When they were first introduced, metasearch channels quickly became an essential part of travelers’ online shopping habits, as they were a way of getting an ordered overview of the endless online shopping options. Growing rapidly in popularity during the 2010s, an industry report in 2017 showed that “nearly half of U.S. travelers used metasearch platforms for flight and hotel bookings;” That same year, another report revealed that “metasearch engines had become a dominant marketing channel, surpassing investments in traditional ads.”
That initial success did not last. An industry report showed that “metasearch’s share of travel traffic decreased from 22% in 2017 to 17% by 2020”, as it was no longer the most reliable or efficient way for travelers to find the best price on travel bookings – a trend that continues today.
But is the value proposition of metasearch dead, or is it simply the original business model that failed?
Let’s examine the key commercial and consumer issues to answer this question.
Ad-Based Revenue Model
The advertising-based, cost-per-click (CPC) revenue model is fundamental for traditional metasearch sites. The sites earn revenue whenever a traveler clicks off the metasearch engine to visit an OTA or hotel site, regardless of whether the traveler books the stay. Because advertisers & hotels are ranked in the search results primarily based on their CPC bids (rather than on price), travelers are often not shown the best rates; instead, they are shown the rates that will earn the metasearch site more revenue.
This leads to higher prices being offered through the metasearch channels, helping sponsor higher bids, while customers click off the site quickly in search of better prices.
Another key problem diluting metasearch’s value proposition is that Booking and Expedia can better navigate the CPC revenue model than smaller OTAs or direct booking sites. As a result, more than three-quarters of the revenue for many top metasearch channels comes from Booking and Expedia.
The value of metasearch engines is diminished because the OTAs’ public rates offered via metasearch are often higher than if the traveler searched directly, as a member of either the OTA’s loyalty program or on their apps, where cheaper rates are more likely to be offered.
Better prices from other sources are even more challenging to come by. An auction forcing high CPCs leads all hotels to raise the room rates offered through the metasearch channels—again, undercutting the value provided by the channels as they do not give travelers access to the best rates.
As such, the business model of running multiple ads using ‘price comparison’ alone does not align well with the traveler’s goal of finding a great hotel with good value or the advertiser’s goal of securing bookings with as low a cost of acquisition as possible, making traditional metasearch channels a lose-lose situation for both.
Simple Price Comparison Marketplaces
Booking a hotel is a subjective choice that requires research to get right. For travelers, price is one of the top criteria in their hotel selections, but it is not the only factor. Metasearch’s core functionality enables travelers to do a quick price comparison on the search results page, and they must click through to the OTA or hotel site to get additional information about the room options, including:
- Room Images– Is it recently renovated? Does it look comfortable and clean? Is it well laid out for my needs?
- Payment Questions – Do I need to pay upfront, or can I pay later? Does the hotel support Apple Pay?
- Customer Support Questions– Does the hotel offer support in my language or currency?
- Detailed Reviews– How are the amenities? What have other travelers like me said about their stay?
In addition, the large metasearch channels do not find the cheapest prices and/or do not highlight them for travelers because they mainly offer ‘public’ rates, which are often limited by price parity agreements. Even when an OTA or hotel site provides a cheaper price than the rest, it must first meet the metasearch auction CPC price to be featured high enough in the search results where a customer would find and click on it.
In short, traditional metasearch offers travelers a ‘click and go’ experience that is not comprehensive enough to enable customers to complete their search or finalize a booking on the sites.
Lack of Customer Retention
Travelers’ online habits have evolved in the past years. This has led OTAs to invest in the growth of their apps and loyalty programs to convince users to begin their search on the OTA (rather than on metasearch). By offering better rates to members and customers using their apps, the OTAs have retained users much more effectively.
Conversely, the traditional metasearch channels offer users no incentive to install their app or sign up to become members of their sites for two reasons:
- Their CPC revenue model financially disincentivizes them to do so because, instead of clicking on a paid ad, the sign-in process adds friction, leading to fewer revenue-generating ad clicks.
- If users do sign in, the auction dynamics change, and they may see better prices. Again, this is counterproductive to traditional metasearch channels’ revenue model as higher bids would be less likely to win the click, leading to fewer clicks and lower revenue per click.
As such, the acquisition cost of metasearch channels must be repaid within the session (hence the CPC revenue model), while an OTA can repay its acquisition cost across the user’s lifetime.
Now, we get to the most important part: With all these innate problems, how can metasearch sites still provide value for travelers and hotels?
Here’s the truth: Traditional metasearch channels are dying, but that doesn’t mean that the utility of an effective price comparison tool is no longer valuable, both to travelers and hotels.
To be successful today, metasearch channels must expand beyond simple price comparison to offer sophisticated OTA functionality. This functionality addresses the diverse needs of today’s travelers and enhances the overall booking experience.
A Customer-Centric Approach
Travelers using metasearch sites aim to find the best hotel at the best value; to be successful, these hybrid booking channels must adopt the same product goal to create a win-win business model.
The best way to do that is to change from an ad-based CPC model – which doesn’t benefit travelers or hotels – and adopt a robust customer-centric strategy using a cost-per-action revenue model based on booking conversions. Given that lower prices convert more often, they are more likely to show higher in the search results, incentivizing hotels to offer better deals.
Integrated OTA Functionality
Like a traditional OTA, this hybrid metasearch model must include comprehensive information about the various accommodation options to empower users in their decision-making process. Travelers can browse room images, understand each offer’s cancellation terms, filter reviews, etc. They can stay on-site to book through the internal OTA or go elsewhere.
At the same time, innovative OTA functionality – such as price freezes enabling travelers to decide on the best hotel, price alerts, membership incentives, incentives to download the app, etc. – are valuable tools to maximize customer retention and customer value.
Transparency & Personalization
When the transparency fundamental to the metasearch model is combined with OTA functionality, conversion and retention rates increase because travelers know they are getting a good deal and appreciate that they don’t need to visit multiple sites to compare prices. We now see OTAs adopting the same strategies, turning their search results or hotel pages into transparent offerings. When they can offer the best price, they rank on top; when they can’t, they tell the customer where they should go to get a better deal, rather than accepting a low conversion outcome and unsatisfied customers.
To become successful, metasearch sites must evolve to a traveler-focused, CPA-based revenue model. This model includes price comparison and OTA functionality to maximize price and product transparency, increasing their value proposition for all audiences. By making these changes, metasearch sites can once again become a trusted booking channel for travelers and firmly re-establish themselves as a sustainable and profitable hotel marketplace.
So, the bottom line is clear: metasearch isn’t dead; it just needs to be reimagined.
To find out more, visit www.vio.com.
Written by Oz Har Adir, Founder & CEO of Vio.com
