For a second year in a row, Amazon Prime Day featured a few travel offerings, this time from big brands like Carnival Cruise Line, Tripadvisor’s Viator and Southwest Airlines.
PhocusWire discusses this entry into the travel space by the e-commerce giant and rightfully asks: “What does the future of travel look like in relation to Amazon? Will the platform become a major player in the industry? And if so, in what form?”
Here is my take:
Amazon missed their one and only chance to enter the travel space by not acquiring Orbitz or Travelocity when these OTAs were for up for grabs. Now it is too late - the consolidation In the travel intermediary space has already happened.
Unless Amazon acquires Expedia with its $18.5 billion market cap, I don’t see Amazon entering the travel space organically, though many hoteliers would love to have another player in addition to the current OTA duopoly Booking-Expedia.
Two main reasons why Amazon will not become a major player in travel:
1. Complex travel inventory management, pricing and distribution technology
In the past, Amazon underestimated the complexity of travel and hospitality technology which consists of many moving parts: old legacy systems that are poorly functioning, co-existing with next-gen cloud technologies and apps and promising Al implementations.
In hospitality alone, where do you start? Deep integrations/two-way APls are needed with legacy systems like PMS, CRS, Hotel Switches, GDS and Channel Managers in order to build real-time hotel inventory availability and pricing connectivity with hotels. Just building an OTA-type CRS with RMS, digital and video content, personalization capabilities, and fully interfaced with the numerous legacy systems in travel, would cost Amazon billions of dollars and take many years.
2. Perishable travel inventory
Despite all of its retailing prowess and innovation, Amazon has no idea how to manage ultra-perishable inventory such as travel inventory. Unlike books or socks, you cannot store travel inventory in a highly efficient automated warehouses.
Once the gate closes, those 15 empty airline seats are gone forever. At the stroke of midnight, the 50 empty hotel rooms are gone forever.
Expertise to manage this type of inventory cannot be achieved overnight. There should be revenue managers and online distribution experts in each of the travel categories: air, hotel, car rental, vacation rental and attractions. Even without a possible entry of Amazon in the travel space, there have been systemic shortages of such experts in the travel industry.
So, Amazon may continue to offer travel deals during its Prime Days or year around, but only acting as an affiliate of major travel brands and OTAs, earning peanuts from every booking it facilitates.
Max Starkov
Hospitality & Online Travel Tech Consultant & Strategist
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