Wednesday, October 9, 2013

How Booking.com "grabs" direct bookings from hoteliers

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To avoid any misunderstanding of this article's title, there is nothing illegal or hidden going on; it is about a real colossus with the staff and power to exhaust any and all available means to increase its profitability.

For about two months we closely followed the way in which Booking.com handles a part of its advertising campaign on Google Adwords. Beyond the ad campaigns at destination level (hotels in Athens, hotels in London etc) they create campaigns at hotel Brand level too.
By searching for any hotel in the world (already listed on their site), there is a relevant ad for Booking.com. See the following examples:

Indicative Search 1 (Hotel Archipelagos Paros)


Indicative Search 2 (Hotel Katikies Santorini)


Searching for Hotel Katikies in Santorini, Booking.com comes first in the ads frame and comes under the official site of the hotel. The displayed ad is absolutely targeted with optimized title, address, description and of course by clicking it you are driven to the registration page of the specific hotel on their website. The same exact description appears not only for the hotel Archipelagos in Paros but also in every hotel they advertise.

The Secret Behind The Strategy

An enormous amount of work is required to implement and monitor this plan, but it appears to be worth it based on these two reasons:

1. Cost: Keywords that are geographically based such as ‘Athens Hotels’, ‘London Hotels’ cost in most cases more than €1 and often over €1.5 euro per click. Out of 100 clicks the cost is approximately €100-150. Out of these clicks if there are three reservations with 15% commission each, it is unlikely they pay for their expenditure. 

In the case of advertising at hotel level, the cost drops to €0.20 to €0.30 per click. Clearly in this case there are fewer visits, however , there are key advantages; the cost of advertising is reduced, there are more targeted visits (because customers behavior when searching for a hotel in general is different to when they are search for specifics) they grow conversion rate and therefore profitability.
2. Consumer Behavior: Studies all over the world have shown the steps people follow when choosing a hotel online:

2. Search for hotels on major websites (Expedia, Tour Operators, OTAs) which have a large index of hotels and provide easy research
3. After choosing three or four hotels of interest, they then check the reviews on websites such as Tripadvisor and HolidayWatchDog etc
4. They visit the official websites of their chosen hotels. Over 90% of those who book hotels online visit the official website of the hotel for more information
5. They decide whether to make direct booking from hotel's website or via third party sites


The fourth step is the secret that Booking.com takes advantage of. Apparently visitors do not know the hotel’s precise website and it is for this reason they turn to Google. Users search the name of the hotel on Google on many different occasions as well as the steps listed above, for example after seeing ads in magazines, hearing from a friend (word of mouth,) advertising on TV or radio or other avenues.

Our research

To analyze the effect of these movements by Booking.com, we launched a campaign for a client for whom Booking.com applied the above procedure. The hotel is Aloni in Paros and the keywords that we used were specifically focused on the hotel’s name (Aloni Paros, Aloni Hotel Paros etc.)The search results are as shown below:


At this point we should mention that at the time we began the campaign for Aloni hotel, Booking.com changed their keyword advertising to more generic terms (seen in the picture above.)

Within a period of three months the recurring ad (which always provides return and in no way goes over the set daily budget) had 4,300 views and a significant number of clicks, some of which would previously have been lost because of Booking.com.

Even now we lose some clicks because of the sum of the clicks we get from the advertisement and from the first organic result that is exactly below the advertisements and is NOT 4.300!

The cost of the campaign so far has not exceeded €80. Of course this cost is relative with the season and with the number of searches that a hotel has.

Conclusion

If we consider that Booking.com is advertising about 100,000 hotels, we can assume it achieves at least 430 million views as a result of this strategy every three months. That means at least one billion views per year.

Some hotels are more searchable and the study is not happening in a peak period. The number of bookings from this strategy is high with a very good rate of profit in relation to advertising expense and led to direct bookings through the hotel’s official website.


Many online travel agencies are starting to follow this strategy, since the number of suppliers is shrinking, margins are slimmer and there are continuous efforts to find cheap targeted keywords. So whatever the Marketing Mix of a hotel, it is good to always run an active google adwords campaign with keywords for the specific hotel name. It is much cheaper than paying commission to third parties.
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