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Mr. McCartan

Revenue Management

OTA v/s Meta Search: The Battle Gets Bloodier

By Michael McCartan, Managing Director Europe, the Middle East, and Africa, Duetto

Let's start with meta-search - the new rising star. According to PhoCusWright, 54% of Chinese, 36% of American and 35% of British travelers use meta-search engines to compare rates. Kayak, which was founded in 2004, took four years to process 1 billion queries, but processed 1.6 billion queries in 2013 alone. This number is expected to triple by 2019. Qunar, a Chinese meta-search channel, processed 3 billion queries for flight and hotel rates in 2013 (Source: http://www.tnooz.com/article/Planning-to-step-into-China-as-a-travel-metasearch-brand-be-ready-for-the-grind). No wonder that meta-search has attracted billions of dollars of investment in the last few years and is being hailed as the hottest thing in travel.

Until recently, savvy customers checked close to 22 sites to ensure they got the best price for their accommodation needs. Further, more than 60% of them began their searches on one device and finished on another (Source: Google Study http://ssl.gstatic.com/think/docs/the-new-multi-screen-world-study_research-studies.pdf). Meta-search is liberating travellers from this wild goose chase and information overload. Through strategic alliances with key channels, meta-search players are adopting semantic search, and ensuring near accurate customized price comparisons based on user preferences in an easy-on-the-eye display.

For hotels, knowing their guests and their online purchasing behavior has been of paramount importance for targeted campaigns which lead to improved booking conversions. According to a recent study by TripAdvisor, 50% of their respondents agreed that hotel price comparison or meta-search saves time and helps to find the right price for their preferred hotel. According to the same survey, hotel guests read between 6 to 12 reviews before booking. This is a global trend cutting across regions and a clear indication that user generated content (UGC) is having a greater influence over traditional marketing material. Meta-search channels, which place aggregated rates next to millions of hotel reviews, significantly reduce the number of steps and sites a consumer needs to visit prior to making a booking. The tremendous growth of this platform can be attributed to the value proposition these sites offer to the travel consumers - not only do they provide real-time availability and rate data, and enable price comparison - these sites are one-stop solution for travelers to research and consequently book their hotel stay.

Meta-Search vs. OTAs

In 2011, Google entered the hospitality business with the launch of Google Hotel Finder which allowed users to search for hotels based on name, location, property type and chain. Using its multiple platforms like Google Carousel, Google+, Google Local and Google Maps, Google offers property owners and OTAs the opportunity to attract the attention of potential guests at every stage of their booking journey. Working on the same premise as the Adwords model, it allows Google Hotel Price Ads (HPA) users the option to place their property on Google's different platforms, and charged on a cost-per-click basis. To compete with the search-engine giant, meta-search channels already in the market have had to offer an improved search experience, and they have taken the challenge head on.

Two years later, TripAdvisor followed the same model while also cross referencing with review types. With the arrival of TripConnect, independent hoteliers and B&B owners got a chance to compete in a market that was previously only available to OTA's and large hotel brands. TripConnect has now gone one step further, and has announced the release of a mobile booking platform for independent hoteliers at end of this year, dramatically improving the connectivity level of 65,000 hotels that signed up to the service last year. Google's recent integration with Room 77 also encourages smaller hotels to bid for their own inventory along with Online Travel Agents (OTAs). This signals the intent of the search giant to play a much larger role in the hotel booking space, but also gives both OTAs and hotels level playing field to attract traffic to their website. In theory at least but is this the case in practice?

Its Advantage to OTAs

While writing this article, I did a random check on Kayak, Google and TripAdvisor. In all three channels, my specifications were the same. The results (shown below) clearly indicate that OTAs, especially the bigger ones, are getting more prominence in search results.

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This is supported by a recent study by L2 Thinktank which showed that in April 2014, OTAs controlled 96% of booking listings in Kayak. According to a report by SIG, Kayak sent 57 times more people to the OTAs than to brand.com sites, and nearly half of TripAdvisor's revenue came from Priceline Inc. and Expedia Inc. For Google, Priceline and Expedia have been their top advertisers for years now, with Priceline and its subsidiaries like Booking.com, Agoda.com etc spending $1.5 billion with Google globally this year, followed by Expedia Inc., which is expected to shell out another $1 billion. (Source: http://skift.com/2014/05/21/priceline-and-expedia-are-googles-two-most-important-advertisers/ ),

Essentially, meta-search sites control the ranking of OTAs and hotel websites within the hotel search results based on the value of bids each website has paid for the search keywords. OTAs with their technical superiority and larger marketing spend have taken full advantage of this model and are getting much better placements for their product.

All is Not Lost for Hotels Either

Does that mean it's a no-win situation for hotels, especially independent ones when it comes to meta-search? Contrary to perception, with intelligent bid-management and improved content, hotels can see good conversion rates. Meta-search channels enforce strict rate parity rules, thereby making OTAs indistinguishable from their competitors from a pricing point of view and prevent price-centric competitive actions to gain market share. Ironically, this also gives hotels a fair chance of competing and attracting qualified leads to their booking engines through emotional appeal, which is vital for influencing rational decision making. A, fast website with high quality photographs and descriptive content and an excellent user experience on desktop, mobile and tablet instils confidence in the guest, which helps booking conversions and builds brand integrity.. However, to get on the top three positions of a meta-search listing, the ones which matter, hotels need to manage bids on a daily basis. Trying to out-bid the big OTAs on the broad search terms that travelers use early on in their booking journey is a costly and futile exercise. Hotels should rather focus on keywords that represent their uniqueness to achieve a meaningful ROI on the meta search engines. This takes us to the crucial question - whether meta-search management is marketing or revenue management task.

While meta-search engines like Google HPA and Trivago give maximum importance to the lowest rate followed by highest bid, TripAdvisor's default search results are based on ranking. For two or more hotels having similar rates - highest bidding within the price bucket gets top position. Under the post-per-click model, which most meta-search channels like TripAdvisor and Google follow, they will only need to pay when someone clicks the direct link, thus ensuring maximum utilization of every dollar spent on meta-marketing. Hence, while it's important to intelligently manage the pay-per-click (PPC) spend, which is a marketing task, online distribution team needs to keep a close eye on competitor rates, and manage the real-time rates and availability and deep-links from the meta-search channel back to booking engine for converting clicks into reservations. For the revenue management team, meta-search has emerged as another revenue channel and they must work with the marketing team to optimize results from this platform.

That is why meta-search management is far from 'set and forget' rates, and needs active engagement in rate and bid management. If managed properly, the return on investment (ROI) on the amount paid in meta-search pay-per-click (PPC) model can be significantly higher than CPA (cost-per-acquisition) hotels usually pay out to OTAs.

Here are four mantras all hoteliers should live by to improve their distribution strategy and influence more customers to book directly with them, including via the Metas -

  • Rate parity - Meta-search sites typically conduct searches across multiple travel sites and allow the user to compare best rates and availability. Meta-search helps to identify rate discrepancies across multiple channels for a single property and gives a snapshot of overall rate behaviour in a given market at a given time. For a consumer, this gives them an apple to apple comparison, and provides an option to book from anywhere they want. Since meta-search visitors are generally deal seekers, they will choose the lowest price. Hence it's important to maintain parity across channels.
  • Bids - The approach to meta-search management varies from channel to channel. For Google, the ranking depends a lot on optimized Google+ presence, while in TripAdvisor, its guest reviews which matter the most. The highest bid not necessarily ensures the top position, and it may happen that low-priced keywords bring higher rankings and hence more clicks. Focus on conversion, monitor your competitors, and make changes in real-time to optimize ROI.
  • Content - Meta-search is another search engine, which aggregates rates from various sites. And like all search engines, content is going to play a major role in page-ranking. Rich content including photographs, accurate property information and amenities in the brand site as well as listed OTAs will certainly help hotels to improve page ranking.
  • Reviews - From Kayak's integration of reviews to TripAdvisor's default ranking based listings to Google+ influencing Google hotel ranking - UGC or user-generated-content today rules. Integrate reputation management into the distribution marketing task to stay on top of the game.
  • Connectivity - Last, but not the least, check on the connectivity. Meta-search channel management needs advanced distribution connectivity for seamless flow of information between the meta-search sites, the hotel booking engine as well as the hotel PMS system. An integrated solution, which connects with traditional OTAs, meta-search channels, rate intelligence and bid management helps hoteliers save time and reduces chance manual errors.

The road ahead will not be without its challenges, but then challenges are the door to success.

An expert in the fields of hospitality and electronic distribution, Michael McCartan joined Duetto as Managing Director for Europe, the Middle East and Africa in 2014 to spearhead the rollout of the company's products and development of Customer Success teams throughout the EMEA region. Since joining Duetto, he has grown the European headquarters of Duetto in London, as well as establishing teams in Germany and Dubai. Mr. McCartan is adept at engineering creative solutions and then executing their delivery, understanding the exact needs of the client and the challenges surrounding the market. He is a valued member of the HSMAI Europe Revenue Management Advisory Board, contributing to articles and leading seminars and keynote sessions for the association. He is also a frequent speaker and panellist at major travel industry events across EMEA. Mr. McCartan can be contacted at +44 7557968806 or michael.mccartan@duettoresearch.com Please visit http://www.duettoresearch.com for more information. Extended Bio...

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