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Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google has recently launched a new online travel app called Google Trips. Investors in online travel companies reacted negatively to the announcement, as shares of TripAdvisor (NASDAQ: TRIP), Priceline (NASDAQ: PCLN), and Expedia (NASDAQ: EXPE) declined after news hit the wires last week.
Let's take a look at the recent move from Google in online travel services and what it could mean for other companies in the industry.
What is Google Trips?
Google Trips is basically a tool to help travelers organize and plan their trips. Google defines Google Trips as "a personalized tour guide in your pocket." The app offers different categories of travel information on 200 main cities around the world, including day plans, reservations, things to do, and food and drink recommendations based on historic visits by other travelers.
Travel itineraries can also be personalized; travelers can modify the schedule according to specific preferences and time constraints. For example, if you want to visit a particular attraction, Google Trips offers different alternatives for other things to do and see near that destination, so that the trip can be planned more efficiently.
Google Trips also integrates information from Gmail and Google Maps, which makes accessing that information easier and simpler. Keeping track of data regarding flights, hotels, and car rentals in different places can be quite a hassle. Google Trips automatically gathers all of that information from Gmail and Maps, and it organizes the data into the travel schedule.
Importantly, the full application is available without Wi-Fi or data connections, and travelers can download the itineraries and reservations to their smartphone. This can be an important advantage for travelers on the road, or those visiting countries where connectivity is limited and unreliable.
Turbulence ahead for online travel companies
Google is one of the strongest companies in the online world: The tech giant has an enormously valuable brand as well as access to massive financial resources and all the information it collects from its users. Across its portfolio of products, Google has seven different services and applications with over 1 billion users each: Google Search, Android, Maps, Chrome, YouTube, Google Play, and Gmail.
Considering these strengths, Google could make inroads into online travel if the company aggressively markets Google Trips. This could be a problem for TripAdvisor, while investors in Priceline and Expedia may also want to keep an eye on the competitive dynamics in the sector.
TripAdvisor is more vulnerable to Google Trips than Priceline and Expedia because the latter companies have different business models and strategies. TripAdvisor is originally an online travel metasearch platform, making most of its money from online advertising. More recently, TripAdvisor is expanding into online travel services with its new instant booking platform, which allows users to make reservations directly through TripAdvisor as opposed to being sent to online travel agencies like Priceline or Expedia for their purchases.
In addition, a big part of TripAdvisor's competitive advantage in the industry is based on the reviews and information it can offer to customers who visit the site and the mobile app. As of the second quarter of 2016, TripAdvisor features 385 million reviews and opinions on 1.9 million accommodations, 4.1 million restaurants, and 690,000 attractions. Many users also rely on TripAdvisor to access travel guides and tours created by other travelers. There is thus a clear overlap between TripAdvisor and Google Trips in many areas.
As for Priceline and Expedia, Google Trips doesn't look like such a big threat for online travel agencies, as the new app from Google does not offer online hotel reservations. As long as this remains the case, the competitive impact from Google Trips on online travel agencies should be modest. Both Priceline and Expedia spend big sums of money on Google advertising, so Google may want to be careful not to hurt its relationship with online travel agencies too much with this new venture.
When Google moves, people notice. For investors in online travel companies, Google Trips is an important potential risk to watch.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Andres Cardenal owns shares of Alphabet (A and C shares), and Priceline Group. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Priceline Group, and TripAdvisor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.