Gulliver | Online travel firms

As Amazon retreats from the travel business, TripAdvisor steps up

The market for online travel bookings may get a third big competitor yet

By B.R.

LAST week Amazon quietly pulled the plug on its hotel-booking service. Amazon Destinations had only been running for six months, so the news came as something of a surprise. The service was initially limited to a just few cities, such as Seattle, but many thought it had the potential to grow (including Gulliver). In 2013, the combined sales for the two biggest online travel-firms, Expedia and Priceline, came to $278 billion. And yet the majority of hotel bookings are still made offline. So it seemed there was plenty of market still to grab.

Amazon, one would have thought, should have had some distinct advantages in its quest. It is a trusted online operator with a well-earned reputation for customer service. It also has the financial clout to disrupt what has become a duopoly. Yet it apparently decided the incumbents were too entrenched. As is Amazon’s modus operandi, it wasted no time withdrawing from the market to concentrate on its next big project. As is also its wont, it gave no explanation.

That is bad news for hoteliers, who don't like the bargaining power that the big two hold over them and would prefer more competition. But for customers there is more reason to be optimistic. Even as Amazon was beating a retreat, TripAdvisor announced plans to beef up its "instant booking" service. Last year the customer-review site enabled customers to book certain hotels directly through its own website, rather than being directed to another vendor. It has recently announced that Priceline, which owns the booking.com brand, is also on board, massively increasing its scope. Wyndham Hotels, too, is another recent big signing.

As we wrote last year, TripAdvisor, which contains 250m reviews of 52m hotels:

...is such a good example of a network effect that it is the subject of a Harvard Business School (HBS) case study. The more users post reviews, the more useful the site is to those about to book a holiday. This makes it more important to hotels and travel agents, who offer better deals. This results in more traffic—and more reviews—closing the virtuous circle.

With Priceline on board, it now offers the best of all worlds: extenisive hotel reviews, more price comparisons between the different vendors, and the ability to book the hotel there and then, without having to slog around different websites as one might with other meta-search engines. That lack of fiddliness is an increasingly important consideration as more of us book on our smartphones and tablets. Priceline, despite its lofty market position, obviously also sees the potential of TripAdvisor; it has decided that cooperation will boost its own income even though one day TripAdvisor may become a rival. If Amazon does ever decide to re-enter the travel business, it might then find itself up against three big competitors, rather than two.

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