Sounding Off: A financial downturn could fuel the power of the platforms

Clayton Reid, CEO, MMGY Global

"You’d think past recessions would be a cautionary tale, but we doubt it will change anything this time around."

Quote from Clayton Reid, CEO of MMGY Global, in an article on PhocusWire this week on why the travel industry is headed toward a recession.

 

 

Each Friday, PhocusWire dissects and debates an industry trend or new development covered on our site that week.

Governments and industries always claim to have learned from previous mistakes, especially when it comes to the impact of financial downturns.

This has not always been the case.

The cyclical nature of economic generations means that when companies are enjoying the heights of the financial growth mountain they should always be preparing for when they inevitably find themselves heading down the valley.

How this manifests itself in the travel industry is often a mixture of lower traveler numbers and associated spend, product discounting and changes in frequency.

The last major, global financial crisis saw all of these elements come to the fore - all of which took years to recover to solid growth levels again. 

How another downturn will shake out for the sector should be easy to determine, based on previous trends.

But what might be different this time is how the elements noted above play out in an industry already dominated by just a handful of key players in the online travel space.

Their collective dominance on the sector in the latter part of this decade (Booking.com was certainly a player in 2009 but not on the scale in which it now operates) could be heightened with their ability to squeeze the commission noose a little tighter on suppliers who are desperate for volume.

Also consider their mastery of the digital advertising realm, using years of experience (and billions of dollars) to play the field at the expense of those without the resources to compete.

Some may point to a reduction in that aforementioned marketing spend but, of course, everyone else will also be facing similar restrictions on their customer acquisition strategies.

Perhaps a glimmer of hope rests, as Clayton Reid suggest in his analysis, with the emergence of an e-commerce giant in the shape of Amazon to capitalize on a nervous and platform-led market.

He notes how Jeff Bezos "would be crazy if he does not take advantage of his programmatic data, Prime membership, ability to sell at a discount and potential to curate unique off‐the‐shelf travel packages at a lower distribution cost to suppliers."

And therein lies the opportunity for the rest of the industry, especially suppliers, even if they're in the valley at the time.

A challenger in the shape of Amazon could emerge and really take on the powerful platforms at their own game, giving the market a new outlet and, if the other factors come into play (such as the prowess of Prime as a loyalty and buying mechanism), alter decade-old practices forever.