Expedia Group, Booking Holdings spent more than $11B on marketing (mostly to Google) in 2019

Online travel giants Expedia Group and Booking Holdings disbursed a record $11 billion on marketing in 2019, up from $10.6 billion the year before.

The difference is that one company grew its marketing spend in 2019 and the other company essentially remained flat.

Under its “selling and marketing” line item, Expedia Group reported a 6% increase from $5.567 billion in 2018 to $6.03 billion in 2019.

The Seattle-based online travel agency spent $5.22 billion under that category in 2017.

Booking Holdings maintained virtually the same marketing expenses, going from $4.96 billion in 2018 to $4.97 billion in 2019.

In “brand marketing,” Booking Holdings paid out $548 million in 2019, which is up from $509 million in 2018 and $435 million in 2017.

The Norwalk, Connecticut-based company reports a decrease in its “performance marketing” spend (funds mostly for customer acquisition via digital advertising) from $4.44 billion in 2018 to $4.41 billion in 2019.

This marks the first drop in the category since an increase from $4.16 billion in 2017.

Google

Google – essentially a competitor in online travel – is the largest recipient of the OTAs’ customer acquisition expenses. 

The rise of Google as a powerhouse in online travel also explains the discrepancies in spending.

“Due to Google pushing its travel listing feature into the search results page in recent times, Expedia’s top-ranked organic links that essentially generate free traffic are pushed down the page further,” writes a self-described tech veteran/analyst on Seeking Alpha who goes by the username Tech and Growth.

“As a result, Expedia will now need to spend more marketing dollars on advertising links to replace its top-ranked organic links to maintain the same level of views and conversions.”

Belgian and Bullish, a self-described hedge fund analyst, writes on Seeking Alpha that OTAs need to decrease its “performance marketing spending is because these acquisitions channels have had a run-up in price which has driven the ROI below acceptable levels.

“Proof of this can be found in the fact that despite deflation in cost-per-click prices on Google, there has been a marketing cost inflation for the OTAs in recent years.”

By contrast, shifting funds to brand marketing could prove to be more beneficial for Booking Holdings.

“Given the fact that brand marketing can lead to higher direct bookings in the long term, there has been a minor shift towards more brand marketing in the recent years,” writes Belgian and Bullish.

In 2020, things might be different for Google if travel revenue falls due to the impact of the COVID-19 coronavirus, says Bank of America.

Inside the PhocusWire Studio at the 2019 Phocuswright Conference, Booking Holdings CEO Glenn Fogel and Expedia Group ex-CEO Mark Okerstrom discuss the state of customer acquisition costs: