How will Google Gobble affect hotels?

Colleen Isherwood

It’s no secret that Google has been on a tear. In September, they announced an “experiment” with HotelFinder.com. Then they paid $700 million for ITA Software, which develops software for the airline and travel industry, and $21 million for Zagat. Add Google Flights and Google Plus, and that’s one heck of a lot of activity.

David Atkins

At the recent Red Roof conference held in Orlando, Florida, social media guru David Atkins of Digital DNA Infusion LLC, showed a chart indicating how Google now had its hands in just about every phase of the travel booking process—inspiration, planning, research and post-purchase—everything except the actual purchase. “Google wants to own the consumer,” Adkins said.

Which raises two questions. First, is Google likely to take the next step and become an online travel agency (OTA)? And second, what are the effects on hotels if it does just that?

Bruno Perez

Bruno Perez of RevPARguru.com thinks it’s a logical business step for Google. “OTAs are just sophisticated search engines, and that’s what Google does best,” he says. He notes that in the U.S., hotels are a $120 billion business. Divide that by 10 and approximate the volume in Canada. It’s a big market.

“We know they can do it,” Perez adds. “Ten or 12 years ago, they were a basic search engine, and now they’re into all kinds of activities.  Why not? If you have the power and capability of online business, why not?

“It’s definitely a possibility.”

While Google Flight Finder is just for U.S. flights, and Google Hotel Finder has been called an experiment, it’s easy to see how consumers will come to see Google as a vehicle for all kinds of bookings.

“Google has new ways of presenting the information so that it’s easy to get,” said Perez.

Even if Google was just to take a small portion of the OTA business, it would put a lot of pressure on existing OTAs, Perez noted.

“The advantage to the hotelier is that they could be stronger in setting commissions with Google; they would have more leverage at the start. Hoteliers tend to resent some of these OTAs. I think they would embrace Google Hotel Finder. We all know about Expedia and all the other site names because we are in the travel industry. But though many people may not know Expedia, everybody knows Google. That gives them a major advantage.

“They could make money on each booking commission. Why wouldn’t you make money on each booking if you could?

“People are comfortable using Google, and they have created a certain level of trust. Why not expand this to the hotel sector?”

Perez adds that many hotels don’t have the infrastructure to negotiate contracts with Expedia, Orbitz and Bookings.com. With Google, they would just have to open one page and plug in the rates. “Hotels would do it without even a push.”

Hoteliers are currently paying 20 to 35 per cent commissions to the OTAs. If Google entered the game, OTAs would have to innovate and eventually rethink their relationships with hotels, Perez notes. And hotels would have to ask themselves, “what is the value of my property and what am I getting out of my relationship with the OTA?”

—Colleen Isherwood, Editor