The internet travel space just got a little bit smaller as Google entered the hospitality industry in a big way on Wednesday. According to a Wall Street Journal article, the internet giant is moving boldly to play a larger role in booking hotel rooms. They are doing it at the risk of offending some of its most important advertisers.
Why Google is making the move now
The potential market Google is entering is very large. In the U.S. alone, travel and tourism spending totaled $450 billion last year, and is expected to grow 3.5% in 2014, according to the World Travel & Tourism Council.
Google also just completed its latest move related to hotels, striking a licensing deal that will give it access to technology from hotel-booking software startup Room 77. This move also adds engineers to Google’s hotel-search team.
Why this move makes sense for Google
Travelers are constantly looking for the most efficient way to book travel accommodations online. ResortsandLodges.com prides itself on putting your property’s homepage one-click away from Google, Yahoo, and Bing search results pages. Google is trying to make sure you don’t even leave their search results pages, allowing you to book without even reaching the major OTA’s and metasearch engines. Google becomes the ultimate metasearch engine in this case.
Where is the risk for Google?
The problem this creates for Google is that major online travel agencies are some of the company’s largest advertisers. Priceline Group will spend more than $1.5 billion in 2014 on Google advertising, and Expedia could spend another $1 billion, mainly to attract hotel bookings, estimates RBC Capital Markets analyst Mark Mahaney. Mahaney also estimates that those two companies alone could account for nearly 5% of Google’s ad revenue this year.
What impact could this play on the entire travel and hospitality industries?
Erik Munoz, an executive director at hotel-booking software company Siteminder claims that the hotel-price ads on Google are “a game changer”, and that the company’s new ads allow hotels to compete with online travel agencies for a direct booking, potentially driving down their costs.
To read the entire Wall Street Journal article, click here.