Google closes commission bidding (CPA) Metasearch.

Did you see this article? Google kills metasearch commission bidding (CPA): what next for hotels? (triptease.com)

There are 2 questions from this article

1. "What comes next" with Google hotel ads CPA bidding closing.
2. CPC, tROAS, Performance Max how can these replace CPA for hotel ads

Perspectives - Publishers perspective on change

1. Impact of Commission Bidding's End: Hotels are accustomed to leveraging Google’s algorithm for bid management now confront significant changes. The end of commission bidding demands a strategic pivot.
2. Shift in Google's Charging Model: Previously, Google billed hotels post-checkout/stay. This change necessitates hotels moving towards alternative advertising strategies, likely involving upfront ad spend commitments, thus increasing their exposure to risks like booking cancellations.

Heres my take on the changes

1. This move could be termed as the end of "lazy" or predictable profit bidding. CPA system allowed hotels to engage in bidding without a strong need to optimize for profit or strategically manage their share of voice. It was akin to the OTA commission model we are used to - 15% on the revenue materialized.
2. With this shift, there's a clear indication that hotels must now adopt a more proactive approach to managing their online presence i.e. Bid for traffic either using the tROAS model, or using the mCPC model under Google smart bidding.

1. The tROAS (target Return on Ad Spend) model aligns well with the commission process. It allows you to set a maximum amount you're willing to pay per conversion. For example, if you're dealing with OTAs (Online Travel Agencies) at a 15% commission, meaning your cost of distribution is INR 15 for every INR 85 revenue booked, the equivalent tROAS is 5.67%. However, it's important to note that while tROAS sets a cap on what you'll pay for a conversion, it doesn't guarantee conversions. This model is effective in a low-bid market, offering good volume and cost benefits. But as the market matures and Cost Per Click (CPC) increases, a cap at 5.67% tROAS may not sustain high booking velocity.

Key Points:

• Apple to Apple The tROAS model incurs a higher initial ad spend than the effective CPA cost, due to its inclusive charge for all ad engagements, including those leading to cancellations
• BUT While tROAS looks riskier than CPA, we are missing the point on the Profit per booking opportunity. If the OTAs were converting at 5.67 tROAS (Equivalent to 15%) they have obviously margins involved.
• Hotels now have the opportunity to Operate both tROAS and Manual CPC in parallel and work a structured approach to Mixing CPC and CPA campaigns based on the AOV, Product type, traffic type, and more.
• The decision between CPA and tROAS depends on a hotel's capability to manage the higher upfront costs and risks associated with the tROAS model, balanced against the strategy for marketing and handling booking cancellations.

The other alternative - Pmax for Travel ads

Performance Max for travel goals is a specific type of Performance Max campaign designed for hotels and other accommodation providers to drive more direct bookings via Google Ads.

• It's a goal-based campaign type that simplifies the advertising process while leveraging Google's powerful AI for optimization.

Key Features

• Reach Across Google's Properties: Ads appear throughout Google's channels, including Search, Display, YouTube, Discover, Gmail, and Maps.
• Property-Specific Asset Groups: Easily create unique ad groups showcasing individual properties, with pre-populated images and text (pulled from your hotel profile information).
• Automated Targeting: Google's AI finds new guests looking for properties like yours. It also offers the "Travel Made for You" audience hints that use hotel attributes to improve audience matching.
• Simplified Property-Level Reporting: Provides reports about the performance of each property within the campaign.

Benefits

• Drive More Bookings: Specifically created to get those "heads in beds" by showing ads and offers to highly relevant travelers in the planning phase.
• Operational Efficiency: Frees up resources previously spent on manual campaign management. The AI manages bids, audiences, and formats.
• Greater Reach: Opens up potential new guests searching across different Google properties that you may not have considered before.
• Adaptability: Google's AI continuously improves performance based on user behavior, ensuring optimization on-the-fly.

PMAX and how it Works / Combines with tROAS

Performance Max, including the travel goals variant, offers the option to use Target ROAS (tROAS) bidding. Instead of a direct commission or CPA, your target is based on return on ad spend:

• You set a tROAS (e.g., for every $1 in ad spend, you want to see $6 in bookings).
• Google's AI manages bids and targeting to try and achieve this goal.

Addressing the Points About Risk & Training.

1. Upfront Spend vs. Post-Stay Commissions: Performance Max (and similar models) often lean towards more upfront spending versus the purely post-booking commission model of older systems. but this is an easily reversible pay as you go, risk.
2. Cancellations: Limit cancellations by tightening up your booking engine e-commerce payment gateway by automating the user authentication don't leave room for offline charges.

Training is an Important Considerations

• Online surveys show that 3- 6 months is what takes to get the Google ads on a positive ROAS.
• Revenue& Budget Management: Careful budgeting and tROAS monitoring (product . asset/ geo location/customer segmentation and combining with CRM are essential to control your risk/reward balance.
• Data Quality: The success of AI-driven optimization highly depends on the quality of your data (images, descriptions, etc.) Blend automated ad creation with manual ones to get the right mix, I would recommend hotel focussed CMS and Conversion rate optimization software to ensure the on-page is working at its best.
• Nothing is a 'Set it and Forget it' Solution: Performance Max simplifies things, but still requires supervision and strategic guidance. Not tROAS, PMAX, IBE, SEO, none of it. https://boomcycle.com/googles-helpful-content-update-hcu/