Google’s Hotel Moves Worry Travel Sector

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Recent partnerships by Google Inc. with hotel chains have raised some concern among others in the travel industry that the search giant is trying to grab more advertising dollars. The company currently owns ITA software, a flight information provider, and has a hotel price-ad program that routes consumers to the hotel websites for booking.

In recent months, hotels have agreed to test Google products, and last month, Google reached a licensing agreement with a startup called Room 77, which lets guests compare hotel prices and book rooms.
Many analysts do not think Google is a big threat to online travel agencies in the immediate future. However, such agreements have sparked buzz about what it could eventually do in the travel sector.

Google’s Major Drawback
Right now, industry researchers do not believe Google is looking to get into the business of processing purchases done by online travel agencies (OTAs), which are some of their biggest advertisers. To add the transaction business would require certain capabilities that would bring new overhead and fixed costs. Google has said they would like to court more travel advertising revenue.

On its earnings conference call last month, Google said its travel efforts were meant to provide “more and more detailed information when people do searches” for hotel bookings or tickets.

Douglas Quinby, vice president of research at PhoCusWright, said that after its recent moves, Google is directly competing with hotel search companies like TripAdvisor, Priceline, Kayak, and Expedia’s Trivago.

Does Google Really Have to Worry?
Of the $4.7 billion spent on U.S. travel advertising last year, 52% went to websites and other digital channels according to PhoCusWright data. Of that, hotels spent the most, followed by online travel agencies and airlines.

While Google’s moves could put some ad revenue from OTAs at risk, Quinby said the online agencies will not cut ties with the company. “Google is just a huge source of traffic,” he said. “It’s not like some of these big (online travel companies) are suddenly going to stop advertising on Google.”

To read the full Reuters story, click here.

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