by Max Starkov, HeBS Digital The industry press is full of articles about Amazon entering the travel retail space, opening travel industry-focused offices, and contacting hoteliers to strike merchant-model wholesale deals. Industry “oracles” are predicting that Amazon will become the next Expedia or Booking.com. In my view, by adding a “merchant model” extension to their flash sale-oriented site, Amazon Local, Amazon is achieving two objectives. On one hand, Amazon is simply “testing the waters” with all of their recent moves into the travel space. On the other hand, they are trying to expand the hotel offering of the fledgling Amazon Local. Like everyone else (Living Social, anyone?), Amazon is realizing that the flash sale model is extremely cyclical. In today’s post-recession environment, hoteliers are no longer willing to provide steep discounts and outrageous deals when they can sell their inventory at higher rates direct or via cheaper distribution channels. Can Amazon become a major OTA player? With Amazon’s current merchant model attempt, I think not, and here is why: - The OTA marketplace is already oversaturated. Travelocity is being “swallowed up” by Expedia. Orbitz is doomed as a stand-alone OTA. Establishing Amazon as a new OTA brand will be prohibitively expensive. - The merchant model Amazon has chosen is against the existing major shift from merchant to agency model that the industry is trending towards. Hoteliers do not like the merchant model: Amazon’s 15% merchant commission is close to Booking.com’s commission, yet Booking.com employs the agency model (i.e. guests pay at the front desk upon arrival) while Amazon has adopted the pre-paid merchant model. Get the full story at HeBS Digital Read also "Amazon’s online travel march continues, should OTAs be sweating?"