According to essayist Nicholas Taleb, in spite of the outlier status of certain events, "human nature makes us concoct explanations" in order to make these "explainable and predictable."
This is called the Hindsight Bias or, less prosaically, the knew-it-all-along effect.
It is human inclination, after an event has occurred, to consider it predictable, even though there were little to no indications for doing so.
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We do not like chaos, as a species, which is why we need to come up with stories, narratives and explanations. And that is why we love the annual "year in review" so much.
And if this narrative fallacy can be dangerous: "Explanations bind facts together," continues Taleb, as "they help them make more sense."
This article is exactly that: a review of 2018 a posteriori. It has been an interesting year for our industry. A quiet one, apparently, but the distinct calm-before-the-storm kind of calm.
So let's take a look at what (at least in my opinion) have been the most important four trends of the year worth saluting.
1. The year when online travel agencies shed their skin (again)
The extreme competitiveness in travel is slowly but steadily bringing search engines, OTAs, metasearch engines and marketplaces to converge towards an increasingly homogeneous model.
The reason is simple, almost Darwinian: The model that will prove to be the most efficient in terms of scalability and efficiency for the end user is going to prevail. After the gold rush of metasearch engine acquisitions of five years ago, 2018 will be remembered as the year of marketplaces.
TripAdvisor may have found a new youth with the new feed-based design, but it is still worth half of what it used to be four years ago.
Simone Puorto
In March, Booking.com launched Booking Basic, a marketplace reselling highly discounted, nonrefundable rates from third-party channels (namely Agoda and Ctrip).
“We may enable you to book Booking Basic,” the OTA's privacy policy page states. “Booking Basic entails that your reservation is facilitated by Trip Provider different from the booked accommodation. As part of the reservation process, we will be required to share some of your personal data that is relevant for the reservation with this business partner.”
Expedia followed a similar strategy with Add-On Advantage, by unbundling its package rates to undercut brands.com and other OTAs.
“Begin by shopping for your flight, car or package on Expedia. After you book, you’ll instantly unlock up to 41% off select hotels until the day of your trip - giving you time to find just the right hotel," Expedia explains.
After you purchase a flight, rent a car or buy a package, in fact, the OTA will automatically send an email with prices for accommodation in the arrival destination, and these prices will be the package ones.
The customer will then be able to reserve the discounted, unbundled rate at any time. It is no mystery that Expedia earns little or nothing from the sale of air tickets (airlines have, in fact, ceased to pay commissions to online travel agencies for some time now), so the goal is, obviously, to increase profits.
And even though Expedia recently published an extensive study highlighting how package reservations have better ADR (+30%), LoS, booking window and cancellation rate, when compared to room-only reservations, this approach openly infringes, if anything, the ultimate meaning of the word “bundled.”
As new, more affordable players entered the hotel's realm (such as Airbnb focusing more and more on boutique properties), OTAs had to reinvent and adapt in order to survive the next generation of distribution, where boundaries between OTAs, metasearch engines, review sites, marketplaces and bed banks will be just a semantic issue.
2. The year metasearch hype finally faded
We all know that Booking.com has dramatically reduced its investments on metasearch engines over the last two years.
In 2016, for example, the budget allocated by the company contributed approximately for half of the Trivago turnover, a figure that fell to a third in 2017, forcing the German metasearch engine to make substantial cuts (both in advertising investments and personnel) in order to survive the loss of over €40 million in the first two quarters of 2018 alone.
Glenn Fogel, CEO of Booking Holdings, left a peremptory comment on the subject: "We are willing to work with those advertising platforms that are willing to collaborate with us (...) and to help us build our brand."
Metasearch advertising can be incredibly expensive, and not only for independent hotels, but for OTAs as well: According to a recent study, in fact, for every dollar spent in marketing, Expedia and Booking earn $16, 15% less than they used to just 10 years ago, eroding their profit.
So how does the future look like for metasearch engines? Let's start with Trivago: The German company was forced to update its algorithm so that hotels advertising on the metasearch engines will no longer have a privileged position, even if offering the best rate.
That's ironic, especially when you think that Trivago advertises itself as the platform in which travelers should "never pay full price."
But the reason for this change is clear: In order to survive, Trivago desperately needs OTAs to start investing again, so what better opportunity to reward them than with the more visible slots, even when the rate on the official brand.com is cheaper?
After the gold rush of metasearch engine acquisitions of five years ago, 2018 will be remembered as the year of marketplaces for online travel agencies.
Simone Puorto
The new algorithm, in fact, no longer favors those who offer the best price, but those who are willing to pay the highest bid, and even though speculations about Trivago giving better visibility to OTAs and penalizing official hotel websites have been running for years, at least now everything is done under the light of the day.
Similar issues for TripAdvisor: In November, the company value dropped by more than a $1 billion, with stocks sinking from $40 to $30.
Since then, its value has increased, but the company is still worth only half of what it was four years ago, mainly because of the reduced investments of Expedia and Booking.com, which for years have constituted about half of the yearly revenue of the famous review site.
Apparent diminished trust from users towards the transparency of the company may have played a role as well.
In 2018, for the first time, a web agency (PromoSalento) has been found guilty of having sold fake reviews.
The investigation began in 2015 following an anonymous tip by a restaurant owner from Trieste, Italy, and, in June, the Court of Law declared the agency guilty of fraud, casting a gloomy shadow on TripAdvisor, guilty by association in the eyes of its customers.
The decision to move to a more à-la-Facebook social approach, then, takes a whole new meaning. Not only creating a community has always been the main goal of the review site (a goal that got lost during the Instant Booking implementation disaster), but TripAdvisor has always been a top-funnel platform, not a bottom-funnel one.
Now, thanks to a new feed-oriented design, fresh content from over a thousand influencers and Facebook integration, it (finally) takes a step back in the customer journey: no longer an OTA/metasearch engine/review site hybrid, therefore, but an inspirational site for curious travelers.
After all, is not this the soul of TripAdvisor? The question remains how the company will be able to make revenue, but going 100% meta has proven to be the wrong strategy anyhow, especially in an industry where (according to a ROIBack survey) 65% of all bookings generated by metasearch engines come from Google Hotel Ads.
And there is the final, central reason why the hype on metasearch engines is, today, totally unjustified and unjustifiable.
We all agree that the main concept of a metasearch engine is to compare and find the best rates, right? Well, we may be wrong.
Up until only 10 years ago, there were dozens of OTAs, each one specialized in a niche market. But, over the years, these OTAs have been acquired, integrated or simply merged under Booking.com (the third largest e-commerce site in the world, never forget it) and Expedia Group's brands.
Today, digital distribution is, de facto, a duopoly. And with only two OTAs sharing almost 100% of online transactions, what exactly should a metasearch engine do?
3. The year Google took over the industry
To make things worse (or better), in 2018, Google took its travel game to the next level, almost monopolizing the search.
It is no mystery that friction during the booking journey is one of the biggest problems in our industry, and (probably) only Google can solve it.
Book on Google, for example, allows users to reserve a hotel without having to leave the SERP. This type of booking experience (similar to TripAdvisor's Instant Booking, but on steroids) is known as "facilitated," as it eliminates all the inherent difficulties in planning a trip (multiple searches on different websites, metasearch engines, OTAs, review sites, etc.) and, most important, in finalizing the transaction.
Up until November, Book on Google was only available in four markets (the United States, the United Kingdom, Australia and New Zealand), but Google eventually expanded its reach to Canada and Europe as well, with a dozen new countries including Austria, Belgium, Denmark, France, Germany, Italy, Holland, Norway, Poland, Spain and Sweden.
Today, digital distribution is, de facto, a duopoly. And with only two OTAs sharing almost 100% of online transactions, what exactly should a metasearch engine do?
Simone Puorto
With a comprehensive overview of the properties, advanced filters, rates, availability, both aggregated and native reviews and photos (plus worldwide coverage), why should a user exit the SERP and go on an OTA or (God forbid!) a brand.com?
By using Book on Google, the process of researching and booking a hotel can start and end, literally, without ever leaving the search engine, thanks to payment systems such as Google Wallet.
It could, potentially, reduce the friction that is typical of travel purchasing processes once and for all, but the fear of industry monopoly is, for once, justified.
In 2018 Google also challenged apps like HotelTonight, adding a new filter that allows users to search for the best offer for same-day stay, and experimented with sponsored hotels, making it easy for properties to rank in the first (or second) slot on their destination SERP, thanks to a simple PPC model.
And what about the decision to integrate Hotel Ads directly in the Google Ad (former Adwords) platform? This merging opens interesting scenarios for all those advertisers that, at the moment, are forced to work on two different platforms.
As icing on the cake, Google created a specific support center for hotels, to help them optimize their GHA campaigns, exactly like it currently happens for Adwords. Soon enough, end users (hotels, apartments, bed and breakfasts, etc.) could be able to manage the entire suite of Google advertising from a single, simple extranet, decreeing the end of hotels' dependence to third parties (web agencies and vendors).
The recent complete hotel SERP redesign marked another milestone in Google's travel domination plan: The new design goal is to keep users as much as possible in the search engine, without the need to search info on OTAs or metasearch engines.
Every hotel comes with its own dedicated landing page (example here) and I would not be surprised to have, in the near future, the possibility to replace the randomly assigned alphanumeric URL to a custom one, which hotels could use as a landing page, replacing hotel websites for smaller properties tout court.
This year has been one of the most active (if not the most active) years for Google in the travel space, and if what we've seen so far is not enough, let's remember the launch of services such as the Location Score, the introduction of exclusive discounts for Google One Cloud users and the brand-new Room Booking Module (RBM) feature.
In this context, therefore, we should not be surprised by the words of Mark Okerstrom, CEO of Expedia Group, when he states that his main competitor is not (at least not anymore) Booking Holdings but, guess what? Google.
4. The year Amazon trained for battle
An intriguing study released by OAG on Americans' online travel habits revealed that 44% of travelers would gladly book on Amazon if the company offered such a service.
After its 2015 blitzkrieg in travel (local.amazon.com) we haven't heard much about Amazon, but, during last Black Friday, Bezos's company signed an agreement with Meliá Hotels International. Now Amazon's customers can now buy convertible gift cards for stays in any of the almost 400 hotels of the Spanish group or use Meliá loyalty points to buy goods on Amazon.
So, let's speculate: What could be the next steps for Amazon? Very likely, acquisitions. Expedia stock value dropped from over $150 to $110 in one year and, with 1:14 stock ratio (Amazon stock reached an astonishing $1,400), the acquisition would give Bezos the technology and know-how necessary to forcefully enter the travel landscape and compete with Google.
Trivago is another possible choice: In June, the German metasearch engine was worth over $20 a share, over three times the current value ($6).
And what about TripAdvisor? It may have found a new youth with the new feed-based design, but it is still worth half of what it used to be four years ago.
All those investments would be possible for Amazon, a company with a capitalization of over $1,000 billion.
Moreover, Amazon (like Google) has a huge advantage in the Next Big Thing, voice search: According to a Travelport study, more than ⅓ of British travelers already use some kind of vocal search (Siri, Alexa, Google Home, etc.) to plan their travels, and analysts expect that, by 2020, 50% of all online searches will be voice-activated.
And Amazon knows it very well, as it even recently launched a special version of Alexa dedicated to hotels.
Conclusions
Now, the next big question: How will 2019 look like for our industry?
Will it be a disruptive year (God, aren’t they all?)? Will robots steal all of our jobs? Will the “blockchain revolution” completely change the way we do business?
Well, I honestly doubt it, and I think 2019 will be nothing but the year of consolidation of 2018 trends. But, hey, when I will write the same article next December, I could come up with a completely different interpretation in retrospect.
After all, I am just a human (all too human), suffering from the knew-it-all-along effect. Aren't we all?