Travel tech businesses used to market themselves as mobile-first, or big data, or as driven by artificial intelligence. ” Now the hip marketing word is platform.” data-reactid=”22″>Every online travel company is calling itself a platform. It makes sense to aspire to be a market-wide intermediary.
Who wouldn’t want to build the next Airbnb, Amadeus, Expedia, or Uber? “Platform” may soon lose its shine as a label, though. “The bubble of ‘everything is a platform’ will likely burst,” said Annabelle Gawer, a professor of digital economy at Surrey Business School in England. ” A less loose definition of a platform is a company that is an intermediary, meaning it lets other companies buy and sell products and services, and that it is large enough it is marketwide and often global. Gawer has spent a few years in researching platforms along with fellow academics Michael Cusumano and David Yoffie.
The professors have summarized their work in a new book, “ The Business of Platforms . ” The book says the golden age of platforms is here to stay in travel and other industries. “It is only starting,” Gawer said. Of these, only a few are in travel, such as Booking Holdings, Expedia, and TripAdvisor.
They act as digital marketplaces, bringing buyers and sellers together. Some offer software building blocks for companies to build services on them, such as how Amazon Web Services provides cloud-based storage and computing. ” The giant did more than simplify consumer travel booking. It also helped travel businesses innovate with new tools and models, the researchers said.
Expedia created an affiliate program, sharing for re-sale its hotel, flight, and rental car inventory. One way they often do that is by combining transactional and innovation platforms like Expedia and Airbnb have. Successful platforms also fight something called “multi-homing,” a term that refers to the habit of buyers and sellers to use more than one company for the same purpose. Airbnb has done the same in its segments.
Pricing can be hard for platforms to get right, too. Profit pressures will likely force these companies to change or merge with other competitors worldwide. The rules may differ somewhat for business-to-business companies. Many enterprise software providers loosely use the word “platform” to describe their services though their models are slightly different.
“Things like service level, security, and integrations play a much larger role than in the enterprise market than the consumer market,” King said. ” Shiji isn’t trying to scale quickly but is instead playing a longer game, King said. It aims to build trust through projects that sometimes take a great deal of work on its end. How to Cope With the Platform Giants Many conventional businesses struggle to cope with the rise of platform giants.
A strong signal that any platform intends to come into travel is if it starts to acquire small tech players in the sector. “Platforms don’t go naked into a new industry,” Gawer said. In the next year, few of the global giants like Amazon and Facebook are likely to enter travel. They’ll be busy defending their reputations from antitrust charges and other consumer complaints.
But platform giants will eventually enter travel. The researchers shared some advice. “Building your own platform from scratch is very risky, as is partnering with the giants,” Gawer said. “We tend to suggest, based on our historical analysis, that it’s often better to buy an existing small tech platform and incorporate it into your business.
” Hotel group Accor’s decision to acquire OneFineStay, a marketplace of vacation rentals the company doesn’t own and that competes with Airbnb, is one example. Mafwengo, a social travel site that has raised about $500 million. TripActions, a business travel startup, has raised $481 million. Omio, a travel search company, has raised $296 million.
These are but a handful of travel tech companies that talk about someday going public alongside the Expedias of the world. Competition will cut many platform dreams short, however. Fierce competition from conventional companies and platform giants will be hard to overcome. Hipmunk, a travel metasearch company, was acquired by Concur in a similar outcome.
They may fear that larger players will acquire startups at stages that are too early. These early exits could deny investors the higher returns they would have otherwise gotten if the startups went public instead. Funding worries related to this have caused startups to stall, as in the case of Tripping.com and in the case of Utrip .
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