Once again interesting times are upon the travel industry.
This week saw Skift run with a story that Amazon are entering the travel industry with the first step into hotels. I must say, this is the least surprising news I’ve heard in a while, it was always just a matter of time. With technology pulling down barriers of distribution it’s an easy move for Amazon. Plug in an extranet, employ a contractor or two and away you go.
Whilst unsurprising, the news remains significant. Hotels will surely be just step one. I see nothing stopping Amazon bringing in other products such as car hire, tickets, insurance and probably flights (although I still believe flights are by far the most difficult sector to enter for a myriad of reasons, not least there is little margin to be had!).
Here is Amazon’s mission statement:
“to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices,”
With that in mind, they’re definitely going into more Travel products. Holidays are more difficult, partly because holiday companies are idiosyncratic by geography. By that I mean there are very, very few holiday companies which operate in more than one country and there are zero truly multinational holiday companies (although Expedia comes close). As a result there is no global solution (yet) which means from an ROI point of view its a challenge for large businesses even Amazon, as development is required for every market. That means lower efficiencies than products which can be rolled out globally. So, single products will be first (Hotels, ticket,s car hire, flights).
However, one must also look east when considering the changing landscape. Alibaba are also entering the market (Taobao is the consumer facing travel brand in China for Alibaba). To place Taobao in context, the business generates almost $2bn per annum in revenues.
It’s big and thats without any internationalisation. In terms of the Chinese market it’s not so big of course. It’s only a matter of time until Alibaba begin to enter more markets.
So, two huge businesses coming into the travel game. I see this as good news but also could be a challenge for some travel businesses. More competition means higher costs for on line advertising. Just like any auction, the more players bidding the higher the costs for the top slots. Different advertising channels are required. I am hoping to help in that area soon.