How mirror marketing by online travel agencies dramatically increases PPC costs

In most industries Google‘s Pay Per Click advertising model represents one of the most cost-effective and scalable drivers of direct business.

But, unlike other industries, hotels encounter a huge obstacle in deriving ROI for their PPC spend due to the practice of mirror marketing by their ‘frenemy’ partners, the OTAs.

NB: This is an analysis by Frank Reeves, co-founder and CEO of Avvio.

To explain, mirror marketing takes places when one or more online travel agencies (including their respective metasearch brands) pay for their sites to appear above the official hotel website when visitors use Google to search for the specific hotel brand name.

The desired result is that third-party sites are more visible than the official hotel website, and traffic that had intended to go direct to the hotel website is diverted away.

“It’s like letting someone else put their number in place of yours in the phone book,” says Stephen Williams of Gresham Hotels and Windward Management.

This greater prominence of the OTA site attracts more clicks and therefore bookings than the hotel site, costing the hotel in commission payments that it would not have incurred had the customer booked direct.

Moreover, the loss of traffic for the hotel site results in a drop down the organic (non-paid) search rankings for the hotel website.

So in all, whenever direct-bound customers are encouraged to a third party, the hotel’s investment in brand building and reputation is directly undermined.

To make matters worse, competing with the OTAs for traffic on brand names is becoming more expensive for hotels.

Impact on marketing costs

Data from our own platform shows a staggering 35% increase in the cost of brand-name PPC traffic for hotels as a direct result of OTA mirror marketing.

Not competing with their “partners” and pulling out of branded (brand-name) PPC activity risks relegating the visibility of the hotel’s own website yet further.

Given the increasing prominence Google dedicates to paid results over organic rankings this would likely lead to an even poorer position on the results page and even less traffic and bookings.

And on mobile, from where our data shows that up to 50% of total hotel website traffic is coming, this problem is amplified as only a single paid result might be presented on the smaller screen.

“By choosing to advertise on our brand term keywords the OTAs are compromising the value of their partnership with Red Carnation Hotels,” says Suzie Wotton of UK-based Red Carnation Hotels.

However, look closely and you will see that not all hotels suffer from the effects of mirror marketing, even if they do work with OTAs.

Many of what the OTAs would term “strategic accounts” (i.e. big brands) preclude the practice of mirror marketing in their OTA contracts.

The fact that big hotel groups will negotiate to prevent mirror marketing on their brand terms demonstrates how seriously they regard its effect.

So, how can smaller hotel groups and independents follow the chains’ example and prevent mirror marketing?

Chance of change?

Officially at least the OTAs are willing to discuss the matter with any of their suppliers, but when compared to the scale of the strategic accounts the bargaining position of smaller players is weak.

Legislation in the UK, for example, may be about to change. In 2013 the High Court of England and Wales ruled in favour of Interflora who claimed that use of “Interflora” as a key word by M&S infringes INTERFLORA trade marks.

The ruling is currently under appeal, and the outcome of that (expected October 2014) may establish some legal protection for trademarked hotel brands from mirror marketing.

But regardless of that outcome, trade associations should play a more active role in coordinating and mobilising their members and other hoteliers around the issue, with the aim of presenting a common front against mirror marketing to the OTAs.

Only by taking concerted joint action can the hotel industry as a whole position itself to bring an end to this unfair dilution of its marketing effectiveness and develop the more cooperative OTA relationships as enjoyed by the major chains.

It seems that the OTA and metasearch sites are also looking for an improved relationship with hotels and it would be nice to think that the more forward-thinking aggregator brands are already considering the benefits of a policy change in regards to mirror marketing.

There is no denying the important role the OTAs play in hotel distribution, particularly in driving international sales for un-localised hotels.

At the same time booking conversion rates on many hotel brand websites remain painfully low.

However, against a global backdrop of rising operational, distribution and marketing costs – often masked at present by rising demand, which will not last forever – can the industry afford in the long term not to tackle issues such as OTA mirror marketing?

We think not.

NB: This is an analysis by Frank Reeves, co-founder and CEO of Avvio.

NB2: PPC money image via Shutterstock.

– See more at: http://www.tnooz.com/article/online-travel-agencies-mirror-marketing-PPC/#utm_source=Tnooz+Mailing+List&utm_medium=email&utm_campaign=16789dbee7-RSS_EMAIL_CAMPAIGN&utm_term=0_c691357c44-16789dbee7-137267565

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