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News Details

Amazon's Influence on Online Travel Agencies

A recent analysis of Amazon's ability to disrupt online travel agencies by Morgan Stanley was recently in the news with a number of opinion articles on the subject being published.

"Online travel has proven immune to Amazon disruption so far.

But as we have seen with other categories, that doesn't mean Amazon won't try again, and they should.

Amazon's focus on selection/service, pricing, and frictionless payment that drive conversion and stronger user economics also translate directly to travel," said analyst Brian Nowak from Morgan Stanley.

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Many hospitality industry experts chimed on the subject, with opinions ranging from complete dismissal to panicked predictions about doom and gloom for the very harmonious online travel marketplace.

This is not the first time it was predicted that Amazon would try to tackle the online travel space. Back in 2013-2015, Amazon attempted twice to enter the online travel space with its ill-conceived Amazon Local, which relied on flash sales, and its short-lived Amazon Destinations, relying on the merchant model and manual upload of inventory availability and pricing by hoteliers. Needless to say, neither of these attempts proved successful among travelers or hoteliers. In January 2015, an opinion article was published, , in which it was concluded that they shouldn't worry, at least for the time being.

These reasons for failure are as valid today as they were back in 2015. Today, compared to 2014 and early 2015, the global online travel marketplace has evolved significantly, and after the wave of OTA consolidations over the past several years, is ruled by a virtual triopoly: , Expedia and Ctrip.

In order to successfully establish itself as an online travel player, Amazon needs to not only successfully overcome its deficiencies as described above, but also tackle new barriers to entry.

Overall, by an organic entry of Amazon into the online travel space. As mentioned above, it would take Amazon unsurmountable efforts and resources to build an OTA type of retail travel product from scratch.

However, if Amazon decides to buy an existing OTA player and build a global travel retail empire on this new acquisition's platform, then . For example, Expedia could be one such acquisition target. In today's world, with $17.4 billion market capitalization, Expedia is on the smaller size, especially compared to Booking Holdings' market cap of $105 billion.

Amazon knows how to drastically improve website user experience and conversions, how to upsell and cross-sell, and how to be efficient at low margins. By integrating its retail offerings into Expedia's fabric, Amazon could potentially change the online travel consumer marketplace.