• Expedia’s online spend unveiled

The scale of Expedia's investment in online advertising were revealed this month in documents leaked to US trade magazine Advertising Age. In June it spent $5.95m on Google AdWords for the Expedia branded sites.

The company was the third-largest spender, after AT&T Mobility and Apollo Group. But it was the largest if a further $3.3m spent through its subsidiary Hotels.com is included. Hotel groups were nowhere to be seen on the list.

It is unclear, with one month's data, whether such a spend was typical. There was also no further data available on which words Expedia had acquired, but with ‘travel' and ‘hotels' both taking the group to the top of the pile, it is likely that the strategy is a permanent one for Expedia.

Google's AdWords are not just used to channel customers, but also to control image. They allow for an added level of sophistication in Expedia's marketing, depending on how it chooses to use it.

The technique is not a new one for Expedia – they offer a similar service on their own site (and Hotels.com) with Travel Ads. The pay-per-click product works on an auction model – so the hotel pays according to the competition for the slot at the top of the listing for their market. Good news for regional hoteliers, less so for properties in capital cities unless you're willing to pay a high premium to stand out from the crowd.

In a world of brands, Expedia is battling with the brands who sell their rooms through its site to create a brand more powerful – when you think ‘hotel' it wants you to think ‘Expedia', not ‘Hilton'.

Hotel companies have been wary around the internet after being burned, first by Third Party Intermediaries, who sold off inventory at a discount in the last downturn via the merchant model, and now by the likes of TripAdvisor, which have given a global voice to the disgruntled consumer.

They are now fighting back. With the backlash against TripAdvisor underway, operators have also become more technology-savvy. Colin Hatt, chief executive of NiteNite, which has a hotel in Birmingham and global aspirations, told the World Budget and Economy Hotels Congress this June that: "The web has made it possible to do anything and with a small brand we can react quickly. We opened up to the agents last November and it's direct marketing. What I pay them – 18% to 20% – is what I would have spent on marketing."

Small groups in particular are benefitting from the profile and room booking provided by online travel agents, compared to the cost and complexity of joining a franchise.

Peter Haaber, chief executive of Zleep Hotels, told the same gathering: "They are creating a load of traffic, which is important, particularly in the first few years. I compared the price to the franchise fees I was paying and this is easier for me and I can kick them out when I want to.

"I pay 5% to 8% to third parties and while I might be able to negotiate that with a franchisor today, I would not have been able to a few years ago."

For larger companies, where owners pay into a central marketing pot, the return on investment for individual hotels is less obvious and harder to sell, suggesting that brand owners may need to pick up the costs directly.

Marketing is more interactive than ever before, down to social networking, where you get your customers to do the promoting for you. However, with greater exposure comes greater room for error, as TripAdvisor is teaching.

 

HA Perspective: The debate about whether the internet levels the playing field for smaller players or tips it up in favour of the big groups continues. Apart from a few small savvy operators, it is hard to see anyone but the big chains winning in the long term.

But in fragmented markets, and most of Europe's hotel markets can be viewed as that, there is clearly much opportunity for smaller owners and operators to play off the OTAs against the franchisors.

Until franchisors are able to offer significant system delivery, their proposition is less than compelling. And they can only achieve significant system delivery if they have a strong distribution in a particular market.

There is no easy solution to this chicken and egg conundrum. And certainly no quick one. Franchising will take time, effort and cash. And there will be further fights with the OTAs.

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