Make no mistake – the entry of Amazon into the online travel business could have far-reaching consequences, especially for the powerful online travel agency incumbents.
The e-commerce giant’s widely anticipated but as yet unseen move into the industry could give it a baseline $600 million profit on an annual basis.
In addition, Google could see its travel ambitions under threat from a range of tactics that could be deployed by a company that already has 300 million estimated and engaged customers.
These are some of the views of one of the leading finance houses, Morgan Stanley, in a report to investors in March.
Equity analyst Brian Nowak says the travel industry has far “proven to be immune” from Amazon but, equally, the company has a track record of testing, struggling and learning what to do when attempting to throw its considerable weight behind a new venture (it eventually acquired Whole Foods, for example, to target food retail).
Morgan Stanley believes a combination of established scale in its customer base and an ability to disrupt the economics of the online travel business could give Amazon a “foundation to compete in online travel.”
The note estimates that ad efficiency is heavily weighted in Amazon’s favor, with spend and transaction rates in the region of $0.75 at a “fraction” of what Expedia Group and Booking Holdings spend.
The two online travel agency groups spent a combined $10.6 billion on marketing and sales in 2018.
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