For the second year in a row, Amazon Prime Day featured several travel-related deals from major brands, including Carnival Cruise Lines, TripAdvisor’s Viator, and Southwest Airlines.
PhocusWire discussed the e-commerce giant’s entry into the travel industry, and rightly asked: “What does the future of travel hold with Amazon? Will the platform become a major player in the industry, and if so, in what way?”
What is your opinion?
Peter O’Connor
Professor of Strategy, University of South Australia Business School
With its massive traffic, incredible insights into customer behavior, and powerful consumer brand, Amazon has the potential to disrupt almost any market it decides to enter. With the possible exception of travel, the unique characteristics of this market mean that Amazon is likely to partner with one of the existing players rather than enter the market directly. Read on to find out more…
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Amazon loves to explore new territories, and the travel industry is no exception. In fact, Amazon tried to do so in 2015 with Amazon Destinations, but it didn’t last long. I believe the best way for Amazon to become a major player in the travel industry is through acquisition. Buying an existing travel company would give Amazon the technology, infrastructure, and expertise to compete with the big players. In my opinion, Expedia stands out as a prime target. With its strong B2B and B2C systems, Amazon would have the technology and know-how to smoothly enter the travel market. Imagine Rufus, Amazon’s AI-powered shopping assistant, trained on Expedia data. The travel booking experience would be seamless for Amazon’s vast customer base. Imagine booking flights, hotels, and rental cars on Amazon and earning Prime rewards. Another option is Trivago. The company’s stock has plummeted 96.46% since its IPO, making it a “cheap” acquisition for Amazon. TripAdvisor is also an option, but its stock price is now less than one-fifth of what it was a decade ago. Bottom line, there’s no denying Amazon’s financial strength. With a market capitalization of roughly $1.87 trillion, these discussions are at least a possibility…
Eric Munoz
Chief Commercial Officer, Lybra.tech
Currently, Amazon has approximately 200 million Amazon Prime members around the world. To put this in perspective, if Amazon Prime were a country, it would be the eighth largest country in the world measured by population.
This massive membership base, or “captive audience,” gives Amazon the market reach it needs to monetize any travel-related product or service.
Frederick Gonzalo
Travel and Hospitality Professional. Digital Marketing and Strategy Speaker and Consultant
When I first saw this topic I laughed because I vividly remember having this discussion in the past. In fact, I even wrote a blog post back in 2014 titled, “Will You Book Your Next Hotel on Amazon?”
Amazon certainly got a foot in the door in travel distribution, but that journey didn’t last long. That was a long time ago, and it’s not the same now. So what has changed 10 years later? From a travel distribution perspective, not much has changed, with major players like Expedia, Booking, Trip.com, and various hotel accommodation banks.
More importantly, Amazon is no longer just a place to buy books and electronics: if you subscribe to Prime, you can find movies, series, and everything else on its platform.
Will this platform become a major player in this industry? The chances remain as great as they were in 2014, if not greater. Amazon can definitely be a player in the travel and hospitality space. But will it be a strong player? To me, this seems like a niche space, too complicated for a big company like Amazon, which thrives on standardization and scalability. But in this industry, 80% of the companies are small and medium-sized businesses.
Lynch Kwok
Professor, Collins School of Hospitality Management, California State Polytechnic University, Pomona
It is clear that Amazon has been on the sidelines for the past two years. Let’s not forget that apart from e-commerce, Amazon is also involved in cloud computing, AI, digital marketing, and other businesses. As a supplier, Amazon already provides IT infrastructure and solutions to airlines, hotels, resorts, restaurants, and related hospitality companies. On the retail side, Amazon also has a wealth of consumer data on consumer purchasing and spending behavior. The global travel and tourism industry is huge, valued at trillions of dollars. It’s too big to ignore. But does Amazon want to build an OTA or a new travel marketplace from scratch? Perhaps it would be much easier for Amazon to acquire an existing OTA if it eventually decides to enter the market.
67% of US internet users subscribe to Amazon Prime. With its massive customer base, powerful e-commerce platform, and data-driven approach, it is clear why Amazon’s audience is an attractive distribution channel for the travel and hospitality industry. Over the past few years, we have seen traditional retailers make inroads into the hospitality industry. Costco Travel and Walmart+ Travel are both well-known examples of retail giants using their platform for exclusive member-only travel. Amazon’s biggest advantage outside of its commission-based model is the first-party customer data it provides. Think about the ability to personalize ads and suggested products, such as luggage, travel accessories, and clothing, before a trip. This is an advantage that Amazon has that other retailers cannot replicate. Due to the complexity and fragmentation of the travel and hospitality industry, Amazon will likely expand its travel offerings for Prime members, similar to what Costco Travel has done, but I don’t think it will go as far as to challenge the “big two” OTAs. So on Prime Day and Cyber Monday, we’ll see more brand partnerships that go beyond cruises and airlines and maybe even branded hotels, and then independent hotels will come in as a sales channel.
Tim Peter
Founder and President of Tim Peter & Associates
There are only two scenarios in which I think Amazon could become a major player in the travel industry.
It will partner with travel providers to acquire key travel brands that offer a wide range of travel benefits to its Prime members.
Amazon’s success has been built on using its logistics network to offer customers fast delivery and a wide selection of products, but its logistical advantages don’t benefit the e-commerce giant in the travel industry, where tour operators — and travelers — don’t need warehouses, fast delivery, or free shipping.
Also, given the sheer number of travel companies using AWS, including Choice, Wyndham, Hyatt, Airbnb, Expedia, Priceline, United Airlines, etc., it seems like Amazon is already “into travel” in a way that best suits their strengths. That said, outside of the two cases already mentioned, I don’t see how Amazon and travelers would benefit from more meaningful inclusion in the travel industry.
Amazon missed its only chance to enter the travel industry because it did not acquire Orbitz or Travelocity when these OTAs were available for acquisition. Now it is too late. The consolidation of the travel intermediation industry has already happened. I don’t see Amazon entering the travel industry organically unless it acquires Expedia, which has a market cap of $18.5 billion. However, many hoteliers would like to have another player in addition to the current OTA monopoly of Booking and Expedia. There are two main reasons why Amazon will not be a major player in the travel industry. Here are my thoughts:
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