Google Hotel Ads Billboard Effect

I recently published the results of a field experiment that I ran with the help of  ThinkReservations a hospitality tech stack solution provider. The full paper is available at the Cornell Quarterly with an AI summary below.

Google Hotel Finder (GHF) has become a dominant platform for hotel search, handling a significant share of hotel booking revenue from search engines. When consumers search for a hotel on Google, results typically include sponsored ads, organic results, and GHF listings. Within GHF, hotels can appear in the organic (“All options”) section for free or purchase advertising to appear in the sponsored section. Hotels not participating in GHF but allowing OTA bookings can still be booked via OTA links. Hotels prohibiting OTA bookings and not participating in GHF will list no booking options.

The study used a switchback field experiment involving 26 independent boutique hotels over 16 weeks to investigate the impact of different levels of GHF participation on consumer behavior, demand, and booking channels. The three treatment levels were:

• • OFF: No direct booking link on GHF (OTA links might be present).

• • ON: Direct booking link appears only in the organic (“FREE”) section (typically ranked highest).

• • PAID: Direct booking links appear in both the sponsored (“PAID”) and organic sections.

The research examined click and purchase behavior using Google Analytics data, as well as total hotel booking data to capture bookings made through direct channels or OTAs.

Key Findings Related to Search Ads and Demand:

1. 1. Cannibalization but Increased Total Traffic: Paid advertising in GHF significantly cannibalizes clicks on the organic (free) link. When a hotel was in the PAID condition, the click-through rate (CTR) of its organic link decreased by 70% compared to the ON condition. However, the sponsored link received an average CTR of 5.9%. Overall, paid ads generated an average 84% increase in total traffic (clicks) to the hotel’s booking links.

1. 1. Lower Conversion Rate from Paid Clicks: Searchers who clicked on the sponsored link had a significantly lower conversion rate than those who clicked the organic link in the ON condition. However, the net effect of increased traffic and lower conversion rates from paid ads was still a positive, leading to an estimated 41% increase in bookings generated through online search based on Google Analytics data.

1. 1. Total Demand Shows a Larger Effect: Analyzing total booking data (including direct and OTA bookings), the study found that sponsored search ads led to a significant increase in bookings and nights booked compared to both the ON and OFF conditions. The demand model estimates suggested a larger effect than the Google Analytics analysis alone, showing approximately 3.36 incremental bookings from paid search ads per week based on average future availability.

1. 1. The “Billboard Effect” in GHF: The difference between the effects seen in the Google Analytics data (which only tracks conversions directly attributed to Google) and the effects seen in the total booking data suggests a “billboard effect”. This means that the presence of ads influences bookings on other channels or at later times, even when those bookings aren’t directly attributable to the ads on Google. Essentially, appearing in sponsored listings might enhance consumer confidence or signal quality, making them more likely to book the hotel later, potentially through different means.

1. 1. Participation Increases Direct Bookings Overall: Displaying a direct booking link on GHF (ON vs. OFF) increased the average probability of direct bookings. While the difference was not statistically significant, it is considered advantageous for hotels to participate on GHF even just in the organic section due to minimal cost and potential increase in direct bookings.

1. 1. Paid Ads Increase Total Bookings but Shift Channel Mix Slightly: In the PAID condition, the expected number of total bookings increased compared to the ON condition. However, the share of direct bookings slightly decreased in the PAID condition compared to the ON condition (from 89.9% to 88.3%), although it remained higher than in the OFF condition (88.2%). Despite the reduced share, the total number of direct bookings still increased in the PAID condition because total demand was higher. The analysis indicated that roughly 78% of the incremental bookings generated by paid ads came from the direct channel.

1. 1. Revenue Optimization: Participation in GHF (ON vs. OFF) generates higher revenue for hotels by increasing demand and shifting bookings to lower-cost direct channels. Although paid ads introduce costs, they drive sufficient incremental revenue when capacity allows. Paid ads are optimal for hotels with low exposure (lower impressions). However, at higher levels of impressions, additional paid clicks may not result in revenue gains due to capacity constraints, making paid advertising less advantageous beyond a certain point.

In summary, while paid ads on GHF cannibalize free clicks, the study’s total demand analysis suggests they contribute to a broader increase in bookings, possibly through a “billboard effect” that influences consumers beyond direct clicks and attributed conversions. Participating in GHF, even just with a free listing, is beneficial for driving direct bookings, and paid ads can be a valuable tool for increasing total revenue, especially for hotels needing more visibility, provided capacity is available.