An older gentleman stands in front of a temple in Siem Reap, Cambodia, gazing up in wonder as sunlight glints off his white hair and wizened face. As he begins to ascend the steps built into the temple ruins, it's clear he's not just making the sightseeing rounds, but fulfilling a yearning decades in the making.
This 30-second commercial for Expedia highlights the online brand not as just a website that books vacations, but as a company that delivers dreams.
"In the old days, we would just show you an ad about people traveling to a destination," says Vic Walia, VP of global brand marketing at Bellevue, Washington-based Expedia. "The insight when it comes to creating an ad now is, 'Let's find the right activity and build the ad around that.' "
When they started, online booking services like Expedia and Priceline were the disrupters. Now they are the ones being disrupted by the digital duopoly of Facebook and Google, as well as Airbnb, which days ago began its own aggressive ad campaign against online agencies—a direct invitation to hotels to partner with Airbnb. Add to that renewed competition from hotel chains using data garnered from rewards programs to offer tailored travel experiences to customers, and online bookers are feeling the squeeze and seeing investor pullback.
No longer able to rely simply on price as a point of difference, Expedia and rival Booking Holdings, which owns Priceline, are fighting back by offering events and activities beyond hotel and airline reservations and spending lavishly to market directly to consumers. Indeed, events provide more growth opportunities for such companies and also help appeal to the changing consumer tastes of the millennial market.
In 2016, Expedia spent $1.6 billion on total U.S. advertising, up 17 percent from 2015, according to Ad Age Datacenter. And Booking Holdings, which owns Kayak and Booking.com, spent $415.3 million on measured media, up 83 percent over 2015.
The goal, experts say, is to rely less on third-party channels like Google—and with good reason. Google recently outpaced Expedia as the No. 1 source travelers use when booking trips, according to a recent study from travel and hospitality marketing firm MMGY Global, while Facebook is also honing ways to reach potential travelers on its site while they are researching trips. Airbnb is also commanding more of the mix as it expands its offerings to include hotels alongside home shares, and hotels are trying to convince consumers to book with them directly, boxing online agencies out.
In the $164 billion U.S. lodging market, booking fees are now nearly split between online travel agencies such as Expedia, with $39 billion, and hotels, with $38 billion, according to Phocuswright, a New York-based travel market research company. Within the online travel market, Expedia (including Hotels.com, Travelocity, Orbitz and Hotwire) commands 70 percent; Booking Holdings, including Booking.com and Priceline, holds 23 percent; and all others garner 7 percent, Phocuswright found.
"A key theme [for online travel agencies] is a shift to direct customer acquisition to drive app downloads and direct engagement," says Douglas Quinby, senior VP of research at Phocuswright. "We're seeing more brand advertising online, for sure, but also offline as well."
Part of the change comes as Google invests more in its own consumer travel offerings. Earlier this year, the tech giant rolled out new features on its mobile search that allow travelers to more easily toggle between choices to plan their trips, compare prices and book directly, according to a spokesman. Google now operates a host of its own services, all branded accordingly, including Google Flights, Google Destinations and Google Hotels.
Such improvements are already proving fruitful as more travelers turn to the Mountain View, California-based search company. According to the annual Portrait of American Travelers study from MMGY last year, 40 percent of travelers cite Google as their first source in booking trips. That's up 8 percentage points from the 2016 study.
Part of the issue for online agencies concerns credibility and consumer perception, experts say. "Travelers are generally distrustful of what they see online when it comes to travel. There's this undercurrent of 'I don't trust what I see, I need to validate it,' " says Clayton Reid, chief executive of MMGY. Enter Google, which most consumers already trust for other search needs.
"Google is the No. 1 influencer across travel and we're seeing it in the numbers," says Reid, noting that the company is getting more aggressive about its products for the space.
Facebook is another potential threat online players are watching closely. Two years ago, the social network rolled out Dynamic Ads for Travel. It recently added features like Trip Consideration, which helps marketers reach travelers who are still picking destinations. As Facebook gathers data and increases its capabilities as a source for vacationers, experts say it too could pose another challenge to online travel brands. But Facebook says its attention is on the advertisers only.