It’s a lovely thought but revenue in this area has stagnated and declined throughout TripAdvisor’s attempts to close that gap. Revenue in Expedia and Booking Holdings Inc (NASDAQ:BKNG) is growing but their marketing spends are also rising in line with it, almost one for one. The marginal gain of a new dollar spent on marketing for them is currently flat or negative for the bottom line. I believe this is due to the increased competition levels as the market is saturating. TripAdvisor has been taking a more calculated and tactical approach to its marketing spend which was down 10% yoy. This is more efficient profit but they are losing further market share as a result and the size of their marketing spend is dwarfed by the size and spend of Booking and Expedia. TripAdvisor spend about a sixth of Expedia and Booking Holdings, and these websites get a large portion of their users direct. It is also worth noting that a large portion of each OTA’s advertising spend is for online presence which is paid to Alphabet Inc (NASDAQ: GOOGL), who are now competing in the space. One could imagine then that the marginal gain on each dollar of marketing spend is going to reduce further. Google being a competitor now will make life more difficult for incumbents by putting their OTA infrastructure directly in the search results of other OTA’s, per below:
Picture 1: Recent screenshot of search for hotel in London
If you are a customer who is looking for hotels in London, why would you bother clicking the ads when on the search page Google gives you date options, pictures, reviews, locations and prices. Some people will look into multiple providers to compare the prices but if, after two or three times of realising the Google prices are as competitive as the paid ad entities then users will not bother going to that effort to compare them. A key element for Google here is if the profits from the endeavour are greater than those from the ads. This will only be clear in time.