What's next for Google's foray into hotels?

Google's recent efforts to expand further into the online travel space could result in a pivotal change for the hospitality industry.

In August, the tech giant announced it had started offering exclusive hotel discounts to paid subscribers to its Google One cloud storage service, while also announcing the development of a "hotel-plus-flight product."

Sean Hennessey, clinical assistant professor at New York University's Jonathan M. Tisch Center of Hospitality, said Google's play in hotel discounts could prove beneficial for hotels looking to bypass the high commissions that have long been synonymous with traditional OTAs.

"From a hotel company's standpoint, the OTAs are a mixed blessing," Hennessey said. "They have been extremely successful in delivering guests to properties in a way that makes them attractive, but they also have the highest cost of securing those customers. So if Google can come in and provide the same service at a lower cost, hotel companies would be eager to replace one distribution channel with, perhaps, a better and cheaper one.

"Hoteliers are keenly focused on driving down customer acquisition costs, and some are hopeful that Google could potentially benefit their position." 

The Airbnb model

Recently, Airbnb has allowed hotels to list rooms alongside its home-sharing offerings, while promising to take a smaller commission cut. Hennessey cited that foray into the hotel space as a potential road map for Google's hotel discounts strategy.

Airbnb's outreach thus far has primarily targeted boutique and bed-and-breakfast properties, with the company's hotel-focused marketing centering on its claim that OTA fees, at up to 30%, are too high.

"Hotels, and particularly independent hotels, are excited about Airbnb because of its commission approach," Hennessey said. "So Google could similarly be revolutionary in that regard."

Hennessey also predicted that Google will likely continue to be discreet with hotel discounting. This is primarily because hotels, as well as OTAs, represent a major customer base for the company's lucrative Google Ads advertising platform, which promises to help improve clients' online visibility and drive traffic to their websites.

"When I speak with both hoteliers and OTAs, they are somewhat confident that Google will remain circumspect with its entry into the online travel world because hotels and OTAs spend a lot on Google Ads," he said. "If Google ever tried to unilaterally enter the travel market in a big way and really throw its weight around, Google would be cutting a gigantic revenue stream off at the knees.

"So, while Google certainly has the reach to enter and compete aggressively in that market, it has not gone all-in at this point, and there's certainly some belief that they won't go all-in at least for the foreseeable future."

Atmosphere Research Group president Henry Harteveldt said that although Google's recent online travel rollouts have been relatively low-key, the company could easily turn them into a much more significant incursion.

"The way Google got these hotels to agree to these Google Cloud deals is likely by saying, 'Look, this is no different from offering a discount to AAA members, AARP members or members of any other affiliated group,'" Harteveldt said. "So from the hotel standpoint, they probably looked at this and said, 'OK, let's try it.' But who's to say Google can't turn around and expand this?"

Harteveldt added that hoteliers and other travel industry players should be wary of Google's next moves.

"What does Google want? I am only half joking when I say total world domination," Harteveldt said. "Like Amazon, what Google really wants to be is the supermarket of services for almost everything, and that includes travel."

* This article originally appeared on Travel Weekly