Google’s new “captive demand” platform puts OTAs on alert

October 1, 2014

Google’s new “captive demand” platform will allow hotels to improve CRM programs and subvert OTA rate parity clauses like never before.

A recent report by U.S. investment banking firm Evercore entitled “Google’s Travel Plans in a Post-Atomic Era” lays out Google’s master plan for “potentially the most disruptive travel initiative” to date. The heart of the report centers on an unnamed “captive demand” platform that will allow hotels to directly offer special rates to their most loyal and valuable customers in a personalized “logged-in travel search experience” on Google Hotel Finder.

Before we get into what that means for the hotel industry, first we need to understand what Google is up to. When it comes to travel, Google has been seeking to deliver an “end-to-end” experience that encompasses the entire coterie of Google products. It starts with a hotel search on Google Hotel Finder, moves to booking with Google Wallet, then reminds you of your upcoming reservation on Google Now, and finally gets you to your hotel on Google Maps.

This new captive demand platform, which Google plans on rolling out in partnership with several major hotel brands (perhaps as early as the fourth quarter of this year), targets users during the hotel search process. By pulling user information from apps like Gmail, Google can integrate offers that users have received from hotels into the search. For example, if Starwood offers its loyalty program members an offer for 20% off the best available rate, Google can adjust the displayed prices on Hotel Finder accordingly.

Furthermore, Google has already quietly rolled out a feature called “Limited Offers,” a new type of Google search / hotel ad that allows hotels to promote a discounted rate next to the displayed best available rate, as shown below.

Limited Offers, when combined with Google’s captive demand platform, will be a powerful CRM tool for hotels. By targeting display ads to members of their brand loyalty programs (which Google will draw from Gmail addresses), hotels can incentivize their best customers to book directly with the hotel by undercutting the OTA rate directly in Google Hotel Finder. Since the offer can only be seen if the user is logged into Google, this does not violate rate parity agreements between hotels and OTAs.

So why is Google so interested in owning the end-to-end travel experience? The Evercore report says that a shift to mobile “marketplaces”—such as booking apps by TripAdvisor, HotelTonight, and other OTAs—threatens Google’s dominance in travel search (currently 50% of travel searches begin on the site). By vertically integrating prices, reviews, and soon personal user information, Google looks to remain the David of travel search for some time to come.

Interested in learning more? David Stevenson at Travel Weekly and Dennis Schaal at Skift have some interesting insights on Google’s captive demand platform.