Is Google joining the Online Travel Industry?
Over the past few weeks, we have frequently received questions about Google and its newly introduced booking widget.
The widget appears when searching for travel related keywords and is quite dominant in search results. In this article, we want to shed some light on that topic and discuss the potential implications.
Is Google taking over the industry?
To answer this question, we first need to understand what Google is.
Google’s official corporate mission is “to organize the world’s information and make it universally accessible and useful.” Undoubtedly, this includes search results, but also sorting images according to relevance, providing accurate maps with navigation, listing information about businesses etc. And now they are also organizing flight and hotel information.
As a second step, we need to think about how Google is converting their mission into financial success.
What is their business model? In short: Ads. For Google, information is a valuable resource. Not only your private information, but literally any information that is available. Organizing the world, making it searchable, is a huge added value and the center of Google’s business model. Putting ads in-between allows for a leverage on that value.
They are now applying the same concept to hotels.
Previously, a given search resulted in ads showing up in the first few lines. And this is still true today.
Now, the widget is following below the ads. What most people do not realize is: It is just another ad interface.
When clicking on a hotel of the widget, you can not book directly from Google. Instead, you are shown ads to choose from. Yes, you can compare prices. But you can in no way cut out the middlemen. In fact, you are adding one middleman on top — because Google receives a financial compensation for referring you.
Google positions itself as another middleman between you and the booking site.
But wait — I see the option to go directly to the Website of the Hotel!
Yes, in the screenshot above it is clearly visible that Marriott.com is listed as an option. Let’s look into this in greater detail.
After selecting the option, we land on the following page of Marriott.com:
Surprise: We get the same offer of 218 EUR/night (neglecting the 2% discount to 214 EUR/night for Marriott members).
Booking.com, Expedia, Hotels.com and even Marriott itself all quote the same price. This is because they are all bound by the same rate parity agreements which were signed between the major booking sites and the hotel. No party is allowed to publicly undercut the price of 218 EUR.
And don’t forget that even if you book over Marriott’s homepage, Google will receive compensation for referring you. Simply clicking on the ad will cost the hotel money.
Google is not joining a new industry, but simply perfecting its core business — which is advertising. It is a very clever move to not only show you static ads, but also make a widget which lets YOU search among their ads. They no longer need to guess which ad will fit you best. They let you select the ad you want to click on by making their ad database searchable.
For the consumer, it does not provide any financial benefit, since nothing changes the rate parity agreements that are in place. More importantly, it does not remove or change the business model of any middlemen.
LockTrip achieves lower prices by
- Using a unique (LOC-based) business model, which allows us to abandon commissions as a profit source entirely.
- Keeping them behind a login-interface which renders rate parity agreements legally inapplicable.
As a result, no business will ever be able to come close to our competitive prices unless they meet both of the criteria above.
LockTrip is the first marketplace with 0% commission where you can save on average 20% on your hotel and rental bookings compared to anywhere else. Read how to buy LOC tokens here!