Google Takes on OTAs With Commission Model

It's finally happened and the gloves are off.

Google is taking on its biggest travel customers – the online travel agents – with a new commission based ad program for hotels.

They'll be charged "industry standard" commissions for bookings generated through Google Hotel Ads rather than the standard cost per click through AdWords.

This seismic move totally changes the game and has been predicted by industry observers for many years.

The long-term implications are enormous, especially for online travel giants such as Booking.com and Expedia, which have a business model largely based on dominating Google search results.

Now Google has turned into a direct competitor while taking billions in advertising from the companies it is challenging.

And there's nothing the big OTAs can do.

They have no choice but to keep advertising on Google, which has clearly decided this is its most profitable course of action.

Industry standard commissions range from 15% to 25% depending on the market.

On this basis, from a $150 room night Google will make between $22.50 and $37.50 per booking.

Google has been running a trial program since March with a range of small and independent hotels in partnership with various tech providers including DerbySoft, Fastbooking, Sabre Hospitality Solutions, Seekda, TravelClick, and Trust International.

Google says this testing shows that the commission program is generating more revenue for hotels than pay-per-click.   

“Since March, hotels enrolled in TravelClick’s Demand Services program have seen, on average, a 56 percent year-over-year increase in revenue driven by Google Hotel Ads ,” confirms Scott Koehler, Senior Vice President, Product & Operations of TravelClick.

"The evolution from a pay-per-click to commission model has increased hotel revenue.” From Google, one assumes.

Google has told Tnooz that the Hotel Ads Commission program will be available globally.

However, a ring around of sales and marketing managers at several prominent Australian hotels revealed none had been briefed by Google.

Meanwhile, Google's head of travel in Australia, Dougal Mckenzie, said he was unable to comment on the initiative which, it is understood, will be marketed to hoteliers through the tech companies Google has agreements with.

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