Customer journey comparison: Booking.com, Expedia, TripAdvisor

Platform businesses have entered many traditional industries. And they have done this in various ways. One successful approach is what I call “demand aggregator platforms.” Platforms like Booking.com, Expedia, TripAdvisor and many others have been successful in the travel industry aggregating existing and generating new demand. Today, we are going to look at how these platforms:

guide the digital customer journey,
how this aligns with their predominant customer value propositions and
the monetisation models they apply.

The most successful travel platforms monetise as:

Sales/distribution channel: Expedia, Booking.com
Advertising channels: TripAdvisor and others

Now, TripAdvisor (and other review pages) are not an advertising channel as such. They are a travel planning and decision support site. But their customer value proposition to the users has lent itself to monetise through advertising.

The development of the last 2-3 years has made things even more interesting. For example, TripAdvisor has started building their own sales channels (via direct booking) increasing the competition among travel platforms. Additionally, meta search engines (Google Hotel Ads, Trivago and Kayak) have emerged as demand aggregators / distribution channels between the consumer and the early platforms.

The travel industry is a $1.3 trillion market. This is why competition is so fierce. It is a leading industry in this regard. But without any doubt, the same ideas will be transferred on to other consumer-facing industries over time.

The Customer Journey

One of the best customer journey models is the one proposed by McKinsey. It is simple but yet more sophisticated than the traditional funnel model. It takes into account (1) that the journey is not linear and (2) that the consumer pulls information that they need actively from various (brand un-affiliated) sources at different times in their journey.

McKinsey-customer-journey — McKinsey’s view of the customer journey is more contemporary than the traditional funnel analogy [source: McKinsey consulting]

This customer journey model touches on four phases:

Initial consideration of a set of brands based on perception and exposure/knowledge (I am adding to this the initial, low-intention browsing).
An active evaluation phase that leads to removal of some brands and the addition of other brands (and with an increasing purchase intention).
The moment of purchase that might (or might not) be congruent with the conclusions of the evaluation phase.
A post-purchase experience that will inform the next decision journey and may or may not lead to loyalty (not covered today).

Mapping platform business models against the customer journey

Now let’s use what we have learned last time about the travel platforms to map their value propositions and website features against this customer journey model. You will notice interesting differences between:

Online travel agencies (OTA): Booking.com, Expedia
Travel meta search engines: Google Hotel Ads, Kayak, Trivago
Review pages: TripAdvisor (who are also a meta search engine, more later)
Hotel brand pages: Marriott.com, Hilton.com, Hyatt.com, and thousands more
Peer-to-peer platforms: Airbnb (I have covered them extensively here but thus not covering them in this article)

Among these, OTAs, meta search engines, review pages and Airbnb fall under the platform business model and hotels under more traditional business models.

Now, let’s jump into the phases of the customer journey.

1. Initial consideration

There are several ways for a customer to start the search for their travel accommodation. The most frequently used starting point would be a general search engine, such as Google. Exceptions are those customers that are very loyal to one of the hotel brands. But even in that case, it is likely that the customer will do some search prior booking.

customer-journey-travel-booking — The customer journey to travel booking across the various platforms from a general search engine, OTAs, hotels, review pages and meta search engines [click image for larger version]

The initial search could be something like “hotel in xxxx“. The results will look something like the above. The boxes on the left show the Google results in the order they appear:

Paid ads are at the top. This top section is generally dominated by the OTAs (Booking.com, Expedia). With their higher conversion rates and lower marginal costs per transaction, these clicks have a higher economic value for them than for hotels.
Google then shows their map with hotels. At the bottom of that box is a link that will lead to their own meta search engine Google Hotel Ads which is described below.
The next section are organic results. Hotels and OTAs will be on this section depending on the exact search query and a number of other factors that Google’s constantly evolving PageRank (here the original paper) algorithm determines.

In this first step, it is all about ranking up the top. The first-ranked often gets more clicks than all the others that follow combined.

Other ways consumers may get started on the initial step are (one or several of the following):

Some may enter a hotel’s brand name in the search engine just to get their URL. Interestingly, OTAs and other travel companies will try to rank first in the paid ads section even on hotel brand names (say “Hilton New York”). Thus, hotels need to even advertise on their own hotel brand name. Ranking first is a tough game!
It is also possible that the user goes directly to the OTA’s webpages if they have previously used these.
Similarly, the consumer might go directly to one of the hotel brand’s pages.
Some may enter the journey through mobile apps. If you search for “travel” on one of the app stores, you will most likely see an ad up the top from one of the OTAs or one the other players of this article.

2. Active evaluation

Following on from the initial consideration comes the active evaluation phase. There is not a hard transition between these two phases as such. The initial consideration may be characterised by a transient/impulse low-intention or inspiration-seeking browsing. The active evaluation phase is at the beginning of an increasing intention and characterised by (extensive) research.

McKinsey notes: “Two-thirds of the touch points during the active-evaluation phase involve consumer-driven activities such as internet reviews and word-of-mouth recommendations from friends and family … the number of brands under consideration during the active-evaluation phase may now actually expand rather than narrow as consumers seek information and shop a category.”

This will likely not be a structured research nor happen in one sitting. Some characteristics are:

The consumer has a rough price range in mind which – though – can be quite wide (and higher than they are willing to lock in at the moment of purchase). Anything that is far above (or below) this wide price range will be discarded/filtered out.
Users will read a number of reviews. A TripAdvisor survey shows that hotel guests read 6-12 reviews before booking,
Users will jump around a lot. It depends on how firm the consumer is on their destination. If they are very flexible, they may look at flight-accommodation package deals where Expedia is leading. If they are pretty clear on their destination, they may browse through various hotels on Booking.com, Google Hotel Ads or directly on hotel pages.
Use various online and offline sources and validate one against the other. They will, for example, validate travel reviews with friends and their experiences.
The back and forth of the user may lead to advertising spend with low conversion rates.

The fact that this phase happens over a prolonged time (days/weeks) and across many devices and moments makes it difficult to track and target. I will be covering this aspect in more detail in an article soon.

Once users have been researching some hotel or OTAs they will most likely notice so-called follow ads (or retargeting ads). These type of banner ads follow users who did not complete the sales process (or did so on a different platform).

3. Moment of Purchase

The moment of purchase was dominated (and embattled) by the hotel pages and OTAs. But in the last 2-3 years, TripAdvisor as a review page and meta search engines (Google Hotel Ads, Kayak, Trivago) have entered the stage as well.

Thus, consumers have now several sales channels to purchase from. A few examples are:

Direct booking through the hotel’s pages
Through the Online Travel Agencies (OTAs):
- Booking.com,
- Expedia, etc
Through (independent) meta search engines: Google Hotel Ads (or Book on Google)
Through meta search engines owned by the OTAs:
- Trivago (owned by Expedia),
- Kayak (owned by Booking.com’s parent Priceline).
Through a review page (e.g. TripAdvisor): who will allow you either book directly from their pages or lead you to the OTA’s or hotel’s booking pages

Next, let’s have a look at the customer value proposition of each of these channels followed by some monetisation models.

Customer value propositions of the different sales channels

The most important customer value propositions of the various online platforms / sales channels revolve around:

Cheapest prices
Availability of ratings and reviews (decision support)
Amount of choice (personalisation)

The different channels score differently on these dimensions.

1. Hotel pages

Advertise that they have the cheapest price for their property because their loyalty programs are only accessible through direct bookings (Book on Google features them as well) but not when booking through an OTA or meta search engines (see below for a trial exception). Ratings and amount of choice are not their strength.

2. Online Travel Agencies

OTAs state that they have the cheapest rates. They have the certainty of this through so-called rate parity clauses in their contracts with the hotels which I have described in my previous article. As also mentioned, this clause has been banned in a few countries so far and the OTAs are working hard to be able to still offer lowest rates.

Booking.com and Expedia have a very large amount of choice of hotels available on their pages (>500k). This is a value proposition that individual hotels can’t compare to. They offer everything from reviews, ratings, good pictures, social proof, provide a sense of urgency to move people to action and instil a fear of missing out on the good deals.

They are typically the highest bidder on the general search engines (most importantly Google). Once they draw the user on their pages, their aim is to keep the customer there until they book. Even if people don’t book at their first visit, the pages are optimised to get people coming back to check up on that offer that sticks into their mind.

3. Meta search engines (Google Hotel Ads)

Google Hotel Ads scores the highest in the above-mentioned customer value proposition dimensions. They trawl through hotel and OTA data in terms of prices and reviews to aggregate everything into the largest data set which they make available to the search users.

They display the Google user reviews and that of other OTAs and review pages (TripAdvisor). They also display special loyalty deals that OTAs don’t. This is possible because Google Hotel Ads has a direct booking facility for some hotels but still mainly links to the hotel’s pages for the booking. This is very similar to TripAdvisor’s approach that I have described previously.

Google-hotel-ads-sydney — When I search for, say, “Hotels in Sydney” I will first see the paid ads, followed by a selection of hotels in the Google Map. At the bottom of that section, I can click ” view xxx hotels”. Following that link brings me into the Google Hotels Ads view that looks something like the above. This is a very comprehensive meta search engine. The other way to enter this is to, say, search for “Hilton Sydney” upon which I see this on the right-hand side of my screen (on a desktop this is).

The results are ranked based on an auction mechanism. Hotels can bid a fixed cost per click or a percentage of the room rate (which get translated to a fixed bid). The ranking algorithm uses the bid and a quality score. There are a number of signals that go into the quality score. One of the most important ones is the price accuracy score that is intended to make sure that meta search engine displays exactly the price that the user will be able to get when they follow the link. This is a crucial governance step to avoid negative externalises to the platform (i.e. the meta search engine itself), to achieve high click trough rates and provide a good customer experience.

Google Hotel Ads allows direct booking of participating hotels (also called Book on Google). This started shortly after TripAdvisor started their direct bookings but is different in its pricing model and seems to not have expanded as much as has TripAdvisor’s pendant.

4. Meta search engines (Trivago, Kayak)

Meta search engines are interesting and nobody knows if they will be the next great thing in travel booking. Nobody wants to be late to what could be the next big party. So, the big players have decided they need to have their own meta search site:

Trivago is owned by Expedia,
Kayak owned by Booking.com’s parent company, Priceline.

Execute a few searches and see the results for yourself. My observation is that most of the top 10 results will come from their parent company or one of their other subsidiaries (e.g. Hotels.com). This is not surprising as such given the OTAs still participate at the lowest prices (barring loyalty discounts). These two meta search engines aggregate prices only.

5. Review pages (TripAdvisor)

TripAdvisor started as a review page but has become a meta search engine in terms of prices. I am categorising it as a review page since for most of its existence its key value proposition was to help people in their planning and decision process. Check out my previous article for the details on TripAdvisor.

Monetisation models and key metrics

Here is a quick summary of the different monetisation approaches and other key metrics.

CPC: The predominant (though not the only) revenue model in online advertising is cost per click (CPC). While the user is browsing through their journey, involved platforms can provide the most suitable links for the user’s query. For each link click the platform will receive revenues. This model is used by:
1. General search engines (Google, Bing)
2. Meta search engines: Google Hotel Ads, Trivago, Kayak
3. Review pages: TripAdvisor
4. Note, that this is only one of several ways that these platforms generate revenues from
CPA: Cost per action (CPA) in this case mainly means a booking commission. No booking, no commission. Booking.com and Expedia charge a 15%-35% commission on every booking that they are providing to the hotels. TripAdvisor has also joined this model in the recent years as described in the previous article. Google Hotel Ads allow bidding in their system with a CPA cost model but translates it back to a CPC fee.
CPM: Cost per Mille (CPM or cost per thousand views). These are mainly the good (bad) old banner ads. In recent years and with the usage of cookies they appear as follow ads (also called retargeting ads). Any of the actors mentioned in this article may send you a nice (nope) follow ad if you visited their sites without completing a booking.
Conversion rates:
- Conversion rates are crucial for CPC campaigns. The advertiser only pays if their ad link gets clicked. But if the page visitor then doesn’t book (i.e. converts), then it has been wasted costs.
- Divide the average CPC costs by the conversion rates and you get the true conversion cost. Low conversion rates means from an advertiser’s (hotel, OTA, etc) perspective lots of spend for little return (low ROI).
- Conversion rates are influenced by some factors that are in the advertising platforms control, e.g. the quality of a lead as well as under control of the advertiser, e.g, the quality of the booking page.
ROIs: hotels have an increasing amount of advertising and sales channels to use from. Every few months new channels emerge or one of the existing ones adds significant new features. Hotels have to decide on a mix of CPC, CPA and CPM advertising. Many hotels will indeed have a mix of all three. Small hotels will have a preference for CPA models as it does not require intricate knowledge of how to create and manage ad campaign on the existing platforms and no costs occur without a booking. Large hotel chains on the other hand, hire skilled employees to try and achieve better ROIs than typical CPA commissions do (up to 35%).

Customer Relationship

When we talk about customer relationships we mean customer (contact) data in this context. As I have pointed out in all our platform business model canvas examples, holding onto the customer relationship is one of the most important elements of the platform business model. Yes, it is so for all businesses but for platform businesses it is even more important as they don’t have a face-to-face relationship and are always at risk of losing the customer to the supply side (in this case the hotels).

The different platforms handle this quite differently:

Booking.com, Expedia are known to share less of the customer’s data than other channels (e.g. not their email that could be used for email marketing down the track).
TripAdvisor shares more (or most) of the customer’s data with the hotels, even if they book directly through TripAdvisor (CPA model).
Google Hotel Ads though just passes the customer directly through to the hotel (in terms of their data). This is the most cooperative approach. But since 2015, there is also Book on Google (their direct booking channel) who share the customer ‘s data but also keep it for themselves.
But to make matters more complicated, things have started shifting in this space. E.g. last year, Expedia and Red Lion Hotel started collaborating on the loyalty proposition as part of which Expedia shares more information with Red Lion (most notably the customer’s email address during the sign-up process).

Summary

Here is the summary of the various channels that support the customer journey to a hotel booking, their monetisation models and their key customer value propositions for each phase.

customer-journey-hotel-OTA-search-engine — Comparison of the different travel channels on the customer journey [click image for larger version]

The meta search engines are coming

The increasing number of channels is not going to be limited to a few industries. I am convinced it will move into all consumer-related industries (and then probably further). One appetiser for this is what Quartz has titled “Facebook is swallowing up America’s food delivery businesses”