As Google’s meta-model becomes increasingly monopolistic Pamela Whitby begins a series on how travel distribution is evolving. Part 1 takes a look at the Google factor
If Google is a travel company, Marriott and Airbnb are morphing into online travel agents (OTAs) and Amazon is, hypothetically, about to become one, could Expedia Group, Booking Holdings or Ctrip be out of business in five to ten years time?
Anything is possible but Abhijit Pal, Expedia’s head of research, thinks that this is highly unlikely. “The travel industry is worth an estimated $1.4 trillion and although we are the largest online travel agency by gross bookings our share of the pie is still rather small,” he says.
Although Expedia’s gross bookings continue to rise – by 11% to $2.5 billion year-over-year, according to third-quarter earnings published last week – Booking Holdings remains the biggest revenue spinner, and has the strongest operating margins (36.7% vs just 5,69% at Expedia). Meanwhile, China’s Ctrip remains the fastest growing, according to a recent report from EyeforTravel.
But Pal is optimistic and, if anything, he believes there is plenty of room for growth, and there may even be space in the market for as many as five global OTAs. “We are still growing phenomenally well with double-digit growth,” he says.
In an earnings call last week Expedia’s new group president and CEO Mark Okerstrom echoed this optimism: “You hear, ‘Is the industry fully penetrated?’ The answer is not even close”.
The platform evolution
Recently, Okerstrom has described Expedia’s new strategic vision as “putting the ‘A’ back into OTA” – in other words, delivering an old school style travel agency service. In this, Expedia is not alone. In fact, the strategic shift and race to become a two-sided, vertically integrated travel market place, a la Amazon and Netflix, is aggressively underway at both Expedia and its main rival Booking Holdings. Their goal: to offer a one-stop-shop to everybody from Joe Traveller to hotel chains, big and small, independent hotels, airlines, car hire companies, tours and activities and more.
This evolution of the OTAs strategy has come in response to fierce competition, not least from the likes of Google and Facebook, growing regulatory pressure, which has led commissions to fall, and shifting consumer behaviour.
