Priceline (PCLN) and Expedia (EXPE) are currently the global leaders in the OTA (online travel agency) business. They’ve converted the OTA industry into a duopoly. Major online booking sites are owned by one of these two groups. Both of these companies have been busy spending millions of dollars to acquire smarter and smaller online sites. The smaller sites are their competitors. By making strategic alliances across the globe, this will help them grow more.
Priceline forms 2.77% and Expedia forms 0.52% of the Consumer Discretionary Select Sector SPDR (XLY).
Are new entrants a possible threat?
The OTA giants face competition from new startups that could disrupt the duopoly. TripAdvisor is the world’s largest travel website in traffic. It plans to start its own hotel metasearch business. Airbnb has also been stealing share from the economy hotel sector and weaker vacation rental players.
While new entrants pose sizable threats to larger players, the large companies are difficult to defeat in an industry where size matters. Priceline and Expedia’s scale of operation helps them to sign up more hotels at better prices. The industry also requires heavy spending on both traditional and digital marketing. This is why these companies have been successful in acquiring their small-scale competitors recently.
Are Amazon and Google the new biggies?
While scale and size make it difficult for new entrants, established online companies like Google (GOOGL) and Amazon (AMZN) could be a sizeable threat for existing industry giants. Amazon launched a new travel site, Amazon Destinations, earlier this year. It focuses on certain markets like New York City, Los Angeles, and Seattle. It helps customers locate and book hotels in and within driving distance of these cities. Amazon has an extensive reach and size. It could become a key travel player in future.
Google could also be a possible entrant into the industry in the future. The company has been updating its hotel listings by adding photographs and virtual tours. It’s also showing price information and reviews. Google also launched its meta-search website for flight comparisons—FlightSearch. This could be the company’s first step into the lucrative online travel market.