Inc. Takes Aim at Priceline, Orbitz, and Expedia With This Recent Move

Source: Amazon

Having blossomed from a tiny online book seller to one of the most loved or feared forces in retail this side of Wal-Mart, e-commerce maven is clearly a company not lacking for ambition.

As author Brad Stone aptly titled his book on the company, Amazon truly is "the everything store." And based on another recent move by the world's e-commerce power, Amazon's ambitions show no sign of letting up anytime soon.

Amazon Travel: What a trip!Earlier this week, Amazon quietly launched a new travel site, Amazon Destinations, to help customers in certain markets locate and book hotels. At present, the site focuses on three metropolitan regions in the U.S. -- New York City, Los Angeles, and Seattle. Beyond specific cities, Amazon Destinations caters to so-called "getaway destinations," meaning vacation locales roughly within driving distance of these cities.

As Amazon spokesman Tom Cook noted, "More than 40% of all U.S. domestic leisure trips are short-term getaways of 1-3 nights, and many of these trips are to nearby, drivable destinations. ... However, travelers often have a hard time planning local getaways. It's difficult to know where to go, the process is labor-intensive, and people often miss out on finding great places to stay." Painted this way, the monetization opportunity here alone appears attractive enough to warrant Amazon's attention.

It's also worth noting that this isn't Amazon's first attempt to break into the U.S. travel market. A previous effort that also appeared through its Amazon Local platform relied on flash sale discounts of 40-60% to attract customers.

Since it uses hotels' published rates, Amazon Destinations is a more sustainable and scalable business model, one that Amazon could in theory take to a national level. And given Amazon's well-documented penchant for placing small bets in horizontal e-commerce markets, I'm guessing Amazon's ambitions for its travel business are far greater than we're seeing today.

A very real threat Amazon has the makings of a genuine competitor in the travel booking space for a number of reasons. The first is its extensive reach. Late last May, Amazon CEO Jeff Bezos divulged that Amazon had around 244 million active accounts, a number that's undoubtedly increased in the interim.

Although it isn't clear what proportion of that figure is domestic, this gives Amazon the size to quickly move the needle for hotel operators large and small. Factor in other powerful tools like Amazon's 1-Click technology or its budding advertising business, and it's easy to envision how Amazon could become a key source of referral bookings for travel destinations around the U.S. in relatively short order. The building blocks for success appear to largely be in place already.

So, which companies does Amazon's move into this space threaten most?

As of last year, four companies controlled an estimated 95% of the U.S. online travel agency (OTA) market: household names Expedia , Priceline , Orbitz Worldwide , and Travelocity, which operates as a subsidiary of Priceline.

It's worth noting here that the OTA industry deals with a number of booking categories including flights, hotels, rental cars, and more. And with Amazon Destinations only hawking hotel deals in the Catskills at the moment, it might seem laughably premature for Expedia, Priceline, or Orbitz investors to sound the alarm bells at this move. However, as any number of toppled industries will attest, Amazon's competitive threat should never be taken lightly.

According to researcher IBISWorld, the total U.S. tourism market, which encompasses but also expands beyond online travel bookings, is a $960 billion annual industry. It's exactly the kind of big-ticket market Amazon would love to target in order to continue to expand its ever-increasing top line. So while it's early innings in this story, I firmly believe that Amazon's move into the travel space, however paltry it might seem, is a critical storyline that Priceline, Orbitz, and Expedia investors will want to closely monitor in the years to come.

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Andrew Tonner owns shares of Apple. The Motley Fool recommends, Apple, and Priceline Group. The Motley Fool owns shares of, Apple, and Priceline Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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