Recently, Google announced a test of a new brand promise for its Flights product: a “lowest fare” price guarantee that offers cash refunds to travelers for overpaying on select itineraries.
If the algorithm recommends “buy now,” and the fare actually drops prior to travel, Google will issue a cash refund. In its initial trial, the guarantee only applied on travel booked between August 13 and September 2.
The feature is either a bold product move or a savvy marketing effort - or both, as the guarantee emphasizes confidence in the accuracy of its predictive algorithm.
Either way, it’s captured our attention.
Given how Google’s product suite is closely interwoven, it’s not that much of a leap to wonder if such a guarantee could soon extend to hotels. After all, the company has millions of data points at its disposal via its hotels product. Once you consider the insights flowing through Google Hotel Ads (which originates 65% of metasearch bookings, by one measure), the company may even have more rich data on hotels than flights.
So what are the implications for hotels?
The price guarantee was packaged with another key product evolution: personalized hotel recommendations within the google.com/travel planning interface.
Google said in its blog post: “When you’re booking a hotel, you may need intel on neighborhoods to stay in and what you’ll expect to pay. ... Let’s say you’re planning a trip to Paris. Once you’ve searched for hotels for your destination and dates, click on 'Where to stay' at the top of your hotel results. For each neighborhood, you’ll see a description, the average price and more. You’ll be able to filter your results for hotels in a specific neighborhood.”
You can see how this will look in the image below. For travelers at the top of the funnel, it’s an entirely new starting point when planning a trip. Google's personalized hotel results will also include hotels that travelers have both searched for and stayed at before, as well as recommendations based on a user’s searches for local points of interest.
Such behavior-driven personalization is yet another reminder of how powerful Google’s closely aligned travel product could be. As an end-to-end tool for travelers, it’s a potent combination of market dominance and user-centric design. A price guarantee really pushes it over the top as far as building trust and confidence with consumers.
So what would a price match guarantee mean for hotels? Let’s consider a few potential outcomes of such a feature.
#1: Informal loyalty program
Price match guarantees are seen as confidence builders that lead to better conversions. But once a consumer believes that a company always has the best prices, a guarantee is less powerful. Back in 2017, Expedia quietly dropped its own price match guarantee and folded it into its Expedia+ rewards program.
If Google wanted to increase the stickiness of its travel search platform, the guarantee could extend the value of its platform by giving travelers a reason to always start with Google. The guarantee provides peace of mind to consumers, as it shows that “Google has your back.” It could become a compelling reason to return to Google, as well as an enticing reason to book right away rather than wait and see.
A loyalty layer across such a massive metasearch platform may actually be a good thing for hotels: It could pull more users away from OTAs. This would give hoteliers (especially independents) a stronger shot at capturing business through Google Hotel Ads - a product widely seen as more of a level playing field than OTAs.
#2: Fewer cancellations
It's no secret that hotel rates change often. Consumers have gotten used to dynamic pricing, leading to the popularity of price-monitoring apps like Hopper and metasearch platforms like Google. This creates an arbitrage opportunity for consumers (and travel managers via startups like TripBAM): With refundable rates and generous cancellation policies, anyone can cancel and rebook if a better deal appears.
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Airlines have never allowed this kind of flexibility. Part of the reason why a price match guarantee for airfare is so noteworthy is due to the extremely restrictive cancellation policies at airlines; since travelers can’t simply cancel and rebook, a cash refund is quite appealing.
Since consumers can usually cancel hotel bookings if they find a better rate, the promise of a cash refund may prevent cancellations. This would provide more evenness to hoteliers’ projections, which would provide stronger ADR and occupancy over time.
#3: Google fights rate parity
Another potential outcome of a price guarantee for hotels would be a focus on rate parity on behalf of Google.
With Google’s metasearch model that isn’t dependent on commissions, hoteliers might find a willing partner in the fight against improperly distributed hotel prices. A promise to refund the difference in cash via a best price guarantee would align Google’s interests with those of hoteliers - underpriced room rates would actually cost the company money as well, thus incentivising removal. If hotels find a willing partner in Google to fight for rate parity, you better believe more dollars would flow to Google Hotel Ads. It could be a virtuous cycle that permanently alters the ongoing battle against disparity.
#4: Direct booking wars escalate
If Google were to extend its price match guarantee to hotels, it's likely that some hotels would follow suit with changes to their own “best rate guarantees.” Rather than putting the onus on the traveler to submit claims, these guarantees could become automatic. Otherwise, there’s a real risk of cannibalization of direct bookings. Why book direct (and have to submit claims for a price-match) when Google does it automatically? Hoteliers would have to carefully consider how best to compete with such a strong brand promise from Google.
To maintain their share of direct bookings, hotels would need to double down on loyalty, member rates and the user experience of their own booking flow. Alternatively, hotels would need to funnel even more marketing dollars towards capturing those clicks on Google Hotels.
Google: friend or foe?
For hotels, Google actually solves the problem of gaining (and maintaining) visibility as a traveler begins the trip-planning process. Rather than just appearing when a traveler is close to booking, the evolution of Google Travel gives hotels a chance to appear sooner in searches.
A loyalty layer across such a massive metasearch platform may actually be a good thing for hotels: It could pull more users away from OTAs.
Gino Engels
This could actually bode well for hotels, who already benefit from the competitiveness of Hotel Ads, and who stand to gain more prominence across different phases of a traveler’s journey. In its blog post promoting the price match guarantee, Google puts its “end-to-end” vision at the center of its travel strategy:
"Whether you’re looking for the best flight prices and neighborhood for your stay, or you’re on-the-go during your trip, Google can help with your travel needs from start to finish."
For hotels looking to gain free exposure at the start of a trip, and then convert that exposure into a booking, there’s nothing quite like it. Yet, with such centralization of attention, hotels cede a significant portion of the guest journey to Google.
It’s a frenemy situation, where the platform manages to capture consumer attention - and hotels pay an increasing amount of marketing dollars to boost visibility on yet another intermediary.
As more consumers adopt the platform, more hotels compete for a limited number of top spots. It’s the familiar playbook that put search at the center of Google’s flywheel, and it’s here to stay in travel as well.