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The Surprising Rise of Hotel Spending on Metasearch Advertising

Sean O'Neill
The Surprising Rise of Hotel Spending on Metasearch Advertising

Nicholas Ward champions a contrarian take on hotel price-comparison search. Metasearch brands aren’t seen as hot today. But the president and co-founder of tech vendor Koddi argues that some major hotel groups are shifting budgets into metasearch at faster rates than ever.

The view is somewhat surprising. Online travel agencies continue to dominate overall advertising spend in metasearch. Hotel companies still generate only a minority share of the ad buys on Kayak, Skyscanner, TripAdvisor, Trivago, Qunar, and Wego, experts said. A multi-year pullback in spending by online travel agencies like Booking.com has put the hotel metasearch model in trouble, as Skift has reported.

But if you focus on hotel companies, a parallel trend seems to be emerging.

Ward argues that significant hotel chains continue to shift their marketing spending into search advertisements on metasearch channels — and often especially Google’s hotel price-comparison search.

Ward isn’t alone in his thinking. Several vendors we spoke with said they’ve seen a rise in the number of hotel companies making use of their connections to metasearch.

For instance, DerbySoft said that metasearch ad spending on its platform by hotel companies is on average up 34 percent, year-over-year.

“We continue to see strong shifts of ad spend into the metasearch channel as a category,” said Ken Nishizu, vice president and general manager of marketing services at DerbySoft.

“Organic growth in traffic to metasearch channels and the ever-evolving ability to manipulate spend more granularly is very attractive to hotel companies,” said Nishizu.

Derbysoft and Koddi are among several companies that help hotels place ads in metasearch results and use other services, such as automating their ad bids in auction-style markets. These companies include AdsHotel, D-Edge (formerly Availpro and owned by Accor), 80 Days, Kognitiv (which acquired Seekda), Peakwork, SiteMinder, and WIHP (formerly World Independent Hotels Promotion).

A Trend Driven by Hotel Companies

Official figures on hotel metasearch spending are elusive. Google doesn’t break out its figures. TripAdvisor has been somewhat slow to capitalize on its large audience to become a top destination for purchases by travelers. Trivago, for its part, flatlined in 2017 after online travel giants like Booking.com pulled back from advertising on it.

Hotel metasearch doesn’t have a growth problem, some tech vendors said. It instead has a measurement problem complicated by the pullback of spending by online travel agencies. For example, Trivago’s financial filings haven’t broken out specific hotel company ad spending from spending by online companies. But it said Expedia Group or Booking Holdings together accounted for three-quarters of its ad revenue in its most recent quarter — with hotel companies contributing an unspecified amount to the rest.

Unlike hotel companies, online travel agencies may remain standoffish toward metasearch, analysts have argued. Booking.com increased its spend in Trivago in the second-quarter of 2019 versus the same period a year earlier, but only by 1 percent, Trivago said Wednesday.

Google Leads Among the Winners

Anecdotal signs suggest that hoteliers are reallocating budgets from offline marketing, like billboards managed by local ad agencies, to metasearch.

“We believe that metasearch growth is coming at the expense of other media types, including paid search,” Nishizu of DerbySoft said. “Some of the metasearch ad spend growth is also incremental, depending on the maturity of a hotel chain’s strategy to push direct channels.”

Google seems to be the biggest winner, according to Mirai, a digital marketing agency that manages ad campaigns on behalf of hotels.

So far this year hotels have spent 67 percent of their metasearch ad money on Google, up from 24 percent three years ago, Mirai said, referring to its clients.

A commercial, rather than a technical, explanation is behind Google’s apparent gains.

“Google was one of the first metasearches to let hoteliers pay on a commission-like basis, which better suits how the typical hotel company prefers to run its budget,” said Osvaldo Mauro, CEO of hotel tech vendor Profiter and former artificial intelligence director at AdsHotel. “The traditional meta model is paying for each visit that reaches your hotel website, which is less predictable from month to month and often comes out of a different budget bucket.”

Google’s metasearch may grow in importance. Last year, Google said that in the first six months of 2018, it sent 65 percent more leads to participating hotels than the previous year. If that pace is continuing, it will be good news for many tech vendors because the company requires hotels with less than 100 rooms need to work with its few dozen authorized metasearch integration partners.

“Metasearch is a ‘brand protection’ marketing channel,” said Quentin Lederer, vice president of global accounts at WIHP, said. “We are seeing a lot of hotel chains investing more and more into these channels. They want to maximize bookings to their sites rather than third-parties when a user enters dates for their hotel on a metasearch site.”

The growth of the tech vendors, which charge fees for boosting metasearch bookings, also highlights the growing spend by hoteliers.

Koddi’s growth shows anecdotal strength in the segment. In 2017 the privately held company claimed to generate $6.6 million in revenue. In 2018 it saw its revenue grow by more than 400 percent year-over-year, it said.

Work Still to Be Done

Most hoteliers worldwide can’t yet correctly manage ad campaigns on the major metasearch players, Ward said. Hotels need to connect their systems for managing online rates and availability to the metasearch platforms.

Hotel companies also need help in planning their bidding strategies to vary by market and type of traveler as well as to compare the return the investment of metasearch with other marketing channels.

SiteMinder, a hotel booking technology company that generated about $70 million ($100 million Australian) in revenue last year, has responded to the metasearch opportunity by quietly introducing a program, Demand Plus, that may make metasearch connectivity easier for accommodation providers.

More than 35,000 hotels already use SiteMinder’s platform to manage the rates and inventory they upload to various agencies and sites. About half of those hotels use the company’s booking engine for direct bookings. Earlier this year, the company began pulling inventory and hotel details from the booking engine to Google’s hotel metasearch. It will also do so for Trivago, Kayak, Skyscanner, and others soon.

Hotel Strategy Confusion

Figuring out how to spend ad dollars isn’t easy for owners and managers of hotel groups.

Ward gave this example: Imagine two hotels, one with a 95 percent occupancy rate and one with a 75 percent occupancy rate. The mostly full hotel is probably a hit because it is executing well or is otherwise desirable.

In this model, spending money to fill its last rooms will likely give the most value for a company’s ad dollar.

However, a hotel company executive may have a group-wide strategic need to try to direct funds to the other property instead. So they would need to feed that rule into its systems and override a computer program’s standard instincts.

In a complimentary trend growth in metasearch ad spending is also coming from hotel companies in markets that previously ignored metasearch but that have begun to add metasearch capabilities.

“Hoteliers are investing because they realize they now have these really interesting problems and finally have tools to address them,” Ward said.

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