SWOT Analysis of Online Travel Industry

 

The Online Travel Agency industry is composed of websites that allow consumers to search for and purchase airline tickets, car rentals, or hotel accommodations from providers of those services. The companies only serve as an intermediary in the transaction.

Analysis through timeline:

1. From 2013, the number of travel agencies in the United States has declined from about 34,000 in the mid-1990s to 13,000 or so by 2015.
2. By 2014:
   1. 1/3 of leisure travelers and 1/2 of business travelers select an OTA for its site tools and options. People like to compare travel options, quickly, and in this arena brick and mortar agencies cannot compete with OTAs.
   2. More than 75 percent of leisure travelers reported using an OTA because it offered the best travel deals
3. By 2015, 60% of leisure and 41% of business travelers are making travel arrangements via the internet.
4. By 2016, the global travel agency market has grown by an average of 12.2% each year for the past seven years, according to a recent report by Travelution.
5. By 2020, the global travel agency market is expected to growth the 4-5% range, bringing the total travel market to US$403.3 billion.

1.1 Expedia Backgroung

Expedia, Inc. is an online travel company that provides leisure and business travel solution to customers worldwide through technology. As one of the leading online travel companies, it allows thousands of consumers make direct online booking, and efficiently research via its’ system.

1. 1996: Microsoft Corporation launches Expedia, an online travel service, as part of the Microsoft Network (MSN).
2. 1998: Expedia begins operations in the United Kingdom.
3. 1999: Expedia is spun off from Microsoft as a publicly traded company, with Microsoft retaining a majority interest.
4. 2001: USA Networks, Inc. acquires Expedia from Microsoft for an estimated $1.5 billion.
5. 2002: USA Networks changes its name to USA Interactive, Inc., following the sale of its entertainment assets to Vivendi Universal.
6. 2003: USA Interactive, renamed InterActiveCorp, acquires the remaining shares of Expedia for an estimated $3.3 billion.
7. 2004: IAC acquires TripAdvisor
8. 2013: Expedia, Inc. completes acquisition of majority interest in trivago, a leading hotel metasearch company
9. 2016: Expedia.com, had localized sites in 33 countries(Hotels.com had operated 89 localized Websites in 39 languages; Orbitz included the United States travel Websites, Orbitz.com, and CheapTickets.com, as well as e-bookers, a travel brand with Websites in seven European countries.)

1. Revolutionizing travel through the power of technology. The mission of Expedia is to provide the revolutionizing travel to make convenience for  travelers through the power of technology. They are focusing on using their broad and global resources advantage to address the ongoing migration of travel bookings from offline to online around the world.
2. Provide multiple brand portfolio to travelers. Based on the fact that most of the travelers would like to search multiple brand for the flights and hotels, Expedia use the strategy of having multiple brands appear in search result increase the likelihood of attracting visitors.
3. Acquisition of pioneers in online travel . The acquisition strategy is to acquire the best travel brands in the world. Expedia provides a modern technology platform for the iconic brands they acquired and use the brands to enlarge its travel resources and to meet travelers’ needs.
4. Global expansion. Expedia have a goal of generating at least 65% of our revenue through businesses and points of sale outside of the United States. They have their brands of Expedia, Hotels.com, Egencia, EAN and Hotwire operate both domestically and globally, including in Europe, Asia Pacific, Canada and Latin America. They own Venre, a European brand, which focusing on hotels in the south of European, WotiGroup which has sites in Australia and New Zealand, majority share of Trivago which is the best known travel brand in Europe and North America. Besides, they also have commercial agreements in place with Ctrip and eLong in China, as well as Decolar.com, Inc. in Latin America.
5. Provide variety of channels and new channel penetration to travelers. Since mobile booking through smartphones has shorter booking window (time from date of booking and date of stay) than the more traditional online booking methods, Expedia plan to put more investment in the new channel penetration, which includes mobile and tablets booking.

3.1 Strenghts

1. One of Expedia’s Strengths is their wide range of business services it provides. Expedia offers large range of hospitality services and online travel solutions for consumers, from car rental to cruises and local travel services. With the wide range of services provided, Expedia maintains a strong user-base in the international markets. By its own accounting, Expedia has 17 percent in online market share in the U.S and Canada.
2. Expedia has strong brand name and gains huge competitive advantage in the Online travel market. Per Expedia’s analysis through their Facebook page, Expedia as the leading full-service online travel agency had the largest fan base of 5,254,347 in the end of 2015. Through their significantly invested in advertising and media, Expedia intends to capture consumer base and increase the customer loyalty to its brand portfolio.

3.2 Weakness

1. One weakness of Expedia is its dependency on search engines and providers. What their offers in website is highly depends on the hotel and the intermediaries. Without search engines and providers, consumer would not be able to search their desired accommodations, and airline tickets.
2. Expedia’s wide range of business services are identical to their competitors. Their identical services and travel solutions provide no differences for consumer. It’s hard for Expedia to maintain the customer base and increase the customer loyalty.

3.3 Opportunities

1. The Expedia has been expanding its international presence with European travel sites Venere and Chinese travel agency eLong, and could continue to grow. Expedia has also formed agreement with Travelocity and many different companies. Their partnership agreements across the global markets could increase the user base, remove their competitors from locals and converting them into a marketing business. (Priceline Vs. Expedia)
2. As more and more aging individuals tend to have more disposable income and leisure time, Expedia could enhance brand awareness by executing successful advertising campaigns in emerging markets like China.

3.4 Threats

1. New emerging competitors appear every day, such as new entrants (Amazon Destination). Theses increasable competitions could harm financial performance or even more reduce Expedia’s market share.

1. Any organization, whether it may be a small dollar store or a big travel agency, has to increase connectivity in order to prosper and grow.  Small organizations may not have the resources, however organization such as Expedia has many options. If invested correctly then they may be able to reap rewards. It is highly imperative that their engagement medium, whether it may be webpage or mobile application, it has to be user friendly and easy to use. Now days, the audience is very impatient and an exhaustive and hard to navigate application will only turn away potential business. Not only does the application have to be user friendly; it has to offer “sticky” promotions that keep on bringing guest back to only use our sites. Stick products may come in a form of coupons as well. The more they book the more they save. Rewarding repeating customers with ways to save. This can also be part of reward retention.
2. Expedia should invest in technology, such as, artificial intelligence that looks at booking trends then recommends based on those trends. A niche in the market should be sought after. This can become a driving point for the organization to focus its growth on. It can be a game changer if implemented correctly. Due to advancing technology in predictive analytics and ability to analyze the whole population rather than a sample, specific trends or better estimations can be produced. AI can in use the shopping trend by using cookies and display relevant advertisements as well. Algorithms can also assist travel organizations make most of their customers online activities. This can prep the organizations better for future planning. Personalized offers mean increase in conversion rate, which in turn would be improving travellers shopping experience.
3. Forge Partnerships. In new markets, Expedia should try to break barriers and partner up with local booking agencies and individual destinations. Partnerships with airline companies, hotels and resorts will take the business to new levels. Expedia can serve as a broad spectrum for these companies and the companies can return a share in the revenue from these bookings. The market is well established for Expedia in the Americas. However, Expedia can look to places such as China and India where demand is at it’s greatest. Expedia can offer its expertise and review rating system to the advantage to agent companies. This way they can offer better packages to end consumer, in turn more happy customers. For agents they can use the platform as a quality assurance. They can offer better and more expensive packages to customers with more disposable income.

4.1 Specific Recommendations.

Here, we give some more details recommendation based on our observation on two of the Expedia head-to-head competitors, Ctrip and Priceline.

1. Expedia got a lot of buzz for its 2015 buying binge, but over the last two years China’s Ctrip has been on an equal footing with Expedia in terms of acquisition activity. It may be surprising to learn that a much smaller and up-and-coming rival, Ctrip, could be placed in the same mergers and acquisitions conversation, having spent around $5.5 billion or more on acquisitions and minority investments in 2015 and 2016. With Ctrip closing on its $1.7 billion Skyscanner deal in December 2016 and the Priceline Group announcing in February 2017 that it is acquiring the Momondo Group to pair with Priceline’s Kayak business, 2017 could turn out to be considerably busier on the mergers and acquisitions front than was the prior year.

In such environment, we foresee that the whole OTA industry integration trend is at the horizon. And the Expedia will face non-spokenable challenges than ever. The needs of forming new partnership and allies with suppliers and counterparts becomes important than ever for Expedia’s to maintain its’ leadership role in the OTA market.

2. On the other hand, competing with another OTA leader, Priceline, a sign shows that the mobile booking market and the continuously innovation of the companies’ technologies begin to weight more important in the contribution to the OTA leaders’ business continuation. The Expedia and Priceline leadership in the OTA sector as well as their strength in dealing with direct suppliers such as hotel chains seems very likely to continue in the coming years thanks to the ability of these two companies to stay well ahead of other travel players in terms of innovation, such as investing in metasearch engines.

Expedia’s strategy is focusing on building a flexible architecture allowing consumers to book and receive assistance on multiple devices, including wearable electronics, and on personalization powered by big data analytics, in order to offer, in the words of Expedia CEO Dara Khosrowshahi, “the possibility to show very specific deals to small segments of the population”, going beyond rate parity and increasingly partnering with hotel chains to do that.

Priceline’s strategy is equally focused on mobile devices as Expedia. But recognizing that the mobile channel has deeply changed consumer behavior in the travel industry, Priceline has took one step ahead of Expedia. The gradual evolution of online travel agencies into mobile travel agencies expected in the next few years will mean that they will increasingly become platforms for mobile reservations for travellers on the go, which will go beyond the hotel booking to include other tourist services, such as meals and tourist activities. Under this perspective, Priceline acquired the OpenTable, an online restaurant reservations company, with $2.6 billion.

Moreover, Priceline is also focusing on its role of online hotel reservations champion to offer B2B online marketing services to hotel chains, taking care of the whole marketing and booking process for them. We think Priceline did relatively better than Expedia in the past 3 years in term of deploying technology resources and platforms in the emerging markets. The fast pace of innovation led by the Priceline promises very dynamic years ahead, which will no doubt see significant changes in online travel, meaning that the ability of market players to be swift to adapt to them will be increasingly key.

Based on above market observation, we recommend Expedia get stronger cooperation between online travel intermediaries and suppliers as well as with technology companies appears likely in the coming years in order to be competitive in addressing increasingly sophisticated consumer demands.

 

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