Skift Take

Is this only the beginning of the beginning of online travel? With a recent downbeat set of results from online travel agencies, it's a question that's hotly debated these days.

Mark Mahaney, managing director and analyst at RBC Capital Markets Research Division, asked the travel industry to keep one big number in mind – $150 billion – which was the combined market cap of Priceline, Expedia, Ctrip and TripAdvisor. It has subsequently dropped to $135 million.

“Each of these companies still account for less than 10 percent of global room nights sold so it’s not like there’s any 800-pound gorilla in the space yet,” Mahaney said at Skift Global Forum in New York City in September. “Versus the opportunity, they’re still relatively small.”

These companies’ combined market caps have subsequently dropped to $135 million, however, in a rough period for the online travel agencies.

At a time when major hotel companies like Hilton Worldwide are focused on getting more travelers to book direct, Mahaney’s statement seems particularly resonant. Hilton CEO Christopher Nessetta, for example, recently said he believes Airbnb will act as a hedge for his business against the likes of Expedia and and cause the latter two companies to become more competitive.

Mahaney and other investors speaking on a panel at Skift Global Forum agreed that there’s still plenty of room for innovation and growth at these companies.

From an investor’s perspective, the travel industry is interesting because there’s a ton of technology behind the scenes, said Erik Blachford, venture partner at TCV, speaking during the forum. “It’s still possible to grow companies that have giant market caps but in some industries that not how it shakes out.”

You can watch the entire interview above, or consider reading more coverage of Skift Global Forum.

In many ways, technologies like artificial intelligence, augmented reality and virtual reality have moved to the foreground and are integral parts of some travel companies’ long-term technology strategies.

New and emerging technologies like artificial intelligence are starting to get enough scale for large companies to care about them, said Bonny Simi, president of JetBlue Technology Ventures,

Some travel companies are partnering with startups whether it’s by launching an incubator or through another investment vehicle, said Simi. “Startups are growing very quickly and I think it’s because of the success of Airbnb quite frankly,” she said.

“Corporations are listening,” said Simi. “What a startup needs is to have that market particular on the B2B side and companies willing to adopt that technology.”

Although some major travel brands like TripAdvisor apparently aren’t listening to budding technologies as well as they should be, said Mahaney. “TripAdvisor is a company that’s made some major mistakes in terms of product innovation,” he said. “It’s reflected in what’s happening with its stock prices and fundamentals and they haven’t grown profits in three or four years and that’s a real tell in a secular growth industry.”

Mahaney said he’s cautious about TripAdvisor and its future. “I think they could probably use a strategic acquisition if somebody acquired them but I don’t think Priceline would be that acquirer and I’m a little bit stumped as to who that would be,” he said.

At this year’s Skift Global Forum in New York City, travel leaders from around the world gathered for two days of inspiration, information, and conversation for panels such as this, as well as solo TED-like talks on the future of travel.

Visit our Skift Global Forum site for more details about 2018 events.


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Tags: investors, sgf2017, skift global forum, video

Photo credit: From left, Mark Mahaney, managing director and analyst at RBC Capital Markets Research Division; Natasha Kuhlkin, managing director and portfolio manager at Dennison Associates; Bonny Simi, president of JetBlue Technology Ventures, and Erik Blachford, venture partner at TCV spoke on stage about climate change at Skift Global Forum in New York in September. Skift

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