Could Airbnb and Amazon drive OTAs out of business?

Photo credit: Getty Images/scyther5

It’s just a thought. And for hotels, trading Expedia and Booking.com for Airbnb and Amazon is a little like robbing Peter to pay Paul, only the inverse. It would be the ultimate in meta-disruption: disruptors disrupting distruptors. A 3D demolition. The alliteration itself is worth its weight in gold.

If there is one thing you can say about Airbnb, it’s that it has moxie. In announcing it is courting hotels to list on its site, the platform that started as a home-sharing site is not only pivoting, it’s adding a new enemy to the hotel industry: online travel agencies. That’s quite a feat. Far too long the duopoly of Expedia and Booking.com has had relative ownership of the intermediary space—because there was no one with critical mass to challenge it. That’s changing. Estimations are that Airbnb garnered around 100 million bookings in 2017, and it has a verified a total of 300 million guest arrivals all-time. That means the site has eyeballs; people are using it to book travel. Now that Airbnb has reached the prodigious volume it has, it can now really rev its engine. That’s what it is doing by opening up to hotels and not just homes. It’s like having a Ferrari and now kicking it into fifth gear.

Still, you need to have a value proposition that would persuade a hotel to list on the site. Hotels, like any business that pays commission on a sale, likes to pay the lowest commission rate possible. It’s common sense. Airbnb is promising hotels a digestible 3-percent to 5-percent commission rate, which is far smaller than what typical OTAs offer. Sure, there are some variables, and what Airbnb loses in commission to the hotel it makes up for via a between 5-percent to 15-percent service fee passed onto the guest. Airbnb is currently opening itself to boutique hotels and B&Bs, but it would be implausible to think that, down the road, it won’t make itself available to chain hotels, too, especially with an IPO in the near future. The only way it could backfire is if its community or tribe, which comes to Airbnb explicitly to avoid big box, traditional hotels, gets turned off and leaves.

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Airbnb is pushing its message hard to hotels. One gif, which constantly pops up in my Twitter feed, even though I am not a hotel proprietor, states: “Tired of paying up to 30%to the big OTAs? Try Airbnb.” At Airbnb’s rates, should I be?

There is another powerhouse that if it did decide to step (back) into the travel booking arena would be a worthy adversary. I’m speaking, of course, about Amazon. Estimates peg its subscriber base at more than 300 million active users, some 80 million of which are Prime subscribers, who tend to spend more on the platform than non-Prime shoppers. Amazon has become a one-stop shop for anything from socks to a toaster shaped like the Death Star. Fact is, people shop and buy things there, and it’s no stretch to believe that they wouldn’t make travel purchases there, too. Amazon has been down this road before deciding to pack it up. In April 2015, it launched Amazon Destinations, a hotel booking resource that initially targeted weekend getaways. It was shuttered by October of that year, possibly due to the powerful OTAs and their entrenched market dominance on online travel bookings. Three years prior to Destinations, Amazon launched Local, which concentrated on discounted hotel deals. It, too, didn’t last.

Is it time for a comeback? A recent Morgan Stanley note makes the case that it could try again. Heck, if it can make it in health food (Whole Foods), why not travel? While there are no current plans, the note notes Amazon’s loyalty, pricing, frictionless payment and gigantic base of buyers as reason reconsider. The note contends Amazon would be a foe to the OTAs, remarking: “If Amazon could build an online hotel business even 50 percent the size of Expedia… it would add roughly $600 million to operating profit.”

Expedia and Booking.com have little chance of going the way of Blockbuster. But in owning some 80 percent of the online booking market, an outside challenge isn’t only inevitable, it’s welcomed.

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