D-edge covers implications of Digital Markets Act implementation for hospitality and hotels industries, including significant drop in free traffic, increased dependence on paid traffic, rising distribution costs, unfavourable shift in channel distribution mix.
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GLOD-edge covers implications of Digital Markets Act implementation for hospitality and hotels industries.
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Key Takeways:
Digital Markets Act is a new legislation by the European Commission aimed at curbing the power of online “gatekeepers” like GAFA (Google, Apple, Facebook, and Amazon) to promote fair competition and offer consumers more choices in the digital marketplace. The DMA entered into force on 1 November 2022 and become applicable on 2 May 2023. For hotels in Europe, the DMA was expected to create a more level playing field, increasing transparency about how to improve rankings and visibility on these platforms, giving more control over distribution, and reducing dependency on OTAs.
Google Hotel Search Page Changes:
Google has not reported any details, but several key changes to search result pages for hotel-related queries are evident, including:
- Organic results are pushed further down the page, making them less visible.
- The introduction of a new bloc “ places” gives more space to OTAs and Metasearch.
Other notable changes that affect the user experience include:
- Stay dates can only be changed by clicking through to Google Hotels pages and clicking the Dates tab in the newly designed menu.
- Users cannot click Google Maps in the Knowledge Panel for a larger view.
- Guest reviews from various sources are now included with Google reviews.
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Key implications for hotels (d-edge analysed website traffic and digital booking data for a broad selection of independent hotels and small hotel groups in the EU (during January 1, 2024, when most of the changes took effect, to April 28, 2024, and compared to the same period last year):
1. Significant drop in free traffic
- The share of direct revenue from organic and unpaid traffic on Google has decreased from 66% to 57%
- Organic Traffic Decline: There has been a 20% drop in organic traffic to hotel websites, likely due to organic links appearing much lower in search results.
- Free Booking Links Revenue Fall: Revenue from Free Booking Links has dropped by 32%. Despite the placement remaining the same, changes in the overall page display could explain the 41% drop in clicks.
2. Increased dependence on paid traffic
- The share of direct revenue from Google paid campaigns has risen sharply, from 34% to 43%, with Google Ads (Search Marketing) accounting for 39% of clicks.
3. Rising distribution costs
- This shift has led to a 18% increase in direct distribution costs, with average direct distribution costs rising from 3.3% to 3.9% of revenue. However, direct costs remain three times less expensive than indirect costs on average.
4. Unfavourable shift in channel distribution mix
- Direct booking revenue share has fell by 4.3% to an average of 28.1%, while OTA revenue market share has grown to 62.7%, and other indirect sources (mostly Hotelbeds) have increased to 9.1%.
- Given that total digital revenue was up by 11% during this period, some hotels may have missed these important shifts in traffic, revenue, and market share.
Breakdown of online hotel bookings revenues
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