Google’s proposed acquisition of software firm ITA has some online players so alarmed that even competitors have formed an alliance to campaign against it. Yet the deal appears unlikely to have much negative impact on traditional travel agencies.
In fact, Henry Harteveldt, principal analyst with Forrester Research, is suggesting it could even have a positive effect: As ITA’s enhanced airfare search tools enable Google to more clearly define consumers’ travel plans, the upshot could be more targeted advertising opportunities for brick-and-mortar players.
"The benefit is greater insight into customer intent," Harteveldt said. "Absent dates in a travel search, a travel seller has no idea when a traveler wants to travel, and thus has to treat all searches as equally important.
"Once Google offers an ITA-powered flight search, a traveler will be able to enter her or his travel dates. In theory, we see this as allowing a travel company to bid more sensibly for the keywords because they know when the consumer plans to travel and what their needs are."
For example, Harteveldt said, an airfare search for travel within the next three days might indicate whether it is a business trip or last-minute vacation, enabling a travel seller to choose to bid more for those keywords if either type of trip suits its strategy.
A search for a trip several months in the future might indicate a leisure trip, and again the travel seller can choose whether to bid and how much.
Google has traditionally earned its revenue with a highly successful advertising model and has repeatedly denied it has any intention of becoming an online travel agency with its acquisition of ITA.
Google and ITA go together nicely, Harteveldt said: "Google is an excellent resource to find information about websites, but, at least as far as travel information is concerned, it can’t always provide users with the last-mile information they need. This is where ITA will come in. By integrating ITA’s airfare search into its search engine, Google will be able to provide a user with more specific actionable information, such as airlines, schedules, fares and the websites that sell the tickets."
Fear of Google domination
However, industry players fear the acquisition could also enable Google to manipulate the travel market for its gain.
For example, Kayak Chairman Terry Jones suggested that "Google could combine its extensive data about demand by consumers who use its search and other products with proprietary information about supply from airlines and websites using ITA technology." If so, Jones said, Google would be able to command higher advertising rates as it delivers a more targeted audience to travel suppliers.
And these higher advertising costs, he said, would automatically be passed along to consumers in the form of higher fares.
Kayak is one of several online players that believe that with ITA technology in its arsenal, Google would have the power to undermine its competitors. This group of players, comprising online travel agencies, GDSs and metasearch providers, has formed an organization called FairSearch.org to lobby intensely against the deal.
Members say the acquisition would give Google control over collecting information on airfares, flight availability and flight times, as well as the power to organize the data for airlines, travel agents and online travel portals as it wishes, effectively enabling it to become the gatekeeper to online air travel search.
A further concern is that the world’s largest search engine could choose not to renew ITA licenses. Or it could renew them on less favorable terms or simply withhold new technology innovations from competitors.
ITA Software currently powers the flight search capability of several airline and online travel sites, including American Airlines, Bing, Continental, Hotwire, Kayak, Orbitz, Southwest, TripAdvisor, United, US Airways and Virgin Atlantic.
FairSearch.org members include traditional competitors such as Expedia, Kayak, Hotwire, Travelocity and Sabre, in addition to Microsoft, whose Bing search engine competes with Google. What unites the travel companies is the fear that Google could choose to place search results from its highest-paying advertisers above consumer-centric organic search results.
"The concern is whether Google would charge airlines and OTAs to present their links," Harteveldt said. "If, for example, an airline or OTA had to pay Google-ITA a fee for its website to be listed in that flight’s organic results, I see trouble brewing."
He called only one approach "acceptable," and that is "for all bona fide sellers’ websites to be presented within a flight search’s organic results without change to the airline or to the OTA."
Google: 'No plans for direct booking'
However, Lenati LLC consultant Jonathan Alford said that steering consumers toward particular suppliers was what some of the OTA business models are based on already.
"There’s no precedent to block Google-ITA for this, unless you’re also going to change the entire merchandising world — for example, telling Walmart or Safeway they can’t accept slotting fees from Procter & Gamble," he said.
Google insists that it has no interest in transactional services such as selling airline tickets or making reservations. Rather, the search engine claims it wants to provide its users easy access to airline flight and pricing data and to give online travel agencies the ability to bid on the sale of tickets to Google users looking to buy.
"We do not have any plans to sell or book tickets directly," Google spokesman Adam Kovacevich told Travel Weekly. "Rather, our goal is to send more traffic to sites where consumers can book flights."
Google also denies allegations that the deal would reduce choice for consumers or increase costs.
Marissa Mayer, Google’s vice president for search products and user experience, said: "ITA and Google are not competitors. In addition, ITA does not set ticket prices nor sell tickets but merely analyzes data about seat availability and fares, which are set by airlines, and provides that analysis to its websites. So it’s hard to see why it would result in higher prices. In fact, by acquiring ITA we hope to build flight comparison tools that make it easier for users to compare prices and find the best possible deal."
Google said the acquisition would create more overall online sales for airlines and travel agencies.
"Our goal is to build tools that drive more traffic to airline and online travel agency sites where customers can buy tickets," Mayer said. "We also believe that giving users better ways to search for flights online will encourage more users to make their flight purchases online."
Industry pundits suggest that metasearch service providers such as Kayak will be the main losers if Google provides the same dynamic pricing on various travel products in its search.
Meanwhile, Jake Fuller, PhoCusWright’s senior research analyst for finance and analytics, said the deal represented an “indirect threat” to online travel agents because improved air search capabilities would likely shift organic traffic from the OTAs to Google.
"Also, buying a now highly qualified lead from Google would likely cost less than the GDS fee and override commissions that are incurred for a ticket sold through the OTA," Fuller said.
Timothy O’Neil-Dunne, managing partner of T2Impact Ltd., believes Google has its eye on the GDSs.
If so, this is where brick-and-mortar agencies could feel the most impact from the acquisition of ITA.
The travel agency community needs to become independent of the GDSs, O’Neil-Dunne said, reasoning that if "Google is targeting the GDSs, … those that depend on the GDSs must change or die [because the] GDSs’ revenue stream to agencies will decline."
And unlike Google, O’Neil-Dunne added, GDSs do not provide personalized data about the customer of the airline.
Chicke Fitzgerald, CEO of Solutionz Holdings, a consulting firm focused on reinventing status quo technologies and business models for the travel, mapping, geo-content and navigation business, agrees that if Google is allowed to step directly into the travel value chain, the deal will have a "major impact" on both online and offline travel agencies’ transaction volume for air ticket sales.
The Department of Justice is currently reviewing the $750 million deal.