Amazon’s previous attempt to penetrate the online travel industry has been unsuccessful. However, things may look different this time around as the retail giant have now two significant advantages in their hands, customer loyalty and its massive scale.
It will be Amazon’s second attempt to penetrate the travel industry after Amazon Destinations and Amazon Local failed to gain traction from its users.
Morgan Stanley analyst, Brian Nowak, estimates that at least 300 million Amazon customers are willing to spend their money on a potential travel offering.
He also notes that other online travel companies such as Expedia and Booking pay at least $620 million a year to obtain their international hotel inventories.
In comparison to Amazon’s projected revenue of at least $233.4 billion this year alone, it would only be a tiny investment for the eCommerce company to gain access to this inventory.
“Further, Amazon’s focus on selection/service, pricing, and frictionless payment that drive conversion and stronger user economics also translate directly to travel”
Morgan Stanley Analyst, Brian Nowak
The company’s virtual assistant Alexa has several features that can help users find flights, rent cars, and even hotels. The voiced assistant may also provide real-time flight status updates and remote hotel check-in, making it ideal for people who are traveling.
Nowak expects that the U.S. travel market will reach $480 million. He also added that the retail eCommerce giant could create $600 million worth of revenue in one year if it decides to build a business dedicated to online travel.
Amazon Prime members have grown exponentially from 54 million in 2015 to at least 90 million in only two years.
As the expansion continues, the idea of introduction Amazon Prime discounts for hotels and airline tickets can boost its revenue, gaining even more popular than traditional OTAs such as Expedia and Booking.
However, the big prize for Amazon could be the cruise industry. It is estimated that by 2027, travelers will spend over $57 billion annually on cruises.
Unlike airline tickets that have virtually zero margins, cruises lines still pay good commissions to travel agencies.
Prime Members could gain access to special negotiated discounts on cruise lines and the online retailer would get a nice cut from these bookings.
Better Opportunity for Small Independently Owned Hotels
Amazon’s attempt to penetrate online travel can be great news for most independently owned hotels. Amazon’s focus on frictionless payment can also translate directly to travel, Nowak wrote.
Other opportunities may exist for marketplace sellers that offer items for travelers.
With the company becoming the third largest digital marketing platform, marketplace sellers may find synergies in advertising on travel pages.
At the moment there is no firm announcement by Amazon to enter the travel industry. It is all a bit speculation driven by Morgan Stanley analyst Brian Nowak.
But it would make a lot of sense!
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