April 09, 2014

Google finally checks in to the hotel business


Google is moving boldly to play a larger role in booking hotel rooms - at the risk of offending some of its most important advertisers, reports the WSJ. The company is adding more photos and reviews to its hotel listings, and more aggressively promotes its "hotel-price ads" that post room rates directly as travel-search sites do.

The idea is to encourage travelers to plan more of their trips directly on Google. In the process Google gets them closer to making a booking, which experts expect will make referrals more valuable, prompting travel agencies and hotel operators to pay more for clicks on Google ads over time. It also encourages more hotel operators to place ads on Google directly, bypassing online travel agencies that charge commissions of up to 25%.

In its latest move related to hotels, Google on Monday struck a licensing deal that will give it access to technology from hotel-booking software startup Room 77 while adding engineers to Google's hotel-search team.

The potential market is large. In the U.S. alone, travel and tourism spending totaled $450 billion last year, and is expected to grow 3.5% this year, according to the World Travel & Tourism Council.

But the move is risky: Online travel agencies are among Google's biggest advertisers. Priceline Group will spend more than $1.5 billion in 2014 on Google advertising and Expedia could spend another $1 billion, mainly to attract hotel bookings, estimates RBC Capital Markets analyst Mark Mahaney. Those two alone could account for nearly 5% of Google's ad revenue this year, Mr. Mahaney estimates, even though the company has over a million advertising customers.

Get the full story at The Wall Street Journal