeanopportunity.ThefirsthotelstosignupwithBookonGooglemaygainanearlyfootholdand
competitiveadvantageforwinningnewcustomers.IfhotelscanuseGoogletochannelthesaleofunsold
inventoryatmoreconsistentandoftenlowercommissions,yieldfiguresmaystarttolookmorepromising
overall.
WhatitmeansforTMCs
Intheory,Google’smoveintohoteldistributionshouldnotaffectTMCs,whichservethecorporatetravel
market.Businesstravelersaresupposedtofollowpolicyandarrangetripsthroughtheircompany’sappointed
TMC,whichoftenoffersbookingtoolsthatemployeescanusetoplantheirowntravel.
Intheory,TMCscouldlinktheirinternalbookingtoolstoGoogleinsteadoftheirtraditionalglobaldistribution
systems,whichcouldchangethewaytheyoperate─bothtechnologicallyandcommercially.
Buttherealityisverydifferent.Increasingly,businesstravelerssimplyignoretheircompany’stravelpoliciesand
insteadbookdirectlyonhotelwebsitesorthroughanOTA.TheeaseofbookingviaGooglecouldtempteven
morebusinesstravelerstoavoidthecorporatechannelandgofordo-it-yourselfbookings.
Whatshouldhotelandtravelcompaniesdo?
1) Accepttheworldischanging
TheBookonGoogleprogramisinitsinfancyandmovingcarefullyasGoogleteststhewaters.Butthearrivalofa
majorplayerlikeGoogleisalmostcertaintochangehoteldistributionforever,evenifwedon’tyetknowexactly
how.Acknowledgingthatrealityandfactoringitintoyourbusinessplanningisthefirststepforward.
2) Reconsideryourownmodel
Thewinnerswillbecompanieswiththetechnologyandmindsettounderstandthenewrealityandadapt
quickly.Forexample,techcompanieswillhavetodecidewhethertopartnerorcompetewithGoogleorboth,
andOTAsmayhavetolookatadjustingtheircommissionstoremaincompetitive.
3) Lookforthepositives
Googleposesthreatsbutitoffershotelsopportunities,suchasachanneltonewmarkets.Activelyconsider
whetheryoucanworkwithGoogle,notjustprotectyourbusinessfromit.
4) AnewroleforTMCs?
ForTMCs,Google’smovecouldpointtoanevendeeperrethink.Abigconversationlastyearcenteredon
whetherTMCsmightevolveintoaggregators,managingbookingsmadenotonlythroughtheirownsystemsbut
alsothroughconsumerchannelssuchasOTAs,AirBnbandnowGoogle.Remodelingthemselvesasmanagersof
theircustomers’totaltravelspend─whethertravelersbookthroughaTMCordirectchannels─couldbethe
wayofthefuture.
What’syourview?
WhatdoyouthinkaboutGoogle’snewmodelforhotelselling?Isitathreatoranopportunity?Whatstrategies
areneededtoaddressthechangesitwillmaketothemarketplace?Whetheryouworkforahotel,TMC,OTAor
anyotherkindofplayerinthetravelindustry,pleaseshareyouropinion.