In March 2011, the US Department of Justice finally decided to OK the $700 million Google-ITA deal in favor of Google. The question on everyone’s mind is how would Google’s travel game-plan affect the travel industry. Every new feature addition from Google since then is getting wide attention. The new rate displays on Google’s hotel search results is one such feature which is expected to affect many travel industry segments.

For close to a year now, Google has been quietly experimenting ‘Hotel Price Ads’ that displays ads with hotel price for hotel searches inside Google Maps. In some markets this has already gone live. We have found three variants of this new ad format being tested currently…

A. Local Seven-Pack: for a query like “new york hotels”, the rates don’t display directly in the Seven-pack, which is the top 7 hotel results taken from Google Places. The user needs to click either the Place link or the Map to see the rate display on search results as seen below.

B. Google Maps results: for the same query ‘new york hotels’ the Google Maps search result now displays the hotel rates from multiple OTAs.

Here’s how the map displays Google price ads…

C. Place Page For a Hotel: The Google Place page for specific hotel too displays the hotel rates from multiple OTAs.

So what does this mean for the various parties involved?

Online Travel Agents(OTAs):
Though they have to pay for it using AdWords, OTAs currently get better visibility (above the hotel’s direct link) on Google’s rate display. The click on rates takes the user directly to the booking confirmation page on the OTA site, which should be a driver of conversions. Google has indicated it will open the service up to a wider range of advertisers

Hotels:
Google’s current rate display leaves hotel link at the bottom of all other options, and most times the direct rates aren’t displayed. This could be because the hotel’s direct rate feed isn’t integrated into Google at this moment. But this acts as almost an inducement for users to book with OTAs because they may not take the extra trouble of going manually and finding rates on direct hotel site.

Hotel loses anywhere between 10-30% in commission for the booking which comes in though OTAs. For the same hotel displayed above, we found the rates on direct site were at par with OTA rates as seen below…

So effectively the hotels aren’t going to see any advantage with this rate display unless they integrate their direct rate feed into Google while also ensuring their direct rates are lower than OTA sites competing there. There is a serious risk to their margin unless they act on this.

Business Travelers:
The business traveler benefits here, as the search result displays rates across multiple OTAs, making comparison and decision making easier than before. However, this would be limited to an individual booking.

The larger companies and Travel management Companies too would be using hotel booking systems (such as HotelHub) which can already pull best rates from multiple GDS and non-GDS channels. So, this might not be of much interest to them.

All said and done, business travel is still small compared to the much larger leisure pie. Google knows when this new rate display functionality comes out of the experimental stage and becomes available to all users worldwide, competition among OTAs & hotels to increase visibility will dramatically increase and the click rates they can charge will increase exponentially. In short, Google makes money irrespective of whether this would affect the profitability of OTAs and hotels.