April 19, 2016

Google: The newest online travel agency?

With Google having integrated the Google Hotel Finder, Google Destination, and Google Flights over the past couple years, there has been a lot speculation about Google getting involved in other travel sectors. The travel industry has never been bigger, so is the time coming for Google to become an OTA (online travel agent) and compete with Airbnb and HomeAway?

The Case for Google to become an Online Travel Agency

There are certainly some compelling arguments as to why Google would get involved in the vacation rental space.

Working at Rented.com, a marketplace that connects second homeowners with professional short-term management companies, I see our associates speak to hundreds of vacation homeowners everyday. What they’ve been hearing from homeowners has not been pleasant, and Amy Hinote with VRM Intel captured the sentiment in a recent article:

“My page views and inquiries are down 75% and 50% respectively over last year.”

“I have a calendar that is WIDE OPEN for the first time ever.”

For a company that owns VRBO (Vacation Rentals By Owner), it is becoming overwhelmingly evident that the HomeAway/Expedia brand favors the major players in the space and is pushing many of the self-managed owners and small management companies toward the lower rankings.

The reason HomeAway favors the major players is obvious: Disintermediation. With professional property management companies looking at HomeAway as a partner (and not a bloodsucker as many homeowners apparently do), professional managers are playing by VRBO’s rules and subsequently being favored in searches.

Countless homeowners are blatantly avoiding VRBO’s recent fees, but they’re only hurting themselves in the process.

By taking bookings offline, homeowners (like the author of the listing above) are hurting their online conversion rates, which is a major factor in the “Best Match” algorithm. Poor conversion rates and fewer reviews will continue to bump listings down until they are finally on the last page of listings and ultimately have a wide open calendar.

With HomeAway recently under heavy scrutiny due to their latest changes in algorithms,“best match,” and new traveler fees, now could be an optimal time for Google to become involved.

To add to the signs that Google is looking to become involved in the OTA world, one of Rented.com’s Senior Representatives was recently speaking with a self-managing homeowner and learned this:

The homeowner explained that was feeling some of the struggles of self-managing as the VRBO algorithms changed and that he was recently contacted by someone who claimed to be a representative of Google looking to create a website for properties. The representative explained that he was looking to create a website for properties that could outcompete HomeAway’s traffic.

Take it with a grain of salt, but if it’s true, this could be the start of something BIG.

The case against Google entering the OTA space:

At the end of 2015, Google was worth $527 billion. Does competing with HomeAway and Airbnb financially make sense?

With Expedia purchasing the HomeAway family of brands for $3.9 billion and Airbnb being last valued at $25.5 billion, is Google (the $527 billion giant) really going to go after the OTAs?

While the case can certainly be made that Google wants a piece of the $1.3 trillion travel market, it may not be worth the time and investment based on return for them to dive in head first.

A second argument argument against Google getting involved (at least today) in the vacation rental segment is that regulations seem to be changing as fast as babies’ diapers. At Rented.com, we put together a compilation of all the latest news, but since things change so quickly, Google may prefer to ride out the storm.

Lastly, Google’s Managing Director of Travel said, “If we went down a transaction-engine route, it would be a very, very different business model, and we have great partners that we work for that do a great job of when you want to transact. They do that well, and they have great customer service.”

How will it all shake out?

HomeAway has many folks who are very upset with their changes. Another site, similar to VRBO’s original intention, will pop up and truly cater the self-managed homeowner.

HomeAway will continue to change their algorithms to favor those that play by their rules, as they should. They want travelers to have the same booking experience as that of a hotel. They also want conversions to occur on their platform, so they can monetize each transaction.

Google may one day get involved. It does not seem too imminent, but when they do create a travel transaction-engine, it will change everything.

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