Well this is bound to be interesting. Amazon appears to be going it alone to launch its own travel service for independent hotels in drive markets. Amazon has huge marketing power, but don't expect Amazon Travel to turn the hotel industry on its head any time soon.
Amazon.com is poised to launch its own travel service, featuring booking at independent hotels and resorts near major cities, Skift has learned.
The initial rollout of Amazon Travel would feature a curated selection of hotels within a few hours’ drive from New York, Los Angeles, and Seattle. The service will likely go live around January 1.
Skift spoke with representatives of three independent hotels, two of which signed up for the new Amazon service and one that was strongly considering the option.
Properties would load their room types, availability, pricing information, and photos into an Amazon extranet and would pay a standard 15% commission to Amazon for the prepaid bookings, the hoteliers at the independent properties said.
The properties would get notified by Amazon via email of bookings, hoteliers said, and they would update calendars on the extranet.
The hotels would generally list their properties at rack rates, but would be free to discount, one hotelier said.
Hoteliers would receive their payments from Amazon for the stays in two installments and could obviously attempt to negotiate a lower commission than the standard 15%.
The hotelier who hadn’t yet signed up for the Amazon Travel service after being approached by an Amazon sales representative two weeks ago said he was giving “heavy consideration” to participating.
“First and foremost, it’s Amazon.com,” said the hotelier, adding that most of the hotel’s bookings currently come from its own website, although the resort also displays its inventory on Booking.com.
The hotelier said Amazon had used TripAdvisor ratings as part of the criteria for selecting properties to participate, and would only use a few properties per destination, and they would have to be rated four stars and above.
Amazon would round out the content on Amazon Travel with editorial about attractions and other things to do in the destination. At least initially, Amazon would focus on hotels, and not flights or other travel products.
Another hotelier from one of the two properties that had signed on said Amazon has a huge customer database to leverage, and that would be one of the attractions of signing up.
Amazon did not respond to a request for comment.
Amazon’s mission is to create a marketplace for retailers who might have a difficulty finding customers, and a high-profile section of Amazon.com in the form of an Amazon Travel would offer such a marketplace for independent and boutique hotels who don’t have the marketing power of big hotels chains or online travel agencies at their disposal.
Amazon potentially has an advantage over some online travel agencies and hotel booking sites because of the immense amount of data — i.e. Big Data — at Amazon’s disposal. Amazon could pair information about a traveler’s intent with retail offers such as a GoPro camera to use while hiking or boating in Washington State.
Amazon is ramping up its travel business by hirings. It posted employment ads for travel market managers for Amazon Local in Boston, New York, San Francisco, Los Angeles and Dallas, for example.
“We are actively seeking a tenacious Market Manager to drive the sales efforts for Amazon Local’s travel category in the greater New York City area,” one advertisement reads. “Our ideal candidate has extensive sales experience, travel industry experience, and a terrific reputation for achieving goals and insisting on fantastic customer relationships.”
In addition to offering travel accessories and products, Amazon has dabbled in travel in the past, in 2001 with Expedia and in 2006 with SideStep, by establishing partnerships with travel brands. For example, in 2006 SideStep (which Kayak acquired a year later) powered flight, hotel, car and vacation package searches in an Amazon travel store, but Amazon has really never made its mark in travel or sold travel on its own.
It’s obviously difficult to gauge Amazon’s prospects in travel starting in 2015 since the offering isn’t even launched yet, and plans can change.
According to one of the hoteliers Skift spoke with, Amazon intends to use the merchant model that Expedia and Hotels.com used as a foundation for growth, but Amazon would entice hotels to sign up by taking a considerably lower margin, around 15%. Expedia’s usual is 25%.
Under this merchant model, Amazon would get a net rate from a hotel, and mark it up, taking its 15% margin. Travelers would prepay for the room, and Amazon would be the merchant of record.
Hotels would have to wait to get paid by Amazon in two payments, according to one of the hoteliers, and that’s hardly as attractive as letting the traveler pay at the hotel and then have the hotel pay Amazon a commission.
And the envisioned extranet, as detailed by the hoteliers, sounds clunky, at best. Still, given Amazon’s tech prowess, it certainly can put the resources into getting the extranet right for hoteliers.
Still, Amazon obviously attracts a ton of eyeballs and has mega-marketing power online and on mobile so that’s a huge competitive edge.
Amazon, too, is smartly targeting a niche — and it’s a large one — in the drive market for independent hotels and resorts that most competitors have neglected. Chains dominate the U.S. market, but focusing on independent hotels would still fill a void and be an astute focus in Europe, where independents have greater clout.
Another huge question is whether Amazon will have the focus, between selling books, candles and games, to really make a go of it in the hotel industry. Booking.com, after all, basically does one thing — sell hotels and vacation rentals.
Hotel consultant Robert Cole of RockCheetah believes Amazon Travel can be a disruptive force in online travel “if Amazon does it right this time.”
“Amazon by nature is disruptive and has always played the game for the long term,” Cole says. “Check its revenue versus earnings chart.”
On the hotel side of things, Amazon can put pressure on the online travel agencies’ hotel margins through a hotel-friendly model, Cole says.
“A key will be if Amazon can create a great user experience and drive traffic,” Cole says.
“They may be able to lure major hotel brands with lower distribution costs, better payment terms and by exerting margin pressure on OTAs,” Cole says. “Travel is a big global market without shipping/logistics costs. Thinking special Amazon Prime deals are a no-brainer when running at scale.”
With Alibaba becoming an increasingly important player in travel with its rebranded offering, Alitrip, and investments in hotel technology, perhaps Amazon couldn’t resist giving travel another try.
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Tags: amazon, booking.com, expedia, otas