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.”
