Travel Analytics Blog
Travel Meta Search Engines – Threat or Opportunity for Travel Suppliers?
Posted by Sonja Woodman on Thursday, August 21, 2014
Metasearch as a concept has been around for some time, but more recently it has become the hottest trend in the travel industry and the new battleground for winning consumers between the Online Travel Agencies (OTAs) and travel suppliers. Indeed the topic Travel Meta Search Engines – Threat or Opportunity for Travel Suppliers has aroused some healthy debate at recent conferences, such as the one held by HEDNA in Brussels in June. This article looks at the topic in context of the potential it offers Hoteliers in re-taking control of their inventory.
The backdrop to this debate is the reality that metasearch is part of an increasingly diverse distribution landscape that can no longer be regarded as a silo. Distribution now needs to be seen in the context of everything from content syndication and online marketing to connectivity and revenue generation. Distribution encompasses how a hotel is shopped, perceived, rated, booked and shared across the travel eco-system. It is complex and if not understood or effectively managed can have serious implications to a hotel’s bottom line. So increasingly distribution and marketing strategies and functions are becoming intertwined. This means understanding the impact of distribution choices made and connecting the dots between distribution costs, marketing costs and revenue potential.
Metasearch – Passing Trend or Pivotal Role in the Future of Travel?
Enter metasearch as a way of searching for travel products and making comparisons between a competitive range of supplier and OTA driven offerings, before being directed to the chosen site to make the actual booking. This more transparent way of searching is especially popular among ‘Millennials’ the online savvy and very connected under 25 year olds. According to digital researchers L2, 39% of them source their travel via metasearch rather than traditional OTAs or brand sites, compared to only 23% among the baby boomers. Millennials are driving game changing online behaviour and their dominance and influence is shaping the world, so no business can ignore them.
Online travel revolutionised the way people shop for travel products and the popularity of metasearch can be seen as part of that evolutionary journey. In recent years the sector has witnessed impressive growth and investment with:
- New sites springing up, many relying on the dubious practice of content scraping from other sites.
- Expedia and Priceline the dominant global OTAs aligning their business interests with metasearch by buying arguably the two best platforms around at that time, Trivago and Kayak respectively.
- TripAdvisor boosting its powerful review engine with metasearch capabilities
- Google building a business empire around its metasearch engines Hotelfinder and Flightsearch with strategic acquisitions (ITA) and licencing agreements (Room 77).
Metasearch as an aggregator of travel offers across multiple sources is clearly here to stay. Indeed it can be speculated that the traditional OTA model may have had its heyday, hence why the established players are so keen to own their own search engines. Metasearch delivers what today’s consumer wants, namely the ability to compare and contrast from a single screen the various offerings from different brand.coms and OTAs. Metasearch logically presents the three pillars that fuel a search request:
- Descriptions and locations
- Reviews and recommendations
- Real time prices and availability
In short, metasearch gives consumers a fast and comprehensive view of product choice and almost instantaneous purchasing options, by directing the buyer to the site providing the option/price he has chosen – seamlessly. This is why it is growing in popularity and this is why all travel product suppliers need to take it seriously.
Travel Meta Search Engines – Threat or Opportunity for Hoteliers
So metasearch - threat or opportunity for hoteliers in particular? Well there are two simple ways of looking at the conundrum?
- Is metasearch just another distribution channel among the many other channels that exist (Online Travel Agents (OTAs), Global Distribution Systems (GDS), Wholesalers)? Will it be another layer of distribution cost?
- Does metasearch represent a real opportunity for hoteliers to fight back against OTAs by driving consumers, from the metasearch sites to the brand.com front door in order to achieve direct bookings at higher margins?
In other words is metasearch another headache for the harassed hoteliers or could it be the game changing opportunity they need to regain control of those escalating and unsustainable distribution costs? Well I suppose the answer depends on three distinct factors:
- Is the Hotelier willing to seize metasearch as a golden opportunity and find ways of making it work for his (or even her) hotel?
- To what extent can he or she harness the skills and resources needed to succeed?
- Is the metasearch landscape a level-playing field? Or is the metasearch field becoming a bidding model where existing OTAs with the mighty advertising budgets have the advantage?
You might think answering questions with more questions, is not exactly adding clarity to the debate.
So let’s take a closer look at some of the opportunities or threats that metasearch represents for hoteliers.
Traditionally hoteliers distributed their rooms through intermediaries at pre-arranged prices, while maintaining their own web sites for direct bookings. Its only since third party distribution has got so expensive that initiatives to drive more traffic / conversions to brand.com has grown in importance for the hotelier and that the hotel online marketing function grew in stature. This means increasing a hotel’s online brand visibility and optimising online opportunities.
Since OTAs frequently overpower hotel brands in the google SEO world (by bidding on their brand names), metasearch is the new search engine that promises to break that cycle. In addition, hefty advertising campaigns have made some metasearch engines household names with extensive global reach. This makes them attractive distribution channels for the travel suppliers.
To stand a fighting chance, hoteliers need to put their best shop window on the metasearch sites. By being visible and very responsive, they can compete and they can be successful. Can metasearch success break the hegemony of some of the biggest OTAs around? Time will tell.
Increased direct channel bookings
As part of the decision making process behind embracing metasearch, there are two fundamental considerations.
- Firstly metasearch should not be regarded as just another channel. It is a hybrid channel that requires the careful fusion of distribution and marketing know-how. If this is in short supply in-house, then there are online hotel marketing specialists, agencies or even tools that can help get the bidding process right.
- Secondly, hoteliers need to understand how the metasearch model can impact their profitability and their bandwidth to cope with the volume of requests.
Using metasearch as a push model distribution channel where rates and availability are periodically pushed, may be a more convenient approach with less impact on the Central Reservation System (CRS), but it is not likely to deliver the same results as real-time pushing of Availability, Rates and Inventory (ARI). In this instance any purchase interest can immediately be confirmed or updated. The metasearch model must be adopted by hoteliers with the firm resolve to do all that it takes to shift market share from the OTAs. Sharing real-time rates and availability is part of that success.
Competing directly with OTAs
Essentially OTAs are only selling channels. They need to get their inventory from the suppliers in the first instance. OTAs do this secure in the knowledge that rate-parity, where hotels need to supply the same price to all the OTAs is large still respected by the hoteliers. So there is a strong chance that the hotel will be featured on the metasearch site as a result of an existing OTA relationship. But this is the most expensive way of selling a room before its sell by date, so if metasearch can be made to work by the hotel for its direct channel, then the cost to sell the room could be less leaving a high return on customer acquisition costs for the hotel.
Key questions for the hotelier to ask are:
- How much will it cost me to advertise my property? What financial limits should I set?
- Will I be able to influence the value of my property (not just the price) and its ranking in the responses displayed?
- Will I be able to distribute my rooms directly at a lower distribution cost than the OTA who is selling the same room at the same rate.
- Or will the cost-per-click fees exceed the usual commission paid to the OTA for selling the same room either via the OTA or via metasearch?
To answer these questions, hoteliers will need to make sure that their direct channels are strong and competitive while taking a close look at performance from indirect third party channels.
Counting the Costs
The basic maths of metasearch are the referral costs of the qualified lead that is ready to buy coupled with the agreed Cost per Click (CPC) / Cost per 1,000 impressions) CPM charges. In the case of CPC the hotel only pays for the clicks received which can be capped and with CPM the hotel pays for the impressions regardless of whether no one or thousands saw the Ad. The latter model is often avoided as it can end up being a bargain or a bad investment, and always a gamble. Returns on Ad spending (RoA) is a critical yardstick that needs to be constantly evaluated.
Most of metasearch profitability will come from Ad fees, so having opened their doors to hotels directly metasearch sites have a vested interest in providing an affordable economic model for hotel participation. The profitability thresholds for hotels should not be “covering costs”; but ensuring that those costs are lower than the commissions paid to the OTAs. Also the costs to consider are not just “those paid to the metasearch site, but also includes the costs of the booking systems and the costs of any external experts or tools used to manage the process.
The simple business objective of making money remains the same. Metasearch when managed effectively can help drive distribution costs down and increase revenues.
The key metasearch platforms show the availability and prices from intermediaries as well as hotel suppliers, often by connecting directly. This does require some technical effort due to the number of connections needed. The integration can either be made by the hotel directly or via the reservation system provider (booking system).
That direct participation of the hotel website on the metasearch site also has a cost, but direct APIs are now feasible for many hotels and ensure real-time pricing and availability feeds – an important ingredient in being accurate and responsive to secure those all-important bookings.
When a customer conducts a search by studying photos, location maps, reviews, location tips and gets real-time rate and availability based on the selected dates directly from the hotel’s CRS -- that’s pretty powerful.
Moving up the value chain
Travel is a huge online market (a third of all online purchases are travel related), which explains why so many players have been able to sustain themselves with very limited differentiation – from a consumer perspective. But this is on the cusp of changing as travellers move from being mainly price driven, to being more value driven and responsive to greater personalisation. Although today’s metasearch role may be more inclined towards serving the bargain hunter, they have the capacity to evolve into the search engine where price as well as value can be discerned.
A more successful approach is to understand the origin behind every booking: the traveller’s motivations and his decision-making logic leading to the purchase. All the big metasearch providers are working towards capability to deliver the best user experience prior to the booking process, which is the stage of inspiration, search, and price comparison. In this way they can deliver a user of high quality to the hotel, who will then merely have to finalise the booking and payment. This approach is dependent on access to content delivered by the hotelier, or an OTA, namely product catalogue, availability, and price. With this data they can contribute to provide the best experience before the booking process. After which it is the hotelier’s job to build guest loyalty and life time value.
The growth in metasearch can of course threaten the hotelier, much like any other change. This is especially true if the hotelier is unable or unwilling to adapt. But a far greater threat could be the risk that comes from doing nothing. I would suggest sitting on the side line and watching consumers increasingly flock to these platforms for making their travel plans is not a long term option.
Sticking with the OTAs
Indeed the ascendancy of metasearch may well come at the expense of traditional OTAs. By virtue of being able to present the consumer the three pillars of hotel information, reviews and best price across the leading suppliers and OTAs, the consumer can see all his options and has no need to search further. In that scenario, why would the consumer bother going to an OTA to conduct a search. Of course, depending on who offers the best price, the consumer may well still end up on the OTA rather than the hotel website to complete the booking transaction.
The greatest strength of metasearch for the consumer, i.e. the ability to compare and contrast offers against a range of providers, may also be its greatest threat to hoteliers. Metasearch presents the different offers in a list so it is easy to see who is delivering the best price/value. With rate parity still very much driving hotel price relations with third party channels it means that hoteliers need to work hard to be in control of their prices on their own website. If the OTA is seen to have the lowest price for the same room, the hotelier will not succeed in getting the referral. There is little point in paying for the connection if price transparency exposes price differences with your own website.
Failing to succeed in Dynamic Pricing
Metasearch is less about inventory management and more about getting the online marketing techniques and expertise right. Dynamic pricing becomes a powerful tool that requires real-time room availability and pricing feeds. This new advertising format requires daily spend and bid management, daily reaction to what other advertisers (e.g. competitors) are doing, monitoring of budget spend on a daily basis and monitoring of rate parity (that is often abused by the OTAs). Smaller hotels might find this difficult and will need to hire the right help or outsource to experts.
This is important because generally it is only the top positions that tend to dominate consumer attention. Just being present on the metasearch site means nothing since OTAs would surely push the property down or out of the pricing ad menu. This is why many hotels often find themselves outranked by the OTAs in these search engines.
The earlier point about whether Metasearch is a level playing field for hoteliers has been increasingly questioned by distinguished commentators in trade journals, who think that top metasearch rankings can be bought by the OTAs by virtue of their of their Ad buying clout. Conversely, there are plenty of digital marketing experts writing in the same journals who claim that the power of metaserch platforms really can be used to successfully pitch hotels alongside OTAs.
Of course winning the attention of the buying traveller is only part of the buying journey and is worth nothing if the traveller does not convert into a qualified lead that buys. So both claims probably have a ring of truth.
At the same time, initial research results from PhocusWright don’t make encouraging reading for hoteliers. Indeed the study shows that metasearch drives 6% of online travel agencies’ upstream traffic, yet just 1% of hotel brand traffic comes from metasearch sources. Could this disappointing figure be due to a poor adoption rate of metasearch by the hotel companies themselves? If the hotel is not present on the metasearch site, then the surging number of visitors cannot be referred, leaving them mainly with options served up by the OTAs who have entered the fray.
Just a Trend or a real Game Changer
My take? Metasearch is the game changer for Hoteliers to regain control of their distribution pricing. This means hotel companies should get serious about have a strong presence on metasearch sites. Metasearch use grew by 13% in 2013 and will continue to grow at an unprecedented rate. Advertising by the big ones such as Trivago and TripAdvisor alone could see to that. Kayak is already boasting that it processed over 1.58 billion queries in 2013 and TripAdvisor receives 200 million monthly visits and over 50% of them are already using its relatively new metasearch feature.
It will be a focus of the industry and, similar to hotel developments springing up where demand is, hotel companies will have to be visible where consumers go to buy. But by combining marketing campaigns with real-time hotel inventory and pricing, hoteliers are better placed to meet the travellers’ demand for instant, precise and concise information, as well as respond instantaneously to changing market conditions and comp set behaviour.
That said, the OTA channel will continue to evolve and will remain an important part of the travel distribution eco-system. Hotels will continue to be leverage them as another distribution channel to help boost performance. Too much reliance on any channel, be it OTA, metasearch, etc., is not going to be good.