Is hotel metasearch a distribution or advertising channel?

Question

Hotel metasearch has existed for over 20 years now (SideStep, acquired by Kayak), but has been elevated in importance ever since Google launched its Google Hotel Finder product back in 2010, which later became Google Hotel Ads (GHA).

For many years metasearch players used predominantly the CPC (Cost-per-Click) model (Trivago, TripAdvisor, GHA, etc.). Nowadays, most metasearch players use the CPA (Cost-per-Acquisition) model i.e. charge a fee in the form of a commission when a booking is done.

Last year, responding to the travel slump due to the pandemic, Google introduced its Pay-per-stay (PPS) model i.e. Google charges a fee in the form of a commission only if the booker actually stays at the property. Earlier this year Google even resorted to its masterful freemium model and offered hotels free booking link listings in GHA to lure more hotels into its metasearch program. By flooding each destination with booking options, Google is forcing hotels, OTAs and other booking sites to compete for visibility I.e. opt for the PPS premium listings.

The question is: Has hotel metasearch become a distribution channel that needs to be managed by the revenue management team like all commission-based channels like OTA, GDS, etc. or should remain as part of the marketing team's toolset?

Erik Muñoz

Chief Commercial Officer (CCO) at Lybra.tech

Supplier view

More info

Yes - the metasearch segment should be considered a distribution channel to be managed by the revenue team, which should include the online marketing function. For hotels still organised in a fragmented and inefficient manner where marketing and revenue functions aren't integrated, there is likely to be some confusion as to how this channel should be optimised.

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Loren Gray · Answer

I contest the reference to the word 'becoming'. It has always been a distribution channel. To that end, I would also contest the designation that it be regulated solely by revenue management. If anything we have learned (at an accelerated pace due to the pandemic). Is the need to end the continuance of defining the difference between Marketing and Revenue Management. A simple example, without a combined strategy of paid campaigns on the same said platform (Google) how would marketing know if it is competing 'within itself' when unaware of a Metasearch campaign being run by a siloed revenue management team? And visa versa. Rate offers, campaign offers, packages, etc., need to be mutually aligned by these symbiotic departments in a collaborative strategy and shared vernacular of KPIs and goals.

Peter O’Connor · Answer

Given today's radical transparent online hotel marketplace, the dividing line between sales, marketing, e-commerce, revenue management, pricing and even loyalty needs to disappear. These traditional organisational structures only create silos that get in the way of insuring that we put the right product at the right price in front of the right customer at the appropriate time moment in their purchase cycle. Rather than having separate (and often competing) teams, each with their own (often conflicting) objectives, hotels should instead focus on developing an integrated distribution function charged with optimising net room revenue. Now that would change everything.

Max Starkov · Answer

Hotel metasearch has become a distribution channel and is no longer an advertising channel ever since Google introduced its Pay-per-stay (PPS) fee model. Other metasearch players like Trivago and Kayak all offer CPA (Cost per acquisition) model, which is not in tune with the current era of high cancellation rates due to Covid uncertainties and ever-changing travel restrictions. Since Google's share of metasearch clicks, leads and bookings is larger than all other metasearch players combined, it simply doesn't make sense to spend your property's precious marketing dollars on CPC (Cost per Click) metasearch advertising. Google's PPS is the way to go and it makes sense Google Hotel Ads to be treated as just another distribution channel since this channel is commission-based like the OTAs, GDS, etc. There is another wrinkle to the story: earlier this year Google introduced free hotel booking links in its Google Hotel Ads (GHA) program. Google has been trying quite unsuccessfully for over 12 years now to lure more independent hotels join the GHA program. Now Google has resorted to its masterful freemium model: give every hotel a free booking link listing, flooding each destination with booking options thus forcing hotels, OTAs and other booking sites to compete for visibility. Example, if Google lists for free all 700 hotels in New York City in its GHA, what chance does your property have to be noticed, unless it bought a sponsored listing i.e. a paid GHA listing? Nil. The same underlying principle is used in the Google Ads Program (GA) and its sponsored listings (paid search) vs free/organic listings. Or by Expedia and its Travel Ads sponsored listings. Google's latest move is nothing more than returning to the old Yellow Pages business model: every business gets a free listing, but in order to stand out from the competition, you need to buy a sponsored listing. In addition to luring more hotels join its GHA program, Google's latest move has three self-serving objectives: Increase GHA's metasearch market share and put an end to metasearch-only players like Trivago.Provide a replacement for the lost revenue and traction from hotels and OTAs in their main ad category - Google Ads. Last year Booking and Expedia alone slashed their Google Ads spend by $6 billion; all major hotel chains and independents paused or decreased their GA spend many times compared to their pre-COVID levels.Increase competition in the GHA Program by saturating each destination with these new “free” listings and forcing OTAs and hotels to buy the highly visible sponsored listings, which means higher CPC, CPA and CPS (Cost Per Stay) referral fees and revenue for Google. The more active hotels in GHA, the more potential revenue for Google, it is as simple as that. Should hoteliers join the free GHA program? Of course, especially its Pay-Per-Stay business model. Hotels should take advantage of these free booking listings in the same manner as they take advantage of the free organic listings in Google Search, free Google My Business local listings and free YouTube profiles.

Charlie Osmond · Answer

False dichotomy. It's both. The question takes a hotel-centered view of the channel. If you instead start with the guest and consider different moments in a buying journey, there are clearly times where it best operates as a marketing channel, a step in the research journey, and others where it is pure distribution. As for CPC vs. CPA, yes, Covid has driven a big jump in the proportion of hotels who prefer to only pay for bookings (CPA). For small hotels or those with poor websites, then the simple Google PPS model is often the way to go. However for hotels who have invested in digital and direct bookings (a good indicator is "do you get over 30 web bookings a month?") using Google's automated bidding, or 'treating meta like a distribution channel' is a mistake. With automated real time bidding tuned to perform based on guest details, search specifics, parity and more, meta becomes far more powerful. Not only can you double the revenue it generates, but you can also influence the guests' view of the hotel - imagine being listed in on Google when you're $10 more expensive than Expedia. That's like an advert to the world "don't book with us, we're overpriced" perhaps the worst bit of advertising you've ever done!

Erik Muñoz · Answer

Yes - the metasearch segment should be considered a distribution channel to be managed by the revenue team, which should include the online marketing function. For hotels still organised in a fragmented and inefficient manner where marketing and revenue functions aren't integrated, there is likely to be some confusion as to how this channel should be optimised.

Ross McAlpine · Answer

Metasearch certainly sits in the grey area between marketing and revenue management. It is one of our fastest growing media channels, not surprising when you consider how influential it has become as a major source of reservations in the last few years. We typically have two types of metasearch customers: 1) The Marketing Leader – They're managing the hotel's marketing budget and media plan and should have metasearch as a core tactic. They typically prefer a media budget on a CPC model that delivers ROI. 2) The Revenue Leader – They're managing the hotel's revenue and distribution channels. With a focus on acquisition cost and channel share, they tend to favor a commission model. The advantage being you only pay for consumed bookings without any upfront cost. A good provider has enough flexibility in their platform and their service model to allow for either model (or customer) above. There's also the question of property type and which model suits best. We've had some discussions recently with seasonal properties who benefit more from a commission model because media budgets tend to be reduced at properties that close or have low demand for a few months each year. So seasonality and property type are also important considerations when deciding which metasearch model is the best fit. Many of the hotels and management companies that we work with have a much closer relationship since covid between the two disciplines of marketing and revenue management. The real catalyst for that has come out of necessity due to staff shortages and more focus by everyone involved on hotel profitability. So perhaps covid has brought an attitude shift towards better goal alignment across these functions and metasearch is just one example where it pays to have a synchronized marketing and revenue function no matter the metasearch model you choose.

Linchi Kwok · Answer

I am more inclined to see metasearch as a distribution channel because it has become more crucial in revenue generation. More consumers rely their purchasing decisions on searchable information on the internet. Google PPS has an advantage as it is connected to the world's most powerful and most used search engine. Consequently, hotels and OTAs are allocating more budgets towards metasearch. Most of all, the PPS model makes it easier for hotels to quantify the channel's cost for each stay, which is essential in revenue management.

Osvaldo Mauro · Answer

In a nutshell: if you pay metasearch marketing in commissions as you do with OTAs, then they are almost the same thing. You can treat these as other distribution channels. Deep dive explanation:If nowadays we should play a Celebrity Deathmatch (an MTV stop-motion cartoon popular in the 90ties) of the hospitality distribution, it would be Commissions against Cost of Acquisition(CPA). In few words, the OTAs world versus hyper-targeted digital marketing. In commissions, you know in advantage how much you'll pay. In CPA you can get a better deal but you are unsure of results.To understand this, hoteliers should think as they were an OTA. Where do Booking, Expedia and others get their customers? Brand advertising, loyal customers but the majority comes from CPA. The business model of an OTA is to buy a customer from web giants paying its CPA (for example 12% of the generated revenue) and seeing this customer's booking to the hotel for a commission (for example 18%). The resulting 6% is OTA's margin. Again I say: "this is like trading". When you spend money in digital marketing to get a customer, you pay in advantage (usually for clicks) intending to get sales for an ideal percentage of the generated revenue. You can get a good deal but it's tough so in reality, you're buying this risk. On the other hand, if you go for the commission mode, you stay in the super safe area. You'll pay for commissions only when your intermediary will generate the revenue for you. It's like investing in Nasdaq stocks rather than going to the Post Office asking them to give you interests most safely.Meta-searches have a central role in this as the majority of paid traffic (CPC and CPA) comes from them.In 2018 I've made Botelier, an AI startup made to break the loop between the metasearch investment of a hotel and the resulting revenue that it MAY later get as result. Nowadays Google is pushing hard on this, trying to break this loop inside their GHA platform. They strongly use AI (and in particular algo-trading models) to let hotels advertise as OTAs but paying a "postponed and safe commission". The thing is: "how precise are these predictive algorithms?". Google GHA from its last update(early 2021), even uses data generated from OTA's advertising (made in CPC and paid upfront) to train the automatism (read AI) that allocates some "free clicks" to direct hotels to get an uncertain and late commission from them. In this way, GOOGLE is putting direct hotels on the red carpet even allowing free advertising in the covid period. This is the "behind the curtain" of Pay Per Stay. But how many are those "free clicks"?The data tell us that paying GHA in commission mode (Pay Per Stay) delivers a very limited (less than 20%) part of the traffic (clicks) that you can get in PPC. So this sounds like a good deal: you get revenue for a safe commission rather than spending more than this to get just traffic. The downside is the volume. If you stay in the safer way of commissions in metasearch, nobody is going to risk for you, even Google. Algos will drive your risk exposure and you'll only get less than 20% of the volume of sales that you can generate in these channels managing your budget by yourself (CPC).Digital distribution is a tough world for a great opportunity, revenue and marketing should work together to have a chance to cope with this trading.

Simone Puorto · Answer

I am lucky enough to have lived the evolution of metasearch advertising from day one. Ten years ago, I was working for what became one of the major metasearch management platforms in Europe, so I followed the evolution of the phenomenon quite closely. Recently, I've had a long LinkedIn discussion about this subject: with metasearch engines evolving from advertising platforms to distribution channels, should marketers or revenue managers take care of them? The question is valid, but it tells only a part of the story. The CPA approach in meta is nothing new, but it became extremely popular with the introduction of GHA PPS. With less risk involved, it's no surprise that most properties decided to treat their metasearch ad strategy as an OTA, especially with cancellation rates rising post-COVID. That being said, some properties can still benefit from a CPC approach, especially hotels with low cancellation rates and located (or making business) in areas where there is not much competition online, so that the clicks remain relatively cheap. Moreover, when advertising in Google, hotels can bid differently based on many variables, such as check-in date, length of stay, check-in day of the week, and booking window, maximizing their visibility where the return is higher and, consequentially, decreasing the cost per acquisition. If properly managed, a CPC campaign can generate high ROAS with an investment that's a fraction of the average metasearch commission. On the other hand, advertising in PPS or pay-per-booking doesn't require any understanding of the platforms, and hotels don't have to allocate man-hours to manage the campaigns. It's simple plug-and-play advertising. Personally, I have clients using both approaches, with some of them even practicing hybrid strategies: CPA on certain months of the year and CPC for the remaining ones. Ultimately, the goal is always the same: maximizing impression share and conversion rate, with the lowest possible CPA. So, if it's true that most metasearch engines do offer commission-based solutions, this doesn't mean it's always the best way to go.

Is hotel metasearch a distribution or advertising channel?

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