Google Works With Hotels To Hurt Travel Competition (wsj.com)

An anonymous reader shares a WSJ report: More than 100 million Americans are expected to travel during the holidays, and many will search for lodging online. But travelers may unknowingly pay more and fail to see all of their options because some major hotels have ganged up with Google to undercut competition (The link may be paywalled). Online travel agencies like Expedia, Priceline and Travelocity have replaced brick-and-mortar agents by offering consumers more choice and convenience at a lower price. These OTAs purchase inventory from wholesalers and then market rooms at a discount to consumers in addition to flights, rental cars and travel packages. Many also have agreements with companies like American Express, Costco and Delta to market their inventory. OTA websites let travelers sift through hotel offers based on price, brand, location, amenities and guest rating, among other search filters. OTAs earn a roughly 20 percent commission from hotels for each reservation they book, which covers their cost of marketing, inventory acquisition, customer support and payment processing. As hotels get squeezed by Airbnb and home rental sites, they have begun complaining that OTAs are eating into their profits. Several major hotels are now trying to use Google as a counterweight, while Google is exploiting its search dominance to steer consumers to its travel service. Some 60% of travelers begin trip-planning on Google.

Comments

be careful what you ask for

[Ritz_Just_Ritz]

The whole premise was that hotels wanted help to move their excess inventory of rooms. Now that there's an ecosystem around collecting and marketing that inventory, the hotels have decided they want to claw back more control (and profit) from the process. I'm not sure I see the issue here. Why not just stop selling rooms at a discount to these 3rd parties and become better at selling the capacity themselves?

shrug

Re:be careful what you ask for

[robo1]

I work for a hotel company. It's not really excess inventory. We sell on Expedia, Travelocity, Orbitz, Booking.com, etc just like we do on our own site. It's all the same inventory. Now if it's getting close in and we have unsold inventory we might sell on Hotwire or Priceline. In the industry these are referred to as "opaque" since you don't know what hotel you are getting until it's booked. We would much prefer to sell on our own site and sometimes offer discounted rates since we don't have to eat the fees. The OTA sites force rate parity which prevents us from selling a room on Expedia cheaper than say Booking.com. This even gets down to the room type level so we can't sell 1 & 2 bedrooms on Expedia, but only 1 bedrooms on Booking.com. They have automated systems to enforce this and send out warnings. We can usually get away with selling discounted rooms on our own site though. I always laugh when I see a trivago add since for the most part they all will have the same rate anyway. Expedia has pretty much taken over everything. They have HomeAway, VRBO, Hotels.com, Hotwire, Orbitz, Travelocity, trivago. I usually tell people to shop around and find something you like, then go to the hotel site and see if you can get the same or better rate.

Not a fair article to Google

[Trax3001BBS]

Maybe the searchers trust Google to have what they need, Plain and simple. I do and can enter gibberish and expect Google to produce. An example a movie I've see once and no clue of it's name, input: movie beach ball monster - results, top (first) hit was it: "Dark Star", which youtube had available (I didn't say it was a good movie).

Would the other search engines done as well? I've no clue, I have only used Google cause it's working for me.

Just another day with the need for another story.

I don't see how this hurts competition?

[v1]

Is it just my imagination or are they confusing "hurts competition" with "lowers retailer margin"?

They're creating a race to the bottom, and then complaining about their falling margins. That's going to be the result when you play that game. I suppose you might look at it as "bad for competition" if you're a vendor looking for better margins, and ultimately it may end up driving some vendors out of the market and lowering competition, but in a free market economy a Race to the Bottom will usually fix itself. Sometimes it crashes the market a bit hard and it takes awhile to rebound, but when it does, the remaining vendors are usually more careful to avoid a repeat occurrence.

And as for their handing out blocks of inventory for resale, that's just another angle they're trying to exploit to squeeze a little more out of their inventory. Iin the case of hotels, those few vacant rooms every day, they're just playing the "half of something is better than all of nothing" game, and the resellers getting their margin is usually okay as long as they're not selling at a loss. If they're stupid and dumping larger than necessary blocks of rooms to the resellers, which is then resulting in a drop in traditional direct sales, that's their own fault for overdoing it. It's no different than using sales to attract customers, and making the mistake of making too many, too frequent, or too heavily discounted sales. Don't DO that, the customers will take advantage of it and the outcome is your own fault. If you don't know how to play that game, you shouldn't be playing it at all, not complaining when you lose.

Re:OTA not always the best deal

[Lab Rat Jason]

Cash works for places that rent rooms by the hour... not so much when you are traveling for other situations. Can you imagine not booking a room in Vegas during a major conference? Can you imagine driving 13 hours to the shore (pick any shore you care to visit) and then explaining to your family that you're going to have to sleep in the car? I think this is dangerous advice.