Google enters hotel booking business

Earlier this week, Google Inc. licensed the hotel booking software from Room 77 Inc., which is backed by Expedia. As a result, many of Room 77′s engineers will join the Mountain View-based company’s hotel search team, reports U.S. Finance Post.

Google will add more reviews and photos to its hotel listings to make sure that its listings are on-par with travel search sites like Expedia Inc., Priceline Group Inc., and TripAdvisor Inc. The Internet giant is aggressively promoting its ‘hotel-price ads’ that show room rates directly on the search page.

The idea is to encourage travelers to plan more of their trips directly on Google. In the process Google gets them closer to making a booking, which experts expect will make referrals more valuable, prompting travel agencies and hotel operators to pay more for clicks on Google ads over time. It also encourages more hotel operators to place ads on Google directly, bypassing online travel agencies that charge commissions of up to 25 percent, reports the Wall Street Journal.

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But the move is risky: Online travel agencies are among Google's biggest advertisers. Priceline Group will spend more than $1.5 billion in 2014 on Google advertising and Expedia could spend another $1 billion, mainly to attract hotel bookings, estimates RBC Capital Markets analyst Mark Mahaney. Those two alone could account for nearly 5 percent of Google's ad revenue this year, Mahaney estimates, even though the company has over a million advertising customers.