One of our members recently sent me a copy of an article written by the Wall Street Journal’s editorial board (“Google-Hotel Travelopoly”) about Google and hotels not playing fairly with online travel agencies (OTAs), such as Expedia, Travelocity, etc. Here is the gist from the WSJ perspective (my comments in parentheses), and please stick with this until the end. There is a message for the golf industry.
Hotels are complaining that OTAs, which make about 20% commission on each room booked, have begun squeezing profits from hotels, due in part to the rise of competition like AirBnB. (Wait…what? Seems the editorial board needs a history lesson. Considering that OTAs get 20% of the revenue of booked rooms and simultaneously facilitate discounting – and the resulting downward pressure on room prices – I’d say profit squeezing has been a permanent fixture in these relationships.)
OTAs place a heavy focus on discounting, even in high-demand situations.
Because of this squeezing, hoteliers are running to Google for assistance, since 60% of travel searches begin with Google, and Google is already a “frenemy” with the OTAs. Apparently now, Google and the hotels (the ones supplying the actual inventory to be sold) are both trying to use each other to benefit each other, possibly at the expense of bookings to the OTAs. The hope is that the hotels will yield more direct bookings from online search. (If you’re the hotelier, it’s hard to blame you for that.) Among other things, hoteliers are asking for Google’s help in preventing OTAs from using their hotel names in branded keyword advertising. (In other words, hypothetically, imagine Enchanted Evening Hotel in Springfield, IL, is trying to limit an OTA from advertising around the search term “Enchanted Evening Hotel in Springfield, IL.” A hotel, which might have to pay 20% to an OTA, doesn’t want the OTA to siphon off bookings from people who already know they want to explore and possibly stay at Enchanted Evening. Seems reasonable, no?)
OTAs are complaining they can’t use Enchanted Evening’s brand in certain ways in the URLs and ad titles that appear in the search results. (OTAs have a long history of trying to redirect travelers, who think they are going to Enchanted Evening’s website, to the OTA’s own listing of Enchanted Evening to book. Even if Enchanted Evening doesn’t sell rooms on the OTA anymore, they still have used clever bait-and-switch tactics off of Enchanted Evening’s brand. Some might call this fair game, but others don’t like such practices of marketing partners.) The OTAs, and the WSJ, believe this is all stifling competition, because it may be tying the hands of the OTAs.
So, that is what the Wall Street Journal editors think. One thing is for sure. Even though the hotel industry is ten years ahead of the golf industry with regard to online booking, they still haven’t figured out how to play well in the sandbox together. Because, ultimately, the hoteliers are willing to pay 20% for marketing and booking services, but not for the bookings they would reasonably have received without the help of the OTAs. And another thing is for sure. The marketing ground continues to shift under everyone’s feet. Whether it is Google or the OTAs that capture the attention of the consumer – and dollars from the merchant – course operators need to “stay woke” on these matters in our own industry.
There was a day when marketing your business felt 100% in your control. But it seems you can’t even be in business today, unless you’re dancing with the big boys. Small businesses can feel subject to or victim of the march forward of the big boys in the online marketing world. My advice? Play ball only if the terms are advantageous for you…capture data and get OBJECTIVE professional help to determine if it’s a win-win for you…and develop the strongest possible, one-on-one relationship directly with your customers. To carry the analogy one more step, if you’re going to dance with the big boys, be sure you are the one leading.
I shared the WSJ article with a few golf industry opinion leaders and practitioners in the online space, asking them to complete the sentence, “And the moral of the story for golf course operators is…”
Here are are the responses. If you have thoughts on this, feel free to add your comments below.
Bryan Lord, TeeSnap
Only you care most about your business. Any marketing company, OTA or GDS will put themselves ahead of the clients they represent. OTA’s are tools, like anything else. If you solely rely on someone else to run your business for you, the results will rarely be as significant as you taking control of it. The key is to keep limited inventory on OTAs solely for new customer acquisition, then market directly to that consumer subsequently.
Scott Merchant, Golfbook
While online golf (tee times) and online travel (flight, hotel, car) isn’t an apples-to-apples comparison, there are good lessons to be learned through what is happening in their space. First, golf courses should spend more time and resources than anticipated on their online marketing strategy. Consumers are naturally migrating online for all of their purchasing decisions, and the golf course should be reacting to this change. Second, be prepared to adjust your strategy. What is true today might not be true tomorrow, as the travel OTAs and hotels are finding out. Third, Google is a powerful force in shaping consumer behavior. Their strategic changes will directly impact your business, so be alert to how their marketing platform works.
Jared Williams, Golf USA Tee Time Coalition
Pay close attention to Google. While all of the attention is on the business practices of online tee time agents, Google is and has already been exploiting its market dominance in the lodging and airline industry– we’ve seen that with Google Flights and Google Hotels. What is going to happen when Google becomes a competitor to the GolfNows and TeeOffs? Google could soon be a problem for both course operators and online tee time agents. If Google starts taking tee time reservations, they become rivals to the tee time distributors. Google already auctions ads to the highest bidder–typically a tee time distributor. The tee time distributors would probably rather not pay Google, but their business requires such. Golf courses don’t want companies bidding on their trademarks (whether they have contractual relationships with those companies or not). Perhaps this is an opportunity for the golf course and online tee time agent to come together and truly act like partners. Google isn’t doing anything to address these issues. Maybe we look to Amazon and eBay as an example– rather than competing against each other for adwords, they simply stopped giving money to Google (as it became more of a rival e-commerce site). Imagine what customer service and course management software would look like if the tee time companies took the money that they spend with Google and used it to make the golf course operation more efficient.
Rick Robshaw and Tom Robshaw, Club Prophet Systems
As an owner/operator, you simply can’t do it all. Whether you outsource the entire thing to a management company or you outsource given tasks to service providers — you will always have 3rd party vendors (in addition to employees) to help you get the job done. You need to do a cost/benefit analysis for that service and don’t forget to factor in opportunity costs and if that service is helping or hurting your business. Sure, you may be at the top of the Google search page, but is it returning enough profit to exceed what you pay for the listing? Are your customers now being targeted with sidebar and pop-up ads for one or more of your competitors? It can be as obfuscated as the barter argument. Sure, it costs nothing to give up those two hard‑to‑fill tee times. Then you turn around a year later and find your $65 golf course is now a $35 golf course. You have given away hundreds or even thousands of rounds. You are twice as busy as you were before but you are making half the money. You look back at what appeared to be a great idea while you are forced to dig in further just to pay the bills and you still have another year under contract with no way out. Don’t get trapped in long‑term contracts that can put you in a death spiral. Do your research with others who have gone down this path. Make service providers accountable for providing a return on the investment you make with them. Do not sign term agreements if possible. If you have to, at least insist on a fair way out of any and every service contract if the deal goes upside down.
JJ Kegan, JJKeegan+
While I understand the relationship to the golf industry’s bandits, I pondered the degree to which there would be a direct statistical correlation to the individual golf course owner. At a macro level, there is a correlation but I think at a micro level it breaks down. National brand recognition, historical capital invested, availability of debt & equity sources, sophistication of technology utilized and the loyalty programs established are differentiators to the individual golf course operators. Meta searches and auction ads are far beyond the intellectual grasp of the individual golf course owner and most management companies (sorry).
Andrew Wood, Legendary Marketing
The moral of the story for golf course operators is and always has been that the most important thing other than your ability to grow grass, is building a large proprietary email database. Third party vendors who provide websites do a shockingly poor job of helping clubs build their databases because its NOT in their best interest. Owners who fail to realize this are dumber than a rock! Clubs that spend the vast majority of their marketing on building a large email list and to a lesser extent a Facebook following are in a far better position to drive revenue than those that spend their money trying to drive revenue in other ways. This of course assumes that the content they send via email is not just mindless discount offer after discount offer and includes some real value to the reader whether or not he wants to take advantage of the offer that day.
Laura Dihel, EZLinks:
Choose good partners. Do the math. Though parallels are often drawn, the golf and hotel industries are remarkably distinct. While we share challenges such as variable pricing and expiring inventory; our consumer behavior patterns, the variance in the number of global brands and our third-party relationships are fundamentally different. It is important that golf course operators do the math when evaluating marketing partners rather than assuming symmetry between industries. The Google meta-search program provides a great example of why doing the math is important. Commission rates in the hotel industry for online travel agents range between 20 – 35%. These rates make the 10% Google meta-search commission an appealing alternative despite the fact that hotel operators have to provide Google with their best website rates and that commission is charged on cancelled reservations. Golf’s leading pay-for-performance travel agent, TeeOff.com by PGA TOUR, features a commission rate of only 15% for rounds booked and played (no charge for canceled rounds). With online tee time cancellation rates hitting double digits for many courses, the fact that commission is only due for rounds played is an important variable. TeeOff.com’s business model ensures it functions as a partner to golf course operators. With each reservation made, TeeOff.com provides consumer data to the course, including golfer email addresses, and ensures course partners stay in 100% control of their pricing. Partners should drive value. Choose good partners and do the math are foundational truths to building a great business.
Harvey Silverman, Silverback Golf Marketing:
Google as the dominant search gorilla in the room makes golf’s dominant search entities – GolfNow, TeeOff, and Golfbook– look like embryonic chimps. However, both GolfNow and TeeOff take advantage of what Google offers by purchasing ad words and course names to elevate their own URLs in golf search functions. Just like the major hotel players, they have the capital to do so and most golf courses…don’t. A general rule of thumb is that golf courses should budget 5% of annual revenue to marketing. I’ll bet about that same percentage – 5% – or less actually do. The moral of the story is first – protect your brand by trademarking it. And second, find a way to budget 5% of revenue to marketing and find the right marketing partners to stretch those precious dollars for maximum return. To not do either is to succumb to an ugly fate.