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Given the circumstances and the numerous articles and posts published in the last days on the Digital Markets Act (DMA) and Google’s announcement on a SERP ten day test/experiment to measure the DMA in Germany, Belgium and Estonia, I would like to share my own personal take on the situation.
I will elaborate based on my understanding of the travel and hotel distribution ecosystem, after 25 years in this industry working in different capacities. Interestingly my tenure has been divided in 3 different periods, relatively evenly distributed in terms of time, amongst leading players in different segments:
- OTA: 8 years at Expedia
- Google: 7 years at the leading search engine – focusing on travel solutions
- Hotels: 7 years in hotels/marketingand technology applied to hotels at Iberostar H&R and at Mirai
The experience gathered through these different gigs has procured me a well rounded perspective on the topic.
Introduction
The DMA is a complex law, aiming to solve a complex issue.
Since its inception, it has been very ambitious. Any law that aims to cover a vast, multi faceted and complex issue, like the digital markets, with a blanket approach will, by definition, face many challenges.
Let me start by saying that, in my humble opinion, the DMA regulation is needed and positive for the digital ecosystem. The difficulty stems from its interpretation and finding the right balance for all the stakeholders involved. In the context of this analysis the key stakeholders are:
- The European consumers (travelers)
- The hotels (as advertisers)
- The intermediaries (OTAs and other incumbents)
If we analyze how the travel industry has evolved over the last fifty years, we can conclude that the most dynamic area of the complex and ever-changing ecosystem is distribution. Over a year ago, we published a post on the evolution of travel and the importance of distribution within this industry.
Traditionally, intermediaries (Tour Operators, OTAs, bed banks and other forms of intermediation) have played a key role in distribution, as they controlled demand, that was their key value proposition: access to the traveler.
Since the turn of the century, we have witnessed a revolution in the way travelers and travel suppliers/service providers (hotels, airlines and rent-a-car amongst other stakeholders) have evolved in the way they interact.
Most travel suppliers have developed their ability to understand demand and address it directly. Travelers have understood that the best product offering and purchase experience should be found on the direct supplier outlets (web, contact center or social media) when the incumbent has a clear B2C strategy and adequate levels of investment and focus on the final customer plus the required technology and marketing budgets.
The historic overreliance of the travel supplier community on intermediaries stemmed from the fact that most suppliers did not consider B2C sales and customer knowledge a core competence. Conversely intermediaries made understanding and selling to the traveler their core competence. As a consequence, OTAs like Expedia, Booking and others, became category killers in the travel ecosystem. Their power was financed by travel suppliers commissions on a pay-to-play basis.
Some intermediaries, through laser focus on building supply, precise execution, superb use of technology and marketing, plus incredible customer focus and brand management, have built world class leading distribution platforms. One of the most prominent and successful in its field is Booking.com. No discussion on this.
Only those intermediaries who add value through honest product management operating with transparency and fairness will thrive. This is not always the case.
Let’s go back to the DMA origin
The main purpose of the DMA is to make the digital market fairer and more contestable. Such a laudable objective includes the definition of gatekeepers (large digital platforms providing so called core platform services) and defines a regulation which complements the existing EU competition rules.
In a context like the travel industry this law is particularly relevant, as the stakes are very high: the amount of money derived from a commission is very significant, especially in very strong market conditions in terms of demand (ADR and number of travelers).
The main beneficiary of the DMA application should be the European consumer yet we have seen that, since the DMA application to the first batch of gatekeepers, the impact on Google has curtailed the choice for the European consumers, due to a reduction of the exposure of hotels website vs intermediaries.
At Mirai we have published different posts on this topic (July 23 post, May 24 post, June 24 post, October 24 post).
My take on what’s the main underpinning driver?
I personally believe the main driving force behind is a hidden “arm wrestle” battle between suppliers and intermediaries.
The latter, despite having grown their businesses and industry penetration, have seen a clear and unique opportunity derived from the DMA application:
- Key intermediaries like Booking, Expedia, Airbnb, Amadeus, Sabre, Skyscanner or Travelport have clustered around initiatives like EU-travel-tech to actively lobby and reclaim what they believe is their “lost turf” to Google.
- Google is a leading platform which has developed, through decades of massive investment and innovation, different solutions and subplatforms (Google Maps, Google Hotel Ads,…) that enrich the search experience. As a result, they have been able to maintain a leading position in the search market. The European user, who is sovereign and free through their choice, chooses Google as the ideal solution for search (amongst other services).
- This consumer choice also applies to the search of travel solutions (hotels, airlines, restaurants and other travel related services), an industry particularly rich and complex in terms of data. Let’s not forget that Google’s mission is to organize and make available the world’s information.
- Through time and thanks to the supplier interest and new marketing and distribution formats powered by technology, travel stakeholders have been able to evolve and/or refine their sales and marketing strategies. In this context intermediaries have witnessed how their power around consumer/user control has been contested by suppliers.
In this context the intermediaries, very well organized around the DMA deployment, are trying to force out players like Google from the travel funnel by influencing the European authorities. Beyond the direct impact on Google, suppliers are also directly affected as one of their main visibility outlets is crippled.
A clear example of this is the lobbying effort to remove dates and or prices from Google travel vertical solutions or the direct attack to Google’s DMA interpretation (See the letter to Ursula Von Der Leyen dated last week signed by EU travel tech).
There’s a clear cascade effect, dismantling Google’s vertical solutions the European Commission does not only damage Google, they would damage many industries that operate under their vertical solution umbrella.
It is particularly concerning that we have not seen a coordinated approach from the hotel industry which is particularly atomized in Europe. This is part of the issue: intermediaries are well organized and coordinated under the leadership of non European platforms. What is the hotel industry waiting for?
Conclusion
Within the context of the DMA, Google needs to comply with all aspects of the law, no question about that. The main issue is who and how will interpret the compliance with the DMA.
Google has been and is a partner to many businesses and plays a key role in the travel industry. It must be subject to all laws and regulations that foster a better digital ecosystem.
On the same token, travel intermediaries, specially gatekeepers, shall be subject to thorough control and scrutiny from the European Commission through the DMA.
So far, the intermediaries, through different lobbies, are harnessing the opportunity derived from DMA to change/bend the rules of the game in their own interest.
The European Commission shall weigh the implications for all stake holders keeping the European users and the European businesses at the core of their objectives.
Should the European Commission fail to do so, the implications will be catastrophic and will generate a less contestable/less fair digital market in the European Union. The exact opposite vs the original objective.
Determined and rapid action is of the essence as the changes derived from the DMA interpretation may result in systemic by-law changes that will redefine the rules of the game in travel distribution in the EU.
