perez
1162 days ago
 

Some rumors die hard — Will Google become an online travel agency? [VIDEO]

Bruno Perez, co-founder of RevPar Guru, has resurrected the time-worn specter that Google is intent on becoming an online travel agency.

He is, of course, not alone in his theory.

Perez cites Google’s recent launch of Google Hotel Finder and says Google would merely need to insert a “Book It” button to become an OTA.

“That’s it,” Perez says.

Take a look and listen:

Skeptics argue that Google would not want to turn its advertising model on its head and build the infrastructure necessary to become a merchant of record and to provide customer service to delayed or sometimes-disgruntled travelers.

And, with the Federal Trade Commission, US Senate, state attorneys general and European regulators intensely scrutinizing Google’s practices, this would hardly be the moment for Google to radically restructure its mission by becoming an OTA.

Following up on the video, Perez says Google has the potential, capacity and “desire for revenues” to become an OTA.

He says Google could charge hotels lower “booking fees” than OTAs do if Google enables hotels to enroll for Hotel Finder online.

“Google’s excursion into the travel industry follows the company’s trend of challenging established markets,” Perez says. “The recent launch of Google+ to take on social media sites like Facebook, Google Offers encroaching on Groupon’s territory — the track record is definitely there.”

Perez points to some Google commercial setbacks such as Google Wave and Google Video Player, but opines that “the OTA opportunity for Google is just too great for it to ignore.”

In the run-up to its acquisition of ITA Software, of course, Google pledged that it would not be selling airline tickets.

Google undoubtedly is already heavily involved in travel, one of its largest sectors by anyone’s count.

But will the temptation to get even further involved in the glamorous travel industry just be too great a temptation for Google?

 
 
Dennis Schaal

About the Writer :: Dennis Schaal

Dennis Schaal was North American editor for Tnooz.

 

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  1. RobertKCole

    Since this piece of fluff is being wallpapered across the web, I thought I would also wallpaper my comment from the CNNMoney article (syndicated from GigaOM.)

    I’m happy to debate Bruno or the full RevPARGuru team on this topic anyplace, anytime

    Here’s the comment:

    Sorry Bruno, I could not disagree more with your assertion that Google will become an Online Travel Agent.

    This is not to say that Google won’t be a highly disruptive force in travel by organizing travel information and providing an advertising platform for suppliers and intermediaries to compete for business.

    At one time, only conventional travel agencies had access to travel information through publications like the Official Airline Guide and Hotel & Travel Index they also had private telephone numbers to contact airlines and hotel companies. Then, GDS’ like Sabre created Easy SABRE to provide direct consumer access to formerly unavailable information. OTAs soon followed that integrated GDS data with additional content stores to provide even greater travel information access. OTA acquisitions consolidated information from around the globe. Finally meta-search providers shopped across suppliers & OTAs to further improve access to he best pricing, inventory and information.

    At each step, the disruptive technology enhancement eliminated the need for intermediaries that did not adequately contribute to the revised value chain. OTAs did not kill travel agents, though they thinned their ranks – those that survived were differentiated and stronger. Similarly, Google will not kill the OTAs, although it may potentially thin the herd of weaker players.

    My guess would be that the meta-search players that are unable to provide incremental value will be most at risk from Google’s entry into the space.

    There are three fundamental reasons Google will not become an OTA:

    - BUSINESS MODEL: Google’s stated objective is to organize the world’s information. They monetize their search capabilities through an advertising model. Travel information is highly fragmented – Google’s own statistics indicate leisure travelers routinely search 22+sites over 10+ sessions to book a trip – this is highly inefficient. Each of Google’s forays into travel has focused on enabling search to democratize travel data and facilitate context-sensitive advertising.

    - ALIENATING ADVERTISERS: Google has no interest in being the merchant of record for the booking. They can make higher margins and lower overheads if they let those wanting to be merchant of record bid on the opportunity to advertise or serve as the fulfillment mechanism for the search results. They do not want to directly compete with their advertisers.

    - CUSTOMER SERVICE: Google wants nothing to do with customer service for travel. Airline schedule changes, service disruptions, fee changes, etc. all disrupt travel and drive the need to staff service operations for peak demand conditions or risk alienating customers.

    Google aggressively entering the travel space is a big deal and it is highly disruptive. Google Flights potentially changes air search to a no-click paradigm. Google’s flexible polygon filters and shortlist are also welcome innovations.

    But the technology alone does not control such a large and global industry. Travel agents remain critically important for segments such as corporate travel, cruises, destination weddings and complex leisure itineraries, among others.

    I will still pick an expert travel agent over the best online travel site. We won’t reach the travel industry equivalent of the computer beating the chess master for some time. Remember, even when that happened, the game of chess did not cease to exist.

     
  2. Luxury Resort Hotels

    Interesting debate. It’s business plain and simple, if Google project by entering the travel sector as an OTA or wherever else they want as being more beneficial of course they will, to the detriment of small operators such as ourselves.
    Ian mention that Google makes $600M/quarter profit from travel ads, if they want to jeopardize that revenue stream, their projection must show at a minimum over 1 Billion/quarter to justify the risque.

     
  3. Bruno Perez

    Thanks to everyone who posted a comment to this story, clearly this is a controversial topic and one that will continue as Google’s acquisition of travel companies moves forward.

    I stand by the comments I made in the video, Google does have the capabilities to become an OTA. Does it have the capacity to handle the minutiae of the OTA process? Possibly not, but its online travel search dominance will only grow and this is something that hoteliers and the travel industry must consider and ask, “how will Google’s entrance into hotel search and bookings, or flight search and bookings impact my business.”

    To Joe Buhler’s point, Google does not have to adapt to a traditional business model – it disrupts them and most likely Google will change the travel business to fit its needs.

    Regardless of what they call themselves, Google brings big business (and even bigger capital) to the travel industry combined with the ability to change an industry.

    And if that doesn’t work… they can always buy an OTA!

    I welcome any other comments and opinions, please feel free to contact me at: bperez@revparguru.com if you want to discuss this further.
    Bruno

     
  4. sidd

    Merely with ITA google cannot bring a lot of charm, what they really need is a booking engine or some sort of GDS support, which I think they are not having now. So I wont thing just searching with effect full travel industry a lot. for end user shopping and then booking are most important.

     
  5. Kevin May

    Kevin May

    @James B/@john – keep it cordial pls.

     
  6. James B

    Hey John,

    You seemed like an EXPERT, so I looked you up on LinkedIn.

    30 Years in “the biz” and all of your companies websites are coming soon!

    This guy is the CEO of THE UNDER CONSTRUCTION TRAVEL GROUP…LOL!

     
    • John Pope

      Hey @James aka @Bruno,

      You caught me, I’m just a legend in my own mind. I’ve got nothing.

      Might want to brush up on your reading & comprehension skills, I referred to Bruno, (cough, cough, I mean YOU), as having 30 years tenure in the biz. I, on the other hand, am a relative travel industry newcomer, obvious smart ass and eternal cynic.

      My weakness is that I can’t help but call out stupidity when I see it, please forgive me, I’m working on my shortcomings. Unfortunately, you or your boss crossed my online threshold for acceptable delusion and BS. Just calling them as I see them, and without much diplomacy.

      Now would you like to go back to debating the validity of Bruno’s / your Google OTA theory vs the content of my comments? Or just continue with the “you hurt my feeling now I’m going to get you” banter. If it’s the latter, please ask Tnooz for my contact details because it’s probably better to take that conversation elsewhere. It’s easy to attack the messenger, but far more intellectually satisfying to attack the message. I’ll let my opinion on Bruno’s message speak for itself. Now let’s hear your opinion on mine.

      Don’t worry, I’ll be sure to let you know when you’ll have a chance to rip our business model and technology to shreds as soon as we launch, in fact, I look forward to it. Trust me, you won’t be alone.

      But for now, come on “James B” tell us all who you really are. Or are you hiding behind the “someone from Revpar Guru” anonymity for convenience sake or cowardice?

      Truth hurts “James B” or should I say Bruno ;) I feel your pain.

       
  7. John Pope

    Whoa,

    Stunning (and by stunning, I mean ludicrous) prediction based on some very sound (and by sound, I mean illogical) reasoning by Bruno Perez as follows:

    First – “Google Hotel Finder is a sophisticated, fully functional OTA. Only thing they gotta do is add a ‘book it’ button… that’s it.” – Oh for sure, they won’t have to worry about customer service, complying with national industry trading standards (bonding, licenses, etc.), setting up a global travel infrastructure or the hundreds of other things necessary to establish a multinational OTA. Why not just buy Orbitz for say $300 million, a premium of $75 million (Orbitz’ current market cap is $225 million – chump change to Google), if that was their ultimate objective? Why bother with Hotel Finder and building something organically? Google is mostly about ‘accumulation’ not ‘innovation’ after all, and patience is certainly not one of their virtues.

    Also, as pointed out by @Dennis and as everybody on the planet knows, they’re already facing regulatory oversight from the FTC, DoJ, US Senate, state Attorneys General and the European Commission. Now Bruno is suggesting that Google, by taking an even greater slice of the travel value chain, wouldn’t raise any further competition concerns? Not to mention the fact that it is waaaaay outside their core, and significantly more profitable, competency – online advertising.

    Second – “Google’s excursion into the travel industry follows the company’s trend of challenging established markets,” , “The recent launch of Google+ to take on social media sites like Facebook, Google Offers encroaching on Groupon’s territory — the track record is definitely there.”, “the OTA opportunity for Google is just too great for it to ignore.” and “I don’t think Google are here to experiment, they’re here to generate profit.” Where should one start to debunk those statements as logical evidence for his Google OTA theory? Too many ways to contemplate, my head hurts.

    Using the same logic, why doesn’t Google get into online donut sales to disrupt and compete against Krispy Kreme? Or online gaming to compete with Zynga and Electronic Arts? How bout pharmaceuticals, making swim suits or organic food production? I think Pets.com might also be available, pet food distribution could really use a shakeup.

    They all make a profit… but, of course, are all equally as absurd as entering the OTA game.

    I was waiting for Bruno to say… “Just kidding everybody, ha ha ha, had you going though didn’t I?” Surprisingly, he didn’t as it appears he’s actually serious.

    Candidly, I hope Google does enter the OTA market because it would surely be the end of any further participation in the travel industry whatsoever. Regulators would have a field day! It would open up considerable opportunities for other businesses, spark a greater competitive environment and ultimately benefit consumers.

    Sorry to be so cynical and blunt but all this is coming from an executive with 30 years experience in the industry and who one might expect to have thoughtful and credible insight… he has certainly disappointed in this instance because his conclusions are nonsensical, in my opinion.

    But what do I know… I’m not a bonafide industry expert, wasn’t interviewed by USA Today, nor do I have 30 years in the biz. I’m starting to thank my lucky stars by the fact that I don’t.

    Interesting side note: RevPar Guru claims to have delivered 98% occupancy rates to it’s hotel clients in the first four years of it’s existence http://revparguru.com/about-us.html. A whopping 33% higher than the industry average and just 2% short of filling every room, every night of the year. Very impressive indeed. On the downside, with those early results there’s only one direction to go from there.

     
  8. Dennis Schaal

    Dennis Schaal

    Joe: You are on the money! Who cares about the business model per se. Google, if it’s successful, will be a force in hotel sales and travel in general.

     
  9. Joe Buhler

    Just another indication that the established travel industry terminology is becoming unscrambled with new hybrid business models. Does it matter whether Google is called an OTA or not, I don’t think so. They are an increasingly important player in travel and will continue to be one generating revenue any way they can. Welcome to more chaos down the road!

     
  10. Ian

    Google gets about 10% of its $9B/quarter revenue from travel advertising. After taking 30% off for SG&A, it makes about $600M/quarter profit from travel ads. Last quarter Priceline, Expedia, and Orbitz earned $256M, $140M, and $9M respectively in net income.

    In other words, Google makes more profit from travel ads than do Priceline+Expedia+OWW from their combined OTA operations.

    There’s no incentive for Google to get into the much less profitable OTA business.

    The real issue is to what extent will Google supplement (replace??) its CPC travel advertising business with a CPA direct connect to the travel supplier model (in which the travel suppliers are the merchant of record)? Its simply a math problem in which Google will probably run some tests to see how it can maximize revenues.

     
  11. Dennis Schaal

    Dennis Schaal

    DJ: Ya, two years ago, I wrote about the Google Checkout and a Google Base angle here http://dennisschaal.blogspot.com/2009/08/kayaks-hafner-awaits-google-hotels.html

     
  12. becky waller

    Well said, gentleman. (And the travel industry, glamorous? Ha ha ha ha ha ha.)

     
  13. Alex Bainbridge

    When all you have is a hammer every problem looks like a nail.

    Google doesn’t have to become an OTA in order to be party to a travel transaction. There are models that enable Google to take a booking using their UI and branding and then transfer it to a supplier…….. just like travel technology companies do – without having to get into the mess that is the product transaction.

    These new models are still not being used by meta-search either – there is an entire third way solution that no one ever mentions….. Google not far off from being able to do that with their hotel PMS connectivity and their ITA software….

     
    • DJ

      Not to mention things like Google Wallet and Google Checkout.
      G is providing all the elements of the infrastructure that the (so-called) travel industry has been unable or unwilling to collaborate on in order to do itself.

      Whereas in another kinda similar vertical in the UK, relatively few people currently use Google as a window into searching for a new place to live. They use Rightmove. Why is that?

       
    • Murray Harrold

      Yes, interesting – if not ironic… Below, @Ian says that Google makes more moeny from advertising the stuff (ie travel) than anyone who actually provides the service. Google can “take a booking and pass it on” – Why ironic? Because in the not too distant past, I heard all the stuff about “order takers” and “middlemen” – Okay, Google (or Facebook) are bigger than Joe’s Travel but the principle is the same, if scaled up by a few squillion – thing is, with Joe’s Travel, the service supplier only paid when they had sold something and with the brave new Google world – you pay (through the nose when it becomes big) even if you sell naff all.

      @John Pope’s ideas hold water. The money is not in providing the service, it’s in everything that leads up to it – and having the information (big data – see Tnooz posts passim ad nauseam) to bring the two together as accuratley and as quickly as possible.

      There used to be this debate about “Who owns the Customer?” Well, that’s changed. Who owns the customer is neither here nor there – but who owns the *DATA* about the customer is another story…

       
 
 

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