Do The Existing Online Travel Players Need To Feel Threatened By Google’s Possible Entry Into Their Territory?

November 30th, 2016 by Trefis Team
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Google might never need to be a full-service online travel agency for the simple reason that the revenues it earns solely from its travel advertising itself surpasses that of the biggest online travel agency, Priceline. According to a report by Skift, in 2016, Google is expected to reap around $12.2 billion in revenues from travel advertisers with around half of this amount coming from only four advertisers including Priceline, Expedia, TripAdvisor, and Airbnb. If we compare this to their 2015 figures, Priceline, Expedia, Ctrip, and TripAdvisor generated revenues to the tune of $9.2 billion, $6.7 billion, $1.6 billion, and $1.5 billion.

Hence, Google already earns a travel revenue that is not only greater than that of the largest OTA, Priceline’s, but its revenues are also double the size of the second largest OTA, Expedia’s revenues. It is also assumed that Google enjoys a much larger profit margin from its travel-advertising revenues than most OTAs whose revenues from different categories provide lower margins.

Additionally, given its present status why would Google want to enter into direct rivalry with its biggest clients, the major OTAs? Though Facebook is coming up as an important source for advertising, Google still remains the most important medium for travel advertising and it wouldn’t make sense for Google to endanger its symbiotic relationship with the OTAs by providing them direct competition.

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It is natural for the OTAs to keep worrying about Google’s possible decision to enter the OTA space, given Google’s vast travel related offerings, including Google Flights; Google Hotel Ads; Book on Google; Google Maps; and the new Google Trips app. However, at the Skift Global Forum, Google’s Oliver Heckmann, who heads its travel products, gave indications that the company is satisfied with being a search engine and with connecting people to the right partners, rather than transforming itself to a full-fledged travel booking website.

In conclusion, this is good news for the existing OTAs. It doesn’t seem that they really need to worry about direct competition from the world’s largest search engine, at this time. Though this doesn’t mean that the possibilities are nil even in the distant future, it does suggest that for a long time Google might not pose any credible threats to the existing OTAs.

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