How Google’s Hotel Ads changes in the EU are affecting clicks and bookings

Following several
months of adaptation, on the January 19 Google began to roll out changes it
made in order to comply with European Union’s DMA (Digital Markets Act)
requirements; a roll-out that finished on March 7.

Just days after the
first changes were implemented, we began to see how they influenced hotel
campaigns in Google Hotel Ads. Three months on, results for hotels are still
getting worse:

Just over three months following implementation,
click-through data has shown a 30% decrease in traffic volume in EU
markets affected by DMA implementation compared to those markets where DMA has
not been implemented. 

The graph below shows the Google Hotel Ads click
differential between regions affected by the DMA vs. those not affected,
revealing a click volume drop of 30%. This is based on our comparison of traffic volume of 3,450 hotels from January 1 through April 22, 2024.

The volume of direct bookings drops as
much as 36%, increasing hotel dependence on intermediaries, which
seriously damages their profitability.

What has changed
exactly?

Basically, Google has
been obliged to alter its results scheme for travel searches (flights and
hotels). Here we will focus only on changes that have affected hotels.

• BEFORE (and
  currently in markets outside the EU):
  
• NOW (implemented
  in the 27 EU markets):
  

Background

In July 2023, the European Union designated six digital companies as
gatekeepers, Amazon, Apple, ByteDance (TikTok), Alphabet (Google), Meta
(Facebook) and Microsoft, on the basis of the relevance of the 22 platforms
operated by these companies.

In the case of
Google, the gatekeeper designation means it
cannot include its own vertical services (Google Maps, Google Flights or Google
Hotel Ads) in its search results pages (known as SERPs). The specific article
in question is Article 6.5 of the DMA,
which deals with “self-preferencing”:

“The gatekeeper shall
not treat more favourably, in ranking and related indexing and crawling,
services and products offered by the gatekeeper itself than similar services or
products of a third party. The gatekeeper shall apply transparent, fair and non-discriminatory
conditions to such ranking.”

This means that
presentation of hotel offers to users based in DMA markets is less organized,
clear and intuitive.

Prior to the DMA,
Google’s taxonomy of results was the result of decades of effort by the company
to refine its results in order to provide an optimized search experience that
would connect supply and demand in a way that was ideal for both.

This pre-DMA search
experience offered hotels participating directly in the Google Hotel Ads
product the option to present their inventory (availability and room rates) in
a way that was both efficient from the standpoint of distribution cost, and
enriched for the user, as it integrated the experience of other services, e.g.
Google Maps. }

This way of presenting
information was clear, relevant and intuitive, and maximized purchasing
decisions such hotel bookings for those users who were so inclined.

What has been lost with
the implementation of the DMA?

The user can no
longer:

• View the hotel offer at the destination (availability
  and prices in aggregate).
• Click on the Google Maps link to locate the hotel.
  This point is particularly frustrating. 
• View the “hotel package” (selection of three hotels
  with availability, price and user ratings) in which both hotels with websites
  and intermediaries could participate. 
• Change the dates and other booking elements, such as
  the number of travelers per room (these are updated in the search engine and
  not in the hotel file), in an easy, user-friendly way during the booking
  process. 
• View calendar prices.
• Easily access the Google Travel environment for more
  comprehensive travel information.
• Clicking on “Book a room” opens search engine
  results, rather than the Travel section.
• Instead of clicking on the price, the user must click
  on “Visit Site.”
• All interactions with the form modify the search
  engine results (SERP).

From the hotel
perspective

The hotel has lost
visibility in terms of the user experience, which can be proven as follows
based on our comparison of traffic volume of 3,450 hotels between DMA and
non-DMA markets from January 1 through April 22, 2024:

• 30% drop in clicks to websites in markets
  affected by DMA.
• 36% drop in direct bookings in markets affected
  by DMA.

While we cannot affirm
the fate of these “lost clicks,” given that existing demand is a “zero-sum game,”
the most plausible hypothesis is that the difference in clicks in DMA markets
is being captured by those advertisers that have gained visibility and
prominence in the new results format, these being intermediaries such as OTAs
(Booking.com and Expedia, mainly).

And Booking.com …  is it not a gatekeeper? 

In the context
described above, this is the key question, the answer being “not at the moment.”

In March, Booking
notified the EU of its potential gatekeeper status. The EU has 45 working days
to ratify or not the notification. 

May 13 is the EU”s deadline for ratification or
non-ratification of Booking.com’s gatekeeper status. Then mid-November is the
EU’s target date for notifying Booking.com of changes to be made to its
platform in the event that it is ratified as a gatekeeper (six months after
ratification, should this occur).

What does this mean for
the hotel industry? 

The key result of the
implementation of the DMA for hotels is that they have lost visibility in the
markets affected by the DMA and as such they have lost direct sales capacity,
their profitability has been reduced and their dependence on intermediaries
increased.

The EU, in its efforts
to make the DMA a fairer, more balanced market, is obliging gatekeepers to
adapt to the regulation. As a result, these changes are subjecting hotels to
the toll of intermediation, strangling direct sales and holding users and hotels
captive to less profitable, less independent business models.  

If Booking.com is
ratified as gatekeeper, it remains to be seen what measures are imposed and the
consequent degree of compliance. In any event, assuming they were restrictive
and favorable to the hotel industry, Booking.com would have gained more than a
year’s competitive advantage by enjoying the increased visibility afforded by
the changes imposed by the DMA since January 2024.

Who stands to gain from
all this? 

In theory, the user
should be the primary beneficiary of implementation of the DMA.

Today, the user
experience on the Google hotel search results page is less clear, less
intuitive and requires a higher number of clicks, thus “pushing” the user to
purchase through intermediaries a service that previously could be purchased
directly from the producer with greater clarity, ease, competitiveness and
efficiency for all concerned.

We should not forget
that, in the event an in-house marketing strategy exists (a transactional
website allowing booking), the best source for a service/product is always the
producer, assuming the service/product is marketed properly and coherently.

OTAs, in particular
Booking.com due to its presence and relevance in Europe, are gaining even more
visibility and prominence in Google search results since the DMA has been
rolled out. It is difficult to determine precisely, but a substantial part – if
not all – of the 30% of clicks lost by hotels are going to intermediaries.

Will the EU impose an equivalent restriction or change of practice on Booking.com?

It is difficult to
anticipate what will happen. The EU has to date taken an asymmetrical approach
to the interpretation of its own rules by excluding Booking.com from the first
group of designated gatekeepers.

If it finally ratifies
Booking.com as gatekeeper and imposes some kind of limitation on it, this will
be at the end of 2024. As we cannot know the decision or its scope, the only
certainty we have is that Booking.com will have enjoyed at least eleven months
competitive advantage as a result of the EU’s erratic application of the DMA.

The remaining
intermediaries (Expedia and others) could continue to enjoy the competitive
advantage derived from non-gatekeeper status forever.

It is worth noting that
the EU’s current implementation of the DMA favors large U.S. companies, such as
Booking Holdings or Expedia Group, while harming the European user experience
by reducing the profitability and competitiveness of the hotel ecosystem,
especially for smaller independent chains and hotels.