Google’s growing presence in online travel will seem ominous for online travel agencies (OTAs) that have no choice but to rely on the search engine giant for traffic generation.
OTAs were already complaining about Google’s supposed anti-competitive behaviour in 2019, but many companies were still performing well and achieving year-on-year (YoY) growth. However, unbeknown to the online travel market, a pandemic would occur that would severely reduce revenue for OTAs, but increase Google’s dominance. In 2020, the global market value of OTAs decreased by 60.4% YoY, to $190 billion.
Alphabet’s (the owner of Google) revenue was over 15 times the amount of Booking’s and Expedia’s combined in 2020, showcasing that Google has the business model and capital needed to better weather an event like Covid-19. Google’s continued foray into online travel, and the fact it will be needed more than ever by OTAs as they look to recover from the impact of the pandemic, represents a threat to the recovery of this market.
Google has ramped up activity in recent years
According to GlobalData, the global market value of OTAs hit $480.3 billion in 2019, increasing at a CAGR of 9.4% from 2015 to 2019. This rapid growth rate and future growth potential intensified Google’s focus on online travel.
Even though Google made its first real step into the online travel space in 2011 with the launch of its hotel finder, its increased focus on the market in recent years has been evident. When looking at 2019 alone, Google launched its travel hub, added flight check-in and hotel booking abilities to Google Assistant, attached lodging listings to its maps function, created a search site for hotel availability by destination, and Alphabet even launched its own ride hailing app.
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Additionally, during 2019, the OTA market blamed weakened visibility in Google search results for poor third quarter earnings. Expedia Group’s net income fell by 22% YoY in Q3 2019, which it partially blamed on changes to Google’s algorithm, resulting in lost visibility. This once again hints at Google’s strategy to increase its dominance within online travel as it introduced its map-based hotel booking tool in the same period.
This series of actions from Google prior to the pandemic will no doubt impact the recovery timelines of OTAs. However, Google will have to be mindful not to expand, or act, too aggressively in the short-term, otherwise anti-competitive claims, lawsuits, and fines could become more frequent.
Another potential blow for OTAs
In March 2021, Google announced the launch of its hotel free booking links program. This program aims to give hotels more visibility, which has the potential to take even more power away from OTAs. This recent launch will help to create a more level playing field in the online lodging market, which will further disgruntle owners of OTAs, but may help to appease competition watchdogs.
The vast amount of resources behind Google and its increasing activity in online travel will continue to threaten the recovery of OTAs. Online travel was a market big enough for many companies to experience success, but this may not be the case in future years if Google continues its expansion.