Hotel Distribution

Amazon, another giant of the hotel industry?

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30 December 2014 at 10:00, by

Cartel hotel, Google Plus.

Hotel  sign, Google Plus.

The possible arrival this month of Amazon Travel has caused quite a stir. But, how will it work, and how will this booking portal for independent and boutique establishments affect the hotel distribution map? Let us explain.

With this platform, the American company wants to compete in what has, until now, been an unknown market for it: the travel industry. While still waiting for official confirmation from the multinational company, Skift released the news and informs us that the company’s idea is to roll out this new platform in some American cities, like Seattle, home to their headquarters, Los Angeles and New York.

Afterwards, and progressively, Amazon Travel will be introduced in more places and markets. Skift has found out about Amazon’s plans as it was able to speak with hoteliers who have already revealed their plans to become part of this new service. Therefore the publication can claim that the commission charged by Amazon Travel for reserving accommodation, will presumably be 15%, 10% less than what consolidated online agencies, such as Expedia, charge in the American market.

Their modus operandi will be very simple. Each hotel will upload to Amazon’s intranet their availability, rates and room type. Then, each time Amazon Travel makes a booking, they will notify the hotel via email.

According to this specialized journal, the emergence of the multinational onto the scene could cause a rupture in the present hotel distribution map; the 15% commission being to blame. Seeking Alpha delves deeper into the question and claims that this circumstance means that Amazon can direct itself to different market segments.

The root of the issue can be traced back to the method payment chosen by Amazon Travel. The norm is for the hotels to collect the money from their clients and then pay the corresponding commission to the OTAs; however, Amazon has opted to take the reverse route, a prepayment method.

Another aspect to bear in mind is that, Expedia or Priceline have very high demands for hotels wanting to register on their database. Seeking Alpha also states that Amazon Travel will opt for more lax criteria. In this way, it will promote registration in its new platform and will be able to mitigate possible reticence due to the unusual prepayment method.

Javier Silvestre, general manager of Idiso, claims that this platform should cause reflections regarding the hotel sector. “It is a new world with new players; everything is changing quickly. I don’t think this is the end, not at all, rather the beginning of a new map in hotel distribution, with new and every time more powerful partners, that should make the hotel sector reflect on how and where to position itself when looking forwards.”

Along the same lines, the CEO of Expedia, Dara Khosrowshahi, feels that the appearance of Amazon Travel is not a threat. To the contrary, Dara feels that it will promote more competitiveness. “We know what the sector is like, this is just another possibility. We have over 300.000 hotels on our database and are calm and secure about our future prospects” concludes Dara.

We are still talking about a hypothesis. But, what seems clear is that, if the news is confirmed – a great company such as Amazon with more than 237 registered users worldwide, is not planning to land in the hotel distribution world to just sit back and watch.

Idiso Digital

Idiso Digital

Marketing & Distribution Services

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