WSJ: Hotels Countering Shrinking Margins By Using Google To Limit Online Shopping Platforms’ Reach
The Wall Street Journal Editorial Board has published an editorial examining practices being undertaken by hotels to combat shrinking margins caused by consumers' use of online travel agents, or shopping/price comparison platforms, such as priceline, expedia, etc.
The WSJ notes that hotels want to steer customers to their own websites to avoid paying commissions to third-party sites. Some hotels require, as part of their broker agreements with online comparison sites, that such sites refrain from buying online ads that include a trademarked term of the hotel (e.g. "Houston Hilton.")
Not all online comparison sites agree to such provisions, however, which is where Google comes in.
As alleged by the WSJ Editorial Board, "After receiving complaints from hotels, Google began to pressure small OTAs [online travel agents] to submit to hotel demands," regarding the use of hotel brand names in online keyword ads.
The WSJ then examines a practice whereby Google allegedly restricts, if not by outright provision then through the application of various rules, the ability of third parties to run ads on google which contain a brand or trademarked name, e.g. "Houston Hilton."
As the WSJ reports that 60% of trip planning begins on Google, such a policy can cripple third-party shopping platforms' ability to reach customers.
Unable to purchase ads directly on Google for such search terms, third-party sites' remaining alternative to get traffic from Google is Google's own "meta search" of hotel prices
As has been previously noted in this space, Google runs a "meta search" for hotel properties and various other services, which compares prices from a range of sites including the first-party service provider's site as well as various third-party comparison sites.
However, the WSJ notes that, aside from charging a rate three times higher for clicks from Google's meta search versus an ad on Google and also taking a cut of revenue from sales brokered through Google's meta search, Google seeks access to online shopping platforms' proprietary information, including room availability and pricing, as part of being placed on the meta search. The WSJ notes that such data can be used by Google to improve its own meta search, which acts as a rival to third-party sites.
The tension regarding margins between brokers and actual service providers is equally applicable in the retail energy space
We're left to wonder what will be the impact if Google ever expands such a meta-search to retail energy?