Growth of Travel Industry in E-Commerce Business

Almost all the industry segments are impacted under the pressure from the exponential increase of online alternatives. One of the earliest casualty of the online onslaught was the travel trade, says a research report by investors.com.If in 2000, there were 124,000 travel agents working in the U.S., the number dwindled to 70,000 by 2014, as per the Bureau of Labour Statistics (BLS), the number will further narrow to just above 61,000 over the next seven years. According to the report, online travel options have made up for the lost services.Online travel-booking industryAccording to the report, Expedia (EXPE) and Priceline (PCLN) control two-thirds of the global online travel-booking industry, more particularly 95% of the market in the U.S. What is more, these online firms also possess a lion’s share of the burgeoning number of smaller entities, such as the Germany-based Meta search company, Trivago (TRVG). As far as the share performance is concerned, Priceline showed an upward tick of 28% since the start of the year, while Expedia has notched up 32%. Trivago surged 91% in June and traded 103% above its mid-December IPO price.

Competition Like most aggregators, Trivago doesn't actually allow users to make bookings. Instead, it makes its money from referrals. In the first quarter, Trivago said qualified referrals increased by 60% to 177.2 million versus a year ago and revenue per qualified referral was up 4% from a year ago. That helped boost its Q1 revenue 58%, sending EPS up 300% — in line with analyst estimates.Most of its Q1 revenue came from Europe, but the company still has a global reach. Trivago said in 2016 that its hotel-search platform offered access to 1.4 million hotels in over 190 countries It has 55 localized websites and has smart phone apps in 33 different languages. In Q1, it saw a 128% increase in revenue from operations from outside the U.S. and Europe.Travel search remains competitive, Cowen analyst Kevin Kopelman said on June 2, but "Trivago has built a significant and multi-year lead over its specialist competitors and the leads appear to be increasing,"Kopelman noted that unlike Kayak (which Priceline acquired for $1.8 billion in 2013) and other rival Meta search companies, Trivago is the only player to concentrate its "marketing message entirely on lodging and driving transactions for its advertisers."Google or TripAdvisor could emphasize their own Meta search engines and bite into Trivago's market share, Kopelman said. TripAdvisor, which was known for its user reviews, is in the midst of a strategic attempt to shift lower in the travel funnel, Fuller said.TripAdvisor has redesigned its website to switch from just reviews to offering more information on travel deals and packages. Fuller expects a big advertising push later this year and next focused on TripAdvisor's new look.Google is unlikely to invest in its own travel booking site outside Google Flights. Air travel isn't a large revenue boost for travel sites, and expanding its services could threaten the large chunk of paid advertising that the search giant receives from Expedia and Priceline.If Google did decide to go into the travel-booking business, it would be one of the very few companies with the ability to beat Expedia and Priceline at the search game. It's hard for smaller companies to retain market share, even in unique sectors, with behemoths Expedia and Priceline dominating searches. Expedia and Priceline accounted for 66% of global online travel bookings last year, up from 55% in 2014, Fuller says and adds that he expects that number to climb to 70% by 2020.