Will COVID Catapult Google Past the OTAs?


Conventional wisdom – at least as espoused by OTA CEOs – is that economic shocks strengthen OTAs’ position. On the Booking.com and TripAdvisor  2Q20 earnings calls, their CEOs made this argument; Glenn Fogel made this point, saying

“We feel confident to talk about how a deep recession can be helpful to distributors, because the suppliers leaned in heavily into distributors who had demand. If you’re a hotel and you’re running 40% or 30% occupancy rate you need to get that demand and we’re here to provide it to them.”

This argument assumes that OTAs control the dominant channel for consumer demand, and an economic shock reinforces their industry leadership.  That was true past economic shocks like the post-9/11 collapse and the 2008 global financial crisis, but this time is different.  While past downturns sharply reduced demand, there was ongoing consumer activity and this allowed OTAs to sustain marketing when others could not.  And in past downturns, OTAs were the Apex Predators of the travel industry, with deepest consumer relationships, strongest brands, and greatest scale.  

In the COVD crisis, these conditions no longer hold.  OTAs cannot market when consumer demand is effectively zero.  Google’s investment in travel tools make it a vibrant competitor with deeper consumer relationships.  Unlike past shocks, OTAs will be weakened by the COVID crisis and Google will extend its dominance over the industry.

OTAs cannot sustain marketing spend in COVID.  

Past downturns created a sharp reduction in demand, but the travel market did not stop.  COVID is different.  COVID has stopped the travel industry, which has forced the OTAs to stop their marketing investment.  Without this continued investment, OTAs will not see their position strengthen over suppliers.

A comparison with the global financial crisis illustrates the difference.  In November 2008, US passenger miles fell by 12% YOY, but US passengers still traveled 41B miles that month and US airlines generated $31.3B in revenue in 4Q08 (down just 3% from 4Q07).  

Over the same period of time, OTAs continued to pour money into marketing.  Below is Booking.com annual revenue and marketing investment from 2006 – 2011.  Their financials show no signs of a demand shock

By contrast, COVID caused a collapse in demand, and OTAs have stopped their marketing spend.  On their 2Q20 earnings call, Booking CFO David Goulden noted that new bookings declined 85% in April, and marketing expenses have fallen alongside newly booked rooms, meaning Booking has effectively stopped marketing.

To underscore the point, in previous market shocks, OTAs were able to increase marketing investment when others could not and grow their brands.  This time, they too have to pause their investment.

Google as an alternative

In past demand shocks, OTAs dominated the travel industry.  Booking and Expedia had customer reach that far exceeded any supplier, and their products offered more selection than any other player.  

Even prior to COVID, OTAs were in thrall to Google.  Google’s travel search products are now very compelling for consumers.  In 2018, they passed Kayak as a source of traffic to airlines.  

COVID provides Google the opportunity for a step change in its growth.  The OTAs have stopped their marketing spend, so consumers see no alternatives to Google’s travel products when they search.

Google knows they are in the driver’s seat.  While Google just made it free to sell on Google shopping, travel still remains a fully monetized category.  In shopping, Google is playing catch up to Amazon.  But in travel, Google has no one to fear.


In the travel industry, demand shocks have cemented the position of those closest to consumer demand.  While past events elevated the OTAs at the expense of suppliers, COVID will mark a changing of the guard.  Google’s dominance will be unambiguous.  More consumers will stick with Google for all travel booking, and OTAs will resort to the suppliers’ approach of imploring consumers to “book direct.”