Why do some OTAs succeed while others struggle, stagnate or fail? And who’s gaining the market share: Booking.com, Expedia, Trivago or TripAdvisor?
We get questions like this all the time at AllTheRooms, and the response is never as simple as it seems, but we believe we have an answer. Booking.com has perfected consumer conversion and knows exactly how to convert a click into a purchase.
We took a look at the three factors that create a recipe for success, from the quality of Google Adwords “traders” through to the customer conversion efficiency and the scale of instantly bookable inventory. Here’s our take on the secret to Booking.com’s success:
Google Adwords Traders
Google Adwords is a powerful product. In the world of travel, the ability to acquire targeted customers at the exact point of intended purchase is essential for success. Travel advertising spending is the third largest revenue vertical after insurance and finance for Google Adwords – and in order to play the game, you need to understand the process associated with bidding on keywords.
Think about the cost-per-click and the conversion rate that is associated when someone searches for “places to stay in NYC”, “places to stay in New York”, “best places to stay in the big apple” or “hotels in Nu Yorf” (purposely spelled incorrectly). Each of these combinations of words has a certain volume of searches along with a certain cost-per-click and an expected click-through-rate, or conversion.
The key thing to note is that it takes a certain skill-set from a trained and experienced ‘Google Adwords Trader’ to successfully navigate this field.
We equate Google Adwords Traders to Goldman-Sachs or Morgan-Stanley-style bond or equity traders, but in this case, instead of purchasing or shorting shares in a public company, they’re bidding and buying keywords at certain prices, times of the day and cycles within the year to drive traffic.
Website Conversion Efficiency
We’ve taken a look at the interface of Booking.com and Tripadvisor. Which of the following two pictures makes you want to click, take out your credit card, log your personal information and book a hotel?
Booking.com’s Hotel Property Page
TripAdvisor’s Hotel Property Page
Companies such as Booking.com spend a huge amount of time working on ‘conversion efficiency’. They are experts in managing the consumer (or the acquired consumer) through the funnel and getting the consumer to click-through the site and make a purchase. This isn’t as easy as it seems. There’s a difference between what people say they want and what people actually respond to.
A site might be beautifully designed, engaging and super interesting, but will you definitely click and transact? Booking.com runs hundreds of different versions of the same site with minor changes to each – they are constantly optimizing and testing the design, colors and font sizes to determine what leads to the right combination of factors that will result in a conversion.
Think of it like A/B testing vs. A/B^x — it’s easy to see why Booking.com continues to stay at the top of the market.
Scale Within Geographic Markets
Scale within specific geographic markets is an important factor that often goes unnoticed. The volume of contracted inventory that an OTA has in a specific geographic area is an important part of the acquisition process. Imagine if we had two different hotel online booking platforms. Let’s call one OTA A and the other OTA B.
Let’s assume that OTA A has contracts with 50 hotels in NYC, which means that when you conduct a search on their site for a place to stay in NYC a list of 50 hotels appears in the search results. You essentially have 50 different hotels in the NYC area to choose from.
Now image if you conducted the same search on OTA B but in this case, OTA B only had 5 hotels. It’s a simple math question. Site A has 50 hotels and Site B has 5, so for Site A the likelihood of a purchase occurring is higher and it could be argued that OTA A might convert at ten times the rate of OTA B.
Scale within a certain geographic location also matters when it comes to purchasing Google Adwords traffic. If your Google Adwords traders are bidding on “Hotels in NYC” and your site has more inventory (more selection and choice for a specific location), which results in higher conversion because you have more of a selection to chose from, then this also means that you can more effectively and efficiently bid on keywords and keyword choices. This allows you to outbid, out-purchase and out-market your competition.
Three is the Magic Number
It’s a combination of these three factors that create the perfect, efficient marketing spend and ROI. It’s a cyclical process: having highly experienced and focused Google Adwords traders who purchase customers leads to website and web conversion efficiency.
This results in a greater volume of choice and selection creating higher on-site time and therefore increased conversion and purchasing. This then feeds back into the ability to more efficiently and effectively outbid and purchase customers via Google Adwords and drive traffic in a cost-effective, ROI fashion.
Each of these factors re-enforces the next. A company might have strength in one of these areas, but it takes all three in concert to create a true market leader.