Can Online Travel’s Titans Ever Break Free of Google? – Yahoo Finance

In our latest report, Skift Research estimates that the travel industry spent at least $8.9 billion on Google performance advertising in 2021. The search engine continues to be one of the most impactful players on all sectors of the travel industry with its role only growing due to the Covid-19.
We see five big open questions about the role of Google in travel that arose before and during the pandemic.
The Key Questions for Google and Metasearch
Can online travel agencies use the pandemic to reset their relationships with Google?
Can travel metasearch diversify away from booking site advertising?
Can Google bring hotel brands onto their metasearch platform?
Can travel-specific metasearch beat back Google?
What is the future of online travel in a Google world?
The below excerpt focuses on the first of these, exploring how major online travel agencies like Expedia Group, Booking Holdings, and Airbnb have changed their relationship with Google during the pandemic.
The full report dives deeper into the rest of these questions. It provides the full methodology for how we arrived at our estimate for travel industry spending on Google performance ads.
Expedia and Booking act as consolidators of, and clearinghouses for, marketing dollars throughout the travel space. This creates a scale advantage that few other travel suppliers can match and makes the booking sites critical partners for hotels and airlines, which can not otherwise afford to secure consumer traffic without being listed on a booking site.
While this model worked well in the early 2000s, even before the pandemic cracks were beginning to show. The big two online travel agency groups found themselves bidding for advertising space not against hotels and other suppliers, but against one another. This created a downward spiral where each tried to outspend the other, cutting into profit margins and lowering the returns for each dollar invested into ads.
This contest played out primarily on Google, much to the delight of its Silicon Valley executives. Expedia and Booking wound up relying on Google for traffic, ironically in much the same way that independent hotels were in turn relying upon the big booking sites.
In our view, for Expedia and Booking to grow long-term profits they need to cut their dependence on Google. And we believe that the pandemic offered a unique opportunity for these companies to do just that.
During the pandemic we have seen Expedia, Booking, and others cut their marketing spend to near nil. Covid-19 was a once-in-a-lifetime opportunity for a hard reset of Google advertising spend. OTA execs could build back up their marketing budgets in new and unique ways that reset their relationship with Google in a more productive way.
So, has that happened? Simply put: No.
Instead, with the rapid recovery of travel over the last six months, the floodgates of advertising spend have been thrown wide open again. We estimate that Expedia and Booking spent a combined $5 billion on advertising in 2021, up 98 percent vs. 2020 and 75 percent recovered vs. 2019.
The main reason that ad spending is not fully recovered is because OTA gross bookings and room nights sold have not yet returned to their pre-pandemic pace. But in common size terms relative to online travel revenue generated, the booking sites are back to their pre-pandemic levels of spending. Expedia spent 34% of revenue on advertising in 2021 (vs. 33 percent in 2019) and Booking spent 23 percent of revenue on ads (vs. 24 percent in 2019).
We take the fact that advertising as a share of revenue is the same today as it was pre-pandemic as a signal that Booking and Expedia are mostly going back to their old playbooks and we can expect marketing dollars to continue to grow in line with the OTAs’ revenue recovery.
We dug further into the online travel agencies’ advertising mix to explore how many of those dollars are flowing to Google. We started with Expedia Group and Booking Holdings’ disclosed marketing and advertising spend. We combined this with company filings from other metasearch companies, historical performance, and expert-informed assumptions to estimate how performance ad dollars are allocated at these sites. We found that Google’s importance to these two booking sites has increased during the pandemic. Details are discussed in the “How Big is Google Travel” section of this report.
We estimate that Expedia and Booking spent a combined $2.9 billion on Google performance advertising in 2021. That is 92% recovered vs the $3.1B of estimated Google ad spend in 2019.
However, as discussed above, the “big 2” OTA advertising budgets are not recovered relative to 2019. So for Google advertising to be so close to being fully recovered means that spend on the search platform has grown as a share of Expedia and Booking’s marketing budgets during the pandemic.
By our estimate, Google now accounts for 65 percent of performance advertising budgets, up from 53 percent pre-pandemic.
Data from SimilarWeb suggest that this growth in advertising is following the same tit-for-tat pattern that existed pre-Covid. Their analysis shows that Expedia and Booking both sharply accelerated spend on Google paid per click advertisements in the U.S. starting in spring of 2021. Expedia seems to have led the charge and Booking rapidly followed.
Rather than use the pandemic to wean themselves away from Google, it would seem the pandemic had the opposite effect. Expedia and Booking are more dependent on Google today than they were pre-pandemic.
This failure to capitalize on this opportunity is reinforced by the opposite actions of Airbnb. We estimate that at the short-term rental booking giant performance spend made up 57 percent of its total marketing budget pre-pandemic but has fallen to just 13 percent of its marketing budget today. Google was the primary recipient of Airbnb’s performance advertising spend. See our “How Big is Google in Travel” section below for more details.
Airbnb shows that it was possible to use the pandemic to rethink its customer acquisition strategy and to significantly cut reliance on Google, and performance advertising as a whole. In that context, the fact that Expedia and Booking saw the share of their budgets dedicated to Google grow during the crisis is all the more striking.
Let’s return to the initial question of this section: Can online travel agencies use the pandemic to reset their relationships with Google? To us, Airbnb is the exception that proves the rule. Few others seem to be following in Airbnb’s footsteps and we believe most online booking sites will remain reliant on Google for top of the funnel marketing post-pandemic. This sets up the search engine well to retain its dominant position in travel.

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