Is the travel industry heading for a new world order?
There remains little doubt among travel experts that tech goliaths Google and Amazon will dominate the online travel arena, threatening to bust up the duopoly of Expedia Group (which owns Expedia, Hotels.com, Travelocity, Orbitz, Trivago and Hotwire) and Booking Holdings (which owns Priceline, Kayak and Booking.com) that has reigned for years.
Google is already making an impact with its soup-to-nuts suite of planning and booking tools. Last year, Google came in second to Expedia for one-stop shops travelers consider, according to the Portrait of American Travelers study by travel and hospitality marketing firm MMGY Global. The same study showed preference for Expedia had dipped to 64% in 2018 from 67% in 2017.
So far, Amazon has only dipped its pinky toe into the travel waters but there’s some evidence – and intense speculation – that something bigger is coming.
Both internet giants bring the kind of vast resources and big-data reservoirs that allow them to dramatically change how we book trips.
Yet with the landscape already shifting under its feet, a travel industry not known for nimbleness is largely unprepared for the freight train coming its way, say experts.
“Oh wait, I hear something. The tracks are shaking — but there’s plenty of room for it to stop,” deadpans Robert Cole, founder and CEO of Rock Cheetah, a hotel marketing and travel technology consulting firm.
“The hospitality industry has a patented four-step method to deal with disruption,” says Cole. “Step one is to ignore it. Step two is that when it’s pointed out to them, they continue to ignore it. Step three is they panic, and step four is they complain about it.”
Even so, there are signs the industry is starting to pull its head out of the sand. At last year’s Phocuswright conference, a panel on the future of corporate travel became a discussion about the inevitability of disruption by Google and Amazon, according to Travel Weekly.
And earlier this month at the Hospitality Industry Technology Exposition and Conference (HITEC) in Minneapolis, a panel entitled “The Next Big Industry Threat” focused on the risks posed by technology giants with deep pockets and keen e-commerce strategies.
“Of all of the companies that we discussed, the two that obviously bubbled up top were Google and Amazon,” says Nick Price, CEO of NetSys Technology, a hospitality technology consultancy.
“And, in fact, Amazon in a significant way was determined to be the more significant threat long term, even though it’s not present in hospitality today and Google is. Amazon is such an efficient and effective digital retailer that it is, by its nature, a primary potential competitor.”
Some see an eventual changing of the guard as part of the natural cycle of the industry. “In a way, nothing is really new in terms of, yes, there are always big players that try to dominate the market, crowd out innovation and crowd out competition,” says Dennis Schaal, executive editor for the travel intel site Skift.
Of course, neither Google nor Amazon hold any flight or hotel inventory. But what they do hold is information – oodles and oodles of it.
“Google, and Amazon in particular, are very, very interesting because they both have massive user bases,” says Cole. “Google is certainly predominantly an advertising-driven platform but it’s got billions of users and has all this behavioral data where it can really do some interesting things. And, from the beginning, Amazon has collected a lot of data and understands the relationships between what people like and their behaviors.”
Google dives in
Last month, Google revealed its streamlined trip-planning platform, Google Travel, which brings Google Flights, Google Hotels and other tools under one roof. It’s much more comprehensive than your average booking site. For travelers who regularly use multiple Google products – Google Search, Gmail, Google Calendar, Google Maps and so on – this platform will keep all of your trip research and past itineraries in one place.
Since the typical trip can take days or weeks to plan, this can be very handy. As you plan and book a trip, all of your travel-related queries from Google Search, saved places from Google Maps, and flagged flights and hotels are fed automatically to your Trips page when you’re signed into your Google account.
The cross-pollination of data across all Google products results in an extremely personalized Google Travel experience that some people will find wildly helpful and others, frankly, will find overly intrusive. The first time you enter the platform, you’re able to view your previous trips going back several years neatly arranged before you, which might be disconcerting if you were expecting a blank slate. (If you don’t want Google to track all your private results, you can opt out by adjusting your settings, but then you lose the cross-platform functionality.)
“I would like to see it less rammed down my throat,” says Schaal. “On the other hand, I do like certain aspects of personalization.”
In the end, says Cole, it boils down to: “Who do you trust? Because some people inherently trust Google, and they don’t care. They’re like, ‘You know what? They’re making my life more convenient.’ Google Maps might tell me, ‘Hey, I should leave earlier to get to work on time.’ Well, how does it know that? It’s followed me to work every day for the last three years,” says Cole.
Google Maps is emerging as an increasingly critical cog in the Google machine. Despite being the No. 1 navigation app with over one billion downloads, Google Maps does not have “superapp” status in the way that WeChat dominates life in China, points out Schaal, who has written extensively about the topic in Skift.
“In China, you wake up in the morning and five minutes later you’re looking at WeChat and you’re on it all day because you can do everything on it,” he said. “It’s messaging, it’s phone calls, it’s file sharing, it’s all kinds of e-commerce.”
“Google denies that there is some grand master plan to create a superapp,” says Schaal. Still, Google Maps is clearly on its way to becoming the do-it-all Swiss army knife on your smartphone. In the past few months, Google Maps has rolled out a dizzying number of new features, including incognito mode, real-time speeds, parking locations, traffic jam crowdsourcing and real-time predictions on mass transit crowdedness.
“Google Travel is constantly improving, just like Google Maps is constantly approving,” says Schaal. “They’re always working on it behind the scenes, always tweaking, and you can argue that, yes, they’re solving real problems.” To his point, Google’s machine learning has become so refined that travelers might learn their flight is delayed from Google before they hear from the airline.
As for booking trips, Google gives consumers a lot to love. “First of all, Google Flights is just so fast. And there are all kinds of tools for traveling to alternative airports or finding the best day to fly to get the best price,” says Schaal.
One of the biggest frustrations travelers have when booking trips is that, despite an overwhelming amount of hotel inventory available, online travel agencies (OTAs) and suppliers all seem to cough up the very same stuff. Google Hotels tries to surface up the most relevant inventory from the OTAs and hotels and, since last March, it also offers vacation rental properties worldwide.
But here’s where many say Google has an unfair advantage. As the world’s largest search engine, Google is the defacto gatekeeper for online travel planning – a superpower status the OTAs have never enjoyed. When you search for a flight or a hotel, Google controls what appears at the top of a search engine results page. Shockingly, the prime real estate is given to Google’s own platform.
And increasingly, no matter where you begin to plan a trip online, all roads lead to more Google products. Google recently increased its review volume exponentially, and made Google ratings more prominent in its search, maps and hotel listings.
“Google argues that the reason that they put Google Hotels and Google Flights on top of the page isn’t to shut out other competitors but to provide the best answers to your travel queries,” says Schaal. “I think that’s pretty much bullshit. TripAdvisor, Expedia, Booking.com, Hotels.com – all of the OTAs can sometimes have lower prices. You still always have to comparison shop.”
The reality is that the travel booking ecosystem is a tangled web of co-dependency. The OTAs and hotels need Google to send them traffic and Google relies on the OTAs and hotels for advertising dollars.
“Expedia’s biggest competitor now is Google,” says Schaal, “and Expedia spent about $5 billion last year on Google ads. That the OTAs are dependent on Google is the whole problem. I don’t think that Google Travel is solving problems to the degree that would justify its monopoly-like stature, and I do think it’s hurting competition.”
“I always say that the hotels are bringing a teaspoon to a nuclear weapons fight. It’s not fair,” says Cole. “Right now, Google is the main source of traffic for hotels. And there’s not another channel where they can cost effectively replace that traffic.”
Yet despite Google’s domination of their sandbox, Expedia and Booking will likely continue to do just fine, says Cole. “Google doesn’t want to abandon them. Google wants a healthy marketplace where all companies can bid on a level playing field. Google isn’t going to put a thumb on the scale for the OTAs or for the suppliers because it understands that the suppliers are paying the OTAs.”
“And right now, hotels like Google a lot,” says Cole, “because Google is giving them better tools to be able to advertise more effectively and counter the online travel agency duopoly between Expedia and Booking.”
Amazon dips in a toe
Google may have a head start, but Amazon is arguably more feared.
The retailing juggernaut had a brief flirtation with the travel industry in 2015, when it added hotel listings to Amazon Local, its former daily deals platform, and then launched a dedicated hotel booking platform called Destinations that focused on helping customers find nearby weekend getaways. After expanding Destinations to 35 cities within a matter of months, Amazon unceremoniously shut down the service without warning and later pulled the plug on Amazon Local. The company offered no explanation other than to say it had “learned a lot” from the experience, leaving many industry analysts scratching their heads.
Flash forward to the spring of 2018, when Morgan Stanley internet analyst Brian Nowak said he thought Amazon should take another look at the lucrative online travel market. In a note to investors, Nowak wrote that Amazon’s “focus on selection/service, pricing, and frictionless payment that drive conversion and stronger user economics also translate directly to travel.” He estimated that Amazon could make $600 million in profits annually if it built an online hotel business roughly half the size of Expedia’s.
Several weeks ago, Amazon took what Schaal calls a “baby step” back into travel when it launched flights in India with the help of a local OTA called Cleartrip. “I would expect Amazon to roll this out in other emerging markets, maybe in the Middle East or in Southeast Asia,” he says. “India is a key target market for Amazon in general.”
While Amazon’s re-entry into the hospitality sector remains speculative, Price thinks the company is uniquely positioned to completely change how we shop for hotels.
“Hotels are weak digital retailers,” Price says flatly. “And the evidence for that is the rise of the online travel agents, which over 20 years came from nowhere to become the dominant force in hotel room retailing.”
“Right now, online travel agents only sell rooms. They’re selling exactly the same product as the hotel itself. But Amazon could differentiate the product,” says Price. “For example, I haven’t found a single hotel company that can actually create a unique basket of goods for me in the way that Amazon does.”
Price envisions a scenario where a traveler might be able to fill a shopping basket with exactly what he or she needs for an upcoming trip – say, a room for five days, two evening restaurant reservations, a bottle of champagne and flowers in the room and a taxi or limo from the airport. “Now that is a basket of goods. That is hotel retail. Not a single hotel company that I’m aware of anywhere that can do that and yet Amazon does it every day,” he says.
“From a consumer standpoint, I would welcome an Amazon Travel,” says Schaal. “First of all, it’s competition against Google, which then wouldn’t necessarily be the biggest player in travel. And Amazon would certainly go for lower prices.”
On the issue of consumer trust, Price thinks Amazon has the edge over Google. “Most people give Google information unintentionally, whereas customers give Amazon information very intentionally through intentional purchases,” he explains.
“Amazon Prime subscribers are a very, very loyal, very well-understood group, which is probably even better than simply being a large group,” says Cole.
“I pay Amazon on an annual basis for the pleasure of being part of Prime. I’m not a loyalty member, I’m a subscriber,” says Price. “I’m already intellectually and emotionally bought in.”
Will Amazon jump into the deep end of the online travel booking? If it happens, it’s likely to come without warning.
“Google’s culture is to try something, see if it works, and if it doesn’t work, shut it down and move on. It is much more inclined to experiment and accept failure. I don’t see that from Amazon,” says Price.
“Amazon tends to study something for a long time in its super-secret labs, and then come out and shock people,” says Price. “I don’t think there were many people that knew Amazon was going to purchase Whole Foods, for example.”
“For all we know,” says Price, “Amazon could right now be working on a retail model of how to merchandise hospitality experiences for the 21st century and we wouldn’t know.”