Will Amazon set its sights on the online travel business? Morgan Stanley seems to think so.
“Online travel has proven to be immune to Amazon disruption so far. But as we have seen with other categories, that doesn't mean Amazon won't try again, and they should,” analyst Brian Nowak wrote in a note to clients last week, according to CNBC. “Amazon's focus on selection/service, pricing, and frictionless payments that drive conversion and stronger user economics also translate directly to travel.”
Nowak estimated that companies such as Booking and Expedia each spend about $620 million a year to acquire their global hotel room inventory — an investment that wouldn’t be an issue for Amazon. Not to mention the eCommerce giant has more than 300 million customers that could utilize a travel service.
“Our rough ad efficiency analysis (ad spend/transaction) speaks to Amazon’s ability to drive repeat/direct traffic…as its estimated $0.75 ad spend/transaction is a fraction of what Booking/Expedia spend,” he wrote.
Travel would be the latest market targeted by Amazon. Earlier this year, the company announced a partnership with Berkshire Hathaway and JPMorgan Chase to create an independent healthcare company that will aim to fix the nation’s healthcare system. And just last month, Amazon launched an exclusive line of over-the-counter health products that is sure to challenge pharmacy retail chains’ bottom lines.
There have also been rumors that the company is setting its sights on the automotive market, warehouse clubs, the discount shopping space and more — as well as meeting with big banks like JPMorgan Chase about designing a checking account-like product.
Nowak went on to restate his $1,500 price target for Amazon shares, with the retailer’s shares increasing 33 percent so far this year. Amazon shares rose 0.9 percent Friday.