Yelp is rolling out a feature that will lets its users book stays at selected US hotels. In a first for the brand, users can complete the transaction within the Yelp website or app.
The new hotels feature is called "instant booking" because it spares the user from being sent off to complete the transaction elsewhere.
The instant booking button is powered by online travel company Hipmunk, a consumer travel business that, like Yelp, is based in San Francisco.
Complex relationships
Neither Hipmunk nor Yelp wants to be having individual direct relationships with hotels. So they've invented a workaround that's a bit complex on the backend.
Hipmunk gets its inventory from online travel agencies (OTAs). These OTAs receive, in their contracts directly with hotels, permission from the hotels to "onward distribute" their inventory.
Nearly every hotel that has given permission for onward distribution has an "instant booking" option on Hipmunk's own site. This group of hotels will automatically receive a booking button on Yelp if it already has a listing on Yelp.
The process of adding the booking functionality will unfold in stages, test market by test market.
Hipmunk says a majority of its US hotel listings are available in an instant booking format on its own platforms. Yelp's inventory range is smaller that Hipmunk's, and there's not complete overlap in listings.
In another caveat, when a hotel listing is served up via Yelp's mobile app instead of the desktop version, Hipmunk will serve a mobile-only rate, where available.
Hipmunk is the first travel company to integrate with Yelp's recently launched Platform, which lets third parties provide services, such as appointment-booking, through Yelp.
White label
Hipmunk and Yelp are calling this "co-branded integration."
They claim the service is not white label for the obvious reason that the names of the companies are transparent. The button is co-branded. So is the confirmation email that a consumer receives after booking a room.
But there's a subtler reason: It's not white-label in the sense that it is not the exact same booking experience as what Hipmunk's own site offers, only with a different logo slapped on the top.
It's a similar but custom experience, with a lot of functions unique to Yelp, such as being able to book only via the user's own information saved via Yelp's own membership profile database.
Trade veterans may point out, however, that this is still white label at its core: One company is powering the service of another, just like Expedia powers Travelocity now.
Hipmunk acts as an aggregator of hotel connectivity from the APIs of various third-parties, primarily OTAs and suppliers like major hotel brands.
The startup passes through to the third-parties the customer payment details that Yelp collects via its profiles. The third-parties are the merchants of record on a user's credit card statement.
A sound business?
Tnooz asked Hipmunk's CEO Adam Goldstein why he wanted his company to get into this line of business, given that the similar -- though not identical -- white-label business model has a reputation for generating mediocre revenue.
"Let's suppose your premise is correct. I don’t think it is -- just look at Kayak powering Bing, or Expedia powering Travelocity. Those are solid arrangements.
But let's say co-branded integrations haven't been lucrative. When they haven't, it’s because most of them have been done really badly. They're often an ugly widget slapped on a page somewhere, and only a tiny fraction of people click on it.
This effort is different. The size of Yelp's mainstream audience, the seamlessness of the integration in a sleek interface that's primed for mobile, the co-branding halo that increases trust in the user, and other factors, suggest there will be much higher conversion rates with this co-branded integration than what white label reputedly gets.
All that said, we're a startup and we experiment. If this experiment doesn't work, we'll try something else."
Entering the land of giants
Until recently, Yelp had been known mainly as a user-review site for neighborhoods, helping locals research services and restaurants. But the startup is increasingly expanding its scope, with the broader goal of converting out-of-town visitors into purchasers.
That puts it squarely onto the turf of giants like TripAdvisor and, to a certain extent, Google in its travel metasearch brands like Hotel Finder.
Yelp recently began offering hoteliers the option to add direct booking links to their listings via a "call-to-action" ad.
Exhibit A: La Quinta Hotels has for some time enabled Yelp users to instantly reserve a room at a variety of rates by clicking a link via a widget that pops up within the Yelp red-bannered shell.
Hotels that prefer the direct bookings via such call-to-action ads, instead of the third-party bookings, would have to speak with their OTA about the "onward distribution" contract terms, not with Yelp or Hipmunk, say the companies.
Mike Ghaffary, Yelp's vice-president business and corporate development, explained its Yelp Platform partnerships this way:
"Let's say you want to visit the Wine Country north of San Francisco, but you're not sure where to go. You could use Yelp to find a town with restaurants, shops and spas that appeal to you. Let's say Healdsburg.
You book a winery tour via our CellarPass integration. Book a spa stay via our Booker integration.
After reserving a hotel room via our Hipmunk integration, you can book a few restaurants, via our OpenTable and SeatMe. Or you can have food delivered to your hotel room, thanks to our partnerships with Eat24 and Deliver.com.
As a revenue category, the transactional platform is still new for us. Local ad revenue remains our mainstay for now. But consumers have responded really well in the verticals we've rolled it out to so far, so we believe they'll do the same in hotels."
Mobile behavior drives "instant booking"
Yelp's integration with Hipmunk's service is another instance of one of the latest industry trends among aggregator or metasearch: adding instant booking.
TripAdvisor, Kayak, and other travel sites have even more eagerly embraced the concept, which claims higher conversion rates than the older model of handing off consumers to complete a transaction on a supplier's or other third-party's website.
The motive for developing instant booking is the growth in mobile usage.
When shopping on mobile devices, consumers tend to dislike having to retype their credit card information for every single purchase they may want to make for a particular trip because of the small keyboards and cramped user experiences of the tiny screens.
Yelp helps users avoid this problem by enabling users to create a single Yelp profile, where users save their credit card and billing information once. Consumers can then purchase third-party services via Yelp using that single ID.
In the case of hotels, the reservation process keeps the user within Yelp's familiar interface and branded design shell. The credit card and address information stored in Yelp's databases are passed along, via Hipmunk, to an online travel agency or a hotel in the background.
Capital news
A financial side note about Hipmunk...
Last March, Hipmunk raised a $20 million Series C funding round, led by Oak Investment Partners.
Today the company says that, in addition to the money raised, Hipmunk did a small additional top-up capital raise. There was participation from existing investors, as well as additional capital from new investors Industry Ventures and Nokia Growth Partners.
There was no change to the startup's board of directors.
Hipmunk has a long-standing relationship with Yelp. For instance, Hipmunk incorporated Yelp reviews into its hotel search results years ago.
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