Last week, we discussed Google’s ambitious jump into the travel industry with the release of the Google Hotel Finder on April 8, but a recent Motley Fool article questioned whether the company’s long-term travel plans are TOO ambitious. The question this article focuses on is not whether Google will be successful (it likely will be), but rather how its move will affect major travel sites like Priceline.com and Expedia.
Now is the Right Time to Make a Splash in the Travel Industry
In 2013, the travel and tourism market accounted for $450 billion in revenue, and analysts expect the field to grow by another 3.5% by the end of 2014. By jumping on board the travel express, Google can get in on the action of a large and fast-growing industry.
Priceline.com and Expedia, two of Google’s primary customers in recent history, have both seen significant growth over the past three years. Priceline saw a 56% increase in revenue from $4.4 billion to $6.8 billion over that period, while Expedia saw a 36% jump in revenue during that time frame from $3.4 billion to $4.8 billion.
Biting the Hand that Feeds You?
The key phrasing when discussing Priceline.com and Expedia is calling them two of Google’s primary customers in recent history. The ad-spend for these two companies on Google totaled nearly $2.5 billion in 2013, or about 5% of the search engine’s ad revenue for the year.
If Google is able to grab hold of just 10% of the travel and tourism market share, the company would double its $59.9 billion revenue and could see some serious profits. This would more than make up for the potential loss of major travel industry advertisers, but there is no guarantee that major OTAs and metasearch engines would be able to afford not advertising on Google.
What is the Google Hotel Finder?
By definition, I would have to call the new Google Hotel Finder feature a mega-metasearch engine. The search engine is offering travelers the opportunity to book rooms through OTAs like Expedia, Travelocity, Hotels.com, and more, without having to navigate these complex websites. The assumption is that these OTAs will still be the merchant of record on the booking side of things, but Google will certainly receive a cut of the action.
Because Google is still advertising the booking rates of these major OTAs, the likelihood of the Expedia’s and Priceline’s of the world to completely cut off their billion dollar advertising budgets with the search engine is unlikely. However, if Google can find a way to list these accommodations independently (and I am guessing that is the ultimate goal here in the long run), you could see a dramatic change in the travel landscape.
To read the entire Motley Fool article online, click here.