Amazon May Not Be Able to Resist the Lure of Online Travel – PhocusWire

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).

Its most recent attempt was the Amazon Destinations service, which opened and closed in the space of five months in 2015.

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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