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Wanna know internet travel business industry.
Hello! Thanks for your request for a market landscape report on the online travel industry. In short, online travel is a $1.2 trillion industry, dominated by major players Priceline, Expedia, and TripAdvisor. Despite its high CPA and low LTV, it is expected to grow at a CAGR of 11.1% over the next five years.
METHODOLOGY
To investigate your query, I scoured a number of sources, including corporate filings, reputable news media, and industry reports and whitepapers. I found the latter to be the most useful sources, but as you'll see, the analysis that follows incorporates information from a wide variety of sources.
INDUSTRY OVERVIEW
The online travel industry -- which includes everything from metasearch providers and online travel agencies down to travel-specific SaaS providers -- encompasses an estimated $1.2 trillion in revenue, and is expected to expand at a CAGR of 11.1% over the next five years. This detailed chaos map should give a you a sense of the scope and segments this broader industry classification entails.
When reviewing the overall industry, a few key trends and drivers can be observed:
1. Consolidation
A high rate of mergers and acquisitions in the past several years has consolidated many of the suppliers in this space. In particular, Priceline and Expedia have absorbed many of their mid-tier former competitors (like Trivago and Travelocity). This has created a market with high entry barriers for new players.
2. Unit economics
While I couldn't find specific industry-wide estimates for the unit economics figures you requested (LTV and CPA), I did find some data points that may help give you a frame of reference.
A. Most sources I could find had at least some data on the major player Priceline, noting that their CPA is around $7 per customer.
B. Priceline was also noted in this recent Morgan Stanley report as overspending on customer acquisition relative to their lifetime value.
C. In accordance with the above, this article on building travel startups notes that businesses in this space in general (particularly online travel agencies) tend to spend a lot of advertising money to acquire new customers, but those customers have relatively low LTV due to the infrequency with which most people (with the exception of business travelers) make travel bookings.
3. Mobile channels
Approximately 25% of all online travel purchases are now made via a mobile device. As an estimated 180 million people visit online travel sites each month, it is expected that online travel business will increasingly rely on a well-designed mobile experience.
4. Millennials
Young professionals aged 22-31 are increasingly driving online travel booking demand and volume due to a combination of their high technology uptake and their greater willingness to spend more on travel experiences (about $200 billion per year).
Having given an overview of the landscape, we'll now move on to profiles of the top three market leaders.
MAJOR PLAYERS
- Business model:
Priceline's business model concerns earning profit from commissions and processing fees generated by the facilitation of booking flights, hotel accommodations, restaurant bookings, rental vehicles, cruises, vacation packages, and other travel services. As with Expedia (below), Priceline segments its business into merchant, agency, and advertising channels.
- Core brands: Hotels.com, Orbitz, Trivago, HomeAway, Travelocity, Hotwire, Wotif, and CarRentals.com (among others).
- Business model:
Expedia profits from offering travel products and services through three business models: as a merchant (direct bookings), as an agency (mediated bookings), and by monetizing advertising channels.
- Core brands: Oyster, Jetsetter, AirfareWatchdog, Viator, SeatGuru, and BookingBuddy (among others).
- Business model:
While TripAdvisor essentially offers the same service as the other two competitors, it segments its business into two parts: Hotel (which accounts for 80% of its consolidated revenue) and non-Hotel (including attractions, restaurants, and vacation rentals). Within the Hotel segment, TripAdvisor also derives revenue from advertising channels (click-based, display-based, and subscription-based).
FURTHER READING
In the course of my research, I found two detailed business reports that may be of interest to you. I would recommend you review them for an even deeper and more granular dive into this huge, complex, and rapidly changing industry. They are:
2. Morgan Stanley report: Online Travel: Why We're Equal-weight and What Could Make Us Change Our Minds (2016)
CONCLUSION
To wrap up, online travel is a $1.2 trillion industry, dominated by major players Priceline, Expedia, and TripAdvisor. Despite its high CPA and low LTV, it is expected to grow at a CAGR of 11.1% over the next five years.
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