Strategists with internet-based travel agencies Expedia (EXPE), TripAdvisor (TRIP), and Priceline (PCLN) might have shed a few tears when web-search giant Google tiptoed directly onto the industry’s own turf on Tuesday by announcing it now had its own hotel-booking platform.
In retrospect, it should come as no real surprise that Google (GOOG) is getting directly into the online-travel booking arena; why help the middleman when you can be the middleman?
The move crosses a line that Google had seemingly been unwilling to cross before now. Priceline and Expedia together account for nearly 5% of the search engine company’s annual revenue, and angering them or their peers could prompt those agencies to abandon Google as a place to advertise. It now seems, however, Google doesn’t really care what names like Expedia or TripAdvisor feel — the monetary reward is worth the risk.
More importantly to investors, this creates a relatively big problem for the internet travel names that had become dependent on Google as a marketing partner.
Google Can’t Disguise its Travel-Booking Plans Any Longer
Google’s foray into the world of travel booking comes with its licensing of Room 77 software. Room 77 (once funded by Expedia, ironically enough) has already made a name for itself as the framework for a handful of hotel booking companies that provide opaque pricing information. Opaque pricing simply means a would-be traveler can see the rate for a room in a certain locale, but won’t actually know which hotel chain has been booked until the reservation is made.
The inclusion of Room 77’s software, however, is actually just a small part of the bigger mission that should have owners of EXPE or PCLN stock worried.
Google has actually been directly in the booking game since 2010, when it unveiled a program called Hotel Price Ads that — predictably enough — allows browsers to shop around for hotel deals via Google Maps, or more recently, Google+. Still, Hotel Price Ads (HPA) wasn’t taken seriously by too many people at the time. But things got more serious in 2011 when Google brought ITA Software into the mix in 2011 to drive airline ticket comparison-shopping, and launched its Hotel Finder tool.
More recently, Google has been forging relationships directly with hotels that are also interested in circumventing the middleman’s fees by buying exposure through Hotel Price Ads.