Is Trivago Expedia’s Answer To Google and TripAdvisor’s Hotel Partnership Spree?

TripAdvisor‘s (NASDAQ:TRIP) hotel chain partnerships and Google‘s (NASDAQ:GOOG) foray into hotel bookings must have shaken up Expedia (NASDAQ:EXPE) about the value that metasearch engines can create by partnering directly with hotels. Expedia’s metasearch platform, Trivago, is also gearing up to provide stiff competition in the metasearch segment. In a recent interview, Trivago’s managing director and head of hotel relations, Johannes Thomas, stated that the company had changed its focus this year to give more importance to direct hotel relationships. ^[1] Trivago has also updated its Hotel Manager platform to attract more independent hotels. We believe that Trivago is strengthening its metasearch competency in order to help Expedia in its quest to gain a larger portion of both the hotel suppliers and travelers, on its platform.

Partnering With Hotels: Recent Trend Among Metasearch Engines

Recently, it has been a prevalent trend among metasearch engines to partner with hotels. Metasearch platforms are providing a fair playing ground to independent hotels alongside OTAs with this move. However, OTAs might not be too happy with losing their competitive edge towards getting the first preference when it came to user searches.

TripAdvisor partnered with 10 leading hotel chains for its Instant Booking Platform in the second quarter of 2015, the most prominent among them being Marriott International. Currently, TripAdvisor boasts of featuring 6 out of the top 10 global hotel brands on its platform. ^[2] A few months ago, Google tied up with Sabre for 20,000 properties, that will enable customers to book accommodations through Google search, Google maps, or Google+. ^[3]

Though its direct relationship with Expedia makes online travel agencies Trivago’s first priority, which Thomas says will continue in the future, however, Trivago’s focus on independent hotels will improve.

When Trivago directly partners with the hotel, then it highlights in blue with the tag ‘official hotel website.’

(Image Source: Trivago)

Thomas mentioned that with Trivago’s earlier tie-ups with mostly hotel chains, it was losing out on half the hotel packages offered by independent hotels. According to Thomas, hotels have the best knowledge about their strengths and entering into partnerships with them meant that Trivago can offer more options to its users. ^[1]

Trivago’s Updated Hotel Manager Platform

Towards this end, Trivago announced an updated version of its Hotel Manager platform that comes in free and fee-based versions, and allows hotel owners to update their hotel details on Trivago, as well as access the analytics data related to their rates and  their competitors, among other details.

(Image Source: Trivago Hotel Manager)

Trivago’s Mystery Shopper Program Might Produce More Authentic Reviews

Trivago has recently removed the reviews of its own users from the website because it does not think that providing reviews is its primary function. It might be TripAdvisor’s dominance in the review area that made the company think this way. However, this makes Trivago’s reviews more authentic than its stronger peers. This is because Trivago displays an aggregation of reviews from other websites and has a Mystery Shopper program. Under the program, hotels pay around 20 to 80 Euros to customers in order to visit and rate their properties over some 250 parameters. The hotels don’t know when these customers arrive and Trivago uses a detailed survey and later on shares the ranks of hotels on the various parameters, in order to let its users make more informed choices about their stays. ^[1]

Unlike Its Peers, Trivago Will Remain Focused On Its Cost Per Click (CPC) Model

The CPC model in metasearch is a more advantageous one for hotels as it directs customers to their website and helps the hotels in building a loyal customer base. According to Thomas, when a metasearch features the booking functionality, then there might be doubt about the hotel ratings etc in the minds of the customer. Hence, Trivago is aiming to build a bridge between metasearch and hotel website booking. ^[1]

Why Is Trivago’s Growth Important For Expedia?

As we’d discussed in a previous article, the OTA industry is seeing a new trend currently. The metasearch engine such as Google and TripAdvisor are entering into the hotel booking arena. TripAdvisor’s Instant Booking platform (currently active across all devices in the U.S. and the U.K.) lets users book hotels directly from the TripAdvisor website. Google has launched its commission based advertising platform called Google Hotel Ads which takes a commission based payment from hotels instead of its previous cost-per-click structure. In the U.S. Google has also started its Book on Google option from mobiles, desktops, and tablets, which might later be expanded to other geographies.

Under these scenarios, when metasearch engines are blurring the lines between their functionalities and those of the OTAs, making Trivago a stronger and better-equipped metasearch engine might work in Expedia’s favor. Expedia’s host of acquisitions had given it an almost 75% online travel market share in the U.S. ^[4] However, given the newer competitors in the OTA segment, it is better for Expedia to strengthen its metasearch engine as well, in order to maximize user footfalls and conversions.

While the metasearch engines feel that the commission program is more lucrative than the pay per click structure ^[5], Expedia doesn’t need to make a choice or focus on either of the two. That is because Expedia has the power to focus and develop both its OTA and its metasearch models.  

We believe, Expedia is leveraging upon the advantage of owning a metasearch, in gaining customers from different avenues – both from Trivago and from its OTA websites. Expedia had earlier spoken about its aggressive expansion plans with Trivago. ^[6] In its Q2 2015 earnings call, Expedia’s management stated that it won’t feature on TripAdvisor’s Instant Booking platform presumably because Instant Booking undermines the functionalities of the OTA by getting all the steps of the booking process completed on TripAdvisor’s own website. Hence, Expedia can compensate for the lack of its visibility on the Instant Booking platform by featuring more on the Trivago website. All in all, Trivago presents a win-win scenario for Expedia and hence the company is taking such efforts to develop Trivago’s core competency.

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1. Interview: Trivago Building Big Team in Shift Toward Direct-Hotel Relationships, Skift, September 29, 2015 [↩] [↩] [↩] [↩]
2. TripAdvisor’s Q2 2015 earnings Call Transcript, Seeking Alpha, July 23, 2015 [↩]
3. Amazon Travel Doubles Hotel Coverage and Appoints Former Expedia Exec as GM, Skift, July 30, 2015 [↩]
4. Expedia Will Pay Orbitz $115 Million if Antitrust Complications Scuttle Acquisition, Skift, February 13, 2015 [↩]
5. Google Takes on OTAs With Commission Model, Travel Trends, September 24, 2015 [↩]
6. Priceline Downplays Kayak While Expedia Gets Aggressive With Trivago, Skift, November 5, 2014 [↩]