Hotel Industry Blog

Learning from the Giants: how Booking and Expedia build their traffic online

By Jacopo | On Mon, June 26, 2017

It’s always good practice to look at how the big online travel agents (OTAs) behave operationally in order to identify what best practices can be taken away for your own everyday hotel business operations. From how they build their visibility online through to their cutting-edge conversion tactics, OTAs are highly optimised and very good at what they do, so there’s always something to learn.

Visibility at the core of OTA strategy

In recent months there’s been considerable noise in the industry after Priceline Group Inc released its Form 10-K 2016 Annual Report detailing the unimaginable sums of money they spent in online advertising in 2016. It wasn’t only the $3.5B that impressed, but also the fact that it represented an increase of nearly 30% year on year. How could it happen that such a big group that already owns the largest market shares in most of the markets it operates in saw fit to increase its own online advertising spend by such a margin? What changed market dynamics so dramatically?

The reason why Priceline has kept putting - and indeed increasing - spend in online advertising is actually clearly stated in its Annual Report and is no secret. It is the exact same goal that every hotelier in the industry also faces:

Performances advertising expenses increased [...] primarily to generate increased gross bookings and gross profit

Generating bookings is the ultimate and definitive goal as this is the only road to profitability: and how the goal can be pursued in first instance looks very clear to Priceline: make a massive investment in online advertising.

Where is the spend?

However it’s not really about the quantity of the spend but the quality. How is this huge amount of money actually spent by Priceline? On what campaigns? Which platforms are they capitalizing on in terms of generating visibility? This information is also conveniently stated in the report, namely:

…advertising expenses consist primarily of the cost of
a) search engine keywords purchases;
b) referrals from meta-search

Now this sounds interesting. We know OTAs have been spending a fortune on Google AdWords for years (with Priceline Group Inc. and Expedia Inc. actually accounting alone for about 5% of Google overall revenue, some estimate). But seeing referrals from meta-search specifically listed here is actually a big change in Priceline’s visibility strategy. In other sources, Priceline is said to have spent about $350M on Trivago cost-per-click based advertising in 2016, representing about 10% of overall Priceline online advertising spend.

Metasearch-wise, we actually see Priceline brands (Booking.com primarily, then Agoda, Priceline.com, etc.) regularly advertised through cost-per-click based advertising across other metasearch websites too, primarily on Tripadvisor. We expect this visibility to grow now that Tripadvisor is said to be reducing emphasis on their direct-to-hotel instant booking effort. It’s reasonable to assume then that another 10% of overall online advertising budget is allocated to Tripadvisor cost per click (CPC) campaigns (or potentially more, as costs of traffic acquisition in Tripadvisor are far away higher than Trivago average CPCs). In addition, perhaps another 10% is split across other metasearch websites that Priceline still regularly dominates in terms of CPC visibility, for example Google Hotel Ads, Kayak, etc.

This analysis leads to our first conclusion: that OTAs have been allocating from 20% to 30% of their online advertising budget to metasearch advertising. This is also confirmed by looking at the OTAs’ online traffic. We can use SimilarWeb functionalities to benchmark metasearch traffic vs other traffic sources, as shown in Figures 1 and 2 for Booking.com and Expedia respectively. Metasearch appears to deliver at least the equivalent to paid search for the OTAs, and it’s growing.

Figure 1
Figure 1: Booking.com in March 2017: Looking at search, 34.38% of all traffic is search, and 54.82% of search is paid. Therefore 34.38% x 54.82%, or about 18% of traffic is paid search. Top referral sites are TripAdvisor, Kayak and Trivago in that order, accounting for 18.29% of traffic. It appears that metasearch is therefore accounting for a similar traffic share percentage as pay-per-click in Booking.com online visibility (SimilarWeb).
Figure 2: Expedia in March 2017: Looking at search, 34% of all traffic is search, and 27.49% of search is paid. Therefore 34% x 27.49%, or about 10% of traffic is paid search. Top referral sites are TripAdvisor, Trivago and Kayak in that order, accounting for 22.72% of traffic. It appears that metasearch is accounting for a much larger traffic share percentage than search pay-per-click in Expedia online visibility (SimilarWeb) compared to Booking.com.

The growing maturity of Metasearch

Contrary to some uninformed discussions in the industry, Metasearch has continued to grow over the last few years and has clearly moved from an early innovation to a majority-adopted platform (See Figure 3).

When Metasearch first disrupted the industry many years ago, OTAs were first to tap in and engage with the Metasearch movement not only by participating from a marketing perspective, but even from a mergers & acquisitions perspective with solid acquisitions. Priceline was first to innovate with their Kayak acquisition and then closed the loop few weeks ago with the Momondo purchase. Other OTAs have also been playing a role in the meantime with Expedia taking major stakes in Trivago and Chinese giant Ctrip acquiring Skyscanner.

Today Metasearch is an area that OTAs cannot afford to ignore, but the question for us is how are independent hotels positioned for benefit from Metasearch?

Figure 3
Figure 3: Innovation adoption curve for Metasearch, and Bookassist’s view on where hotels are positioned.

Metasearch for Independent Hotels

At Bookassist we’re proud to work with some very smart and excellent hoteliers that immediately understood the potential of Metasearch and worked with us as early adopters to tap into it immediately. These hotels today generate significant amounts of direct bookings through referral links from Metasearch with a Cost per Acquisition consistently below 10% and a contribution to their overall direct business of between 20% and 30% generally or even up to 40% in some excellent cases (see Figure 4).

These excellent hotels have been participating in Metasearch for well over a year now and their “early adoption” allowed them to totally understand the challenges of Metasearch as it continues to evolve, with both its opportunity and threats.

But we still see a majority of hotels that remain sceptical of Metasearch, hotels that don’t get it and are reluctant to embrace the change it represents. Hotels really need to change their mindset here and embrace the opportunity that Metasearch can present. Otherwise, the big risk for the slow-adopting hotels is in their attitude, which will bring them to Metasearch only in its Late Majority phase or even later when most of the opportunity has been taken already by earlier adopters.

Figure 4
Figure 4: The results of Metasearch usage by early adopters, the excellent independent hotels who embraced Metasearch and have been able to leverage it in partnership with Bookassist.

Bottom Line

Metasearch is no longer the wave of the future, but of the present. it is now a strong reality that can be no longer ignored by independent hotels in the quest for direct booking business. A change of mindset is needed by hoteliers who need to move now to assign budgets and adopt Metasearch as a key customer capture opportunity.

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Jacopo Rita is Metasearch Manager at Bookassist (http://www.bookassist.com), the multi-award-winning technology and digital strategy partner for hotels. Bookassist is The Direct Booking Expert™ and a Google Premier Partner.




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