Travel

#Competition Is Shaking Up The Online Travel Market

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The online travel agencies (OTAs) had gross bookings exceeding $150 billion in 2013, representing 38% of the global online market and 13% of the global travel market. The online travel sales figure is estimated to be growing at 12% annually. OTAs have 15% of total hotel sales in the U.S. with around $19 billion of gross bookings and are expected to grow 5-6% over the next two years. OTAs customer segments span across business, leisure, and group. OLT websites play multiple roles, acting as marketing engines, booking engines, and search engines, as well as existing as an execution platform for customers.

The global leaders in this space clude: Priceline and Expedia. which individually sell more than 22 million and 12 million hotel room nights per month, respectively. The world’s largest travel review platform, TripAdvisor receives 315 million monthly unique visitors. on its website.

With such prospects for growth, it is hardly surprising that the OTA market space is currently at its dynamic best! While the existing players are continuously expanding through strategic alliances and investments, there is a simultaneous influx of established names (known for their disruptive forces), into the online travel domain.

In this article, we discuss three companies who are gearing up to provide competition to the existing leaders in the coming month.

Amazon: The Online Retail Behemoth Wants A Piece Of The Travel Pie

Amazon has decided to compete in the OTA space. Amazon’s travel platform is expected to go live on January 1, 2015 and it will initially focus on a curated selection of hotels within driving distance of New York City, Los Angeles, and Seattle.

Amazon’s competitive advantages are numerous, including:

• Amazon’s network of global websites is frequented by a ready pool of individuals using the site to buy retail merchandise. Consequently, its advertisement expenditures for its travel related services, through platforms like Google AdWords should be minimal. Also, Amazon has the advantage of cross selling its travel related products/services to its existing customer base.
• Initially, Amazon would opt for a 15% commission to attract more hotels on its platform (as against the prevalent 20%-25% commission).

Presently, Amazon is playing by Porter’s rulebook of acquiring competitive advantage through: 1. Cost Leadership and, 2. Product Differentiation. Not only is it opting for a lower commission, Amazon is also targeting independent hotels and resorts, which do not have a major presence in the traditional OTA platforms.

On the flip side, Amazon’s diversification across several services might be the reason for its fallout, as the major OTA players are focused on providing solely travel related services. Amazon had earlier tested the OTA waters, but with little success. The company forged alliances with Expedia in 2001 and Sidestep in 2006, but those ventures didn’t prove profitable.

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