Why Did Amazon Quit The Online Travel Market?

by Trefis Team
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Out of the blue, Amazon (NASDAQ:AMZN) has decided to shut down its travel booking site, Amazon Destinations! Amazon entered into the hotel-booking business in April 2015 with Amazon Destinations, a travel reservation service focusing on weekend retreats and getaways in the Northeast, the Pacific Northwest, and Southern California. Amazon Destinations was available on desktop and Amazon’s mobile applications. The site offering published hotel rates went one step further from Amazon Local which only sold discounted hotel deals. [1] Along with the closure of Amazon Destinations, the company has also decided to stop selling hotel reservations through Amazon Local, as well. [2] Amazon’s advantages of scale and cross-selling made it a good competitor in the OTA domain. However, too much diversification might not have gone down well with the company. Additionally, the expansion of growth of the leading OTA players could have been a cause for Amazon’s decision, too. 

Amazon Destination displays a message currently saying that since October 13, it has stopped selling hotel reservations.

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According to a hotel partner, their relationship with Amazon was a good one wherein the hotel received increased traffic and booking through Amazon. [3] Hence, going by the cordial relationship with its partners, it is indeed surprising that Amazon took this decision. Amazon had been selling discounted hotel deals for years and only this year it decided to give more flexibility to its partners by selling rooms at listed prices. In our previous articles, we’d even expected Amazon to emerge as a strong player in the OTA arena, in the future. (Read here and here.)

Amazon Had Certain Advantages

Amazon was expected to shine in the online travel domain and become a tough competitor with time. Its network of global websites is visited daily by shoppers to buy retail merchandise. Consequently, its advertisement cost would’ve been considerably lower than those of regular OTAs. Amazon also had the advantage of cross-selling its products across the different platforms.

However, The OTA Battlefield Is Heating Up…

It might be possible that the increased clout of the leading OTAs was pushing Amazon to the sidelines. Expedia currently has three-fourths of the U.S. online travel market under its different websites. Orbitz and Travelocity, who competed with Expedia, once upon a time, are a part of the company now.

TripAdvisor, the travel review leader has entered the OTA business with its Instant Booking platform. TripAdvisor had the world’s leading hotel chains sign up for the platform. In fact, chains like Mariott even did exclusive room booking agreements with TripAdvisor. In a landmark development, TripAdvisor achieved the partnership of Priceline’s Booking.com on Instant Booking, a couple of days ago. After acquiring the partnership of the global OTA leader, it is only a matter of time before Instant Booking receives significant prominence.

Even deal publisher Travelzoo had entered the hotel booking bandwagon by realizing its hotel platform in 2014. After the initial hiccups, Travelzoo is seeing impressive traction on the platform, and has currently reacquired its Asia Pacific business to expand the platform’s reach.

Google has recently launched a new commission-based advertising program called Google Hotel Ads. The new program will charge the commission rates prevalent in the market, instead of charging by the cost per click method through AdWords. Google has allegedly announced  that its Hotel Ads Commission program will be available worldwide.

Too Much Of Diversification Might Make You Lose Focus

Amazon has a history of pulling back from online travel. Earlier in 2001 it teamed up with Expedia and in 2006 it forged an alliance with Sidestep. However, none of those partnerships proved to be successful. [4]

Amazon’s repeated failed attempts might be due to its diversification across several service categories. Most of the leaders in the OTA domain are strictly into travel related services. In fact, except for Google, currently there’s no prominent player in the online travel sector which is managing other service portfolios.

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Notes:
  1. Expedia Will Pay Orbitz $115 Million if Antitrust Complications Scuttle Acquisition, Skift, February 13, 2015 []
  2. Amazon Shuts Down Its Hotel Booking Site, Amazon Destinations, Tech Crunch, October 14, 2015 []
  3. Amazon Abruptly Shuts Its Hotels Business After Stilted Efforts to Compete, Skift, October 15, 2015 []
  4. Exclusive: Amazon to Get Into Hotel Booking With Launch of Travel Site, Skift, November 2014 []
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  • commented 8 months ago
  • tags: CTRP PCLN TZOO TRIP EXPE AMZN
  • How about some mobile friendly here? I had a really a bad experience reading this.