Google’s New Commission Program Is “Cannibalizing” The Direct To Hotel Booking Channel

Google rolled out a beta Google Hotel Ads Commission Program in June 2015 as mentioned in a previously published Lodging Interactive blog. On September 22nd 2015 Google announced a few more changes to this program, making it available to a broader range of hotels and added, what we believe are, serious business implications for hoteliers to consider.

According to the new Google commission program, hotels receive bookings from Google searches and pay Google a commission instead of pay-per-click. It’s very similar to the OTA-type programs charging commissions where users book through Trip Advisor or Booking.com. Hoteliers must understand that the entire booking process is handled through Google’s widget and not the hotel’s own website. In our opinion this presents increased OTA type dependencies and is counter productive in driving more direct to hotel website booking opportunities. Direct to hotel website booking opportunities are being “cannibalized” and redirected through Google’s booking widget.

In September Google announced key changes to this program, which include

  • Availability of the program to more hotels
  • Expanding “Book on Google” by bringing it to desktop and tablet devices
  • Inclusion of more amenity information within Google search
  • Retiring the dedicated site Hotel Finder
  • Availability for all Hotel Ads partners
  • Availability in the U.S. (for now)

So how Google’s new commission program negatively affect hoteliers?

  • It is not a direct booking with the hotel
  • Commissions paid (typically 15%) cut into profits by increasing costs
  • Increased reliance on an OTA for revenue
  • Decrease in generating leads independently
  • Loss in hotel’s independent competitive edge in the digital world

Recommendations:
Hotel operators, especially independent and smaller boutique properties, should consider adjusting their digital marketing strategies to receive more of a fair share of the direct to website market and make themselves less dependent on OTAs. Instead of feeding yet another OTA like model, properties should take advantage of proven digital marketing strategies to drive direct to hotel website booking opportunities. The industry has already witnessed the power and the revenue losses attributed to OTA’s and have worked hard to become less dependent on the OTA’s; as an industry it cannot go backwards. Doing otherwise would result in a greater reliance on the OTA’s rather than building a self-sustaining digital marketing eco-system.