Booking Holdings Inc. is a public limited company dealing in the online booking travel and hospitality industry and offering and selling its products and services via travel fare search engines including booking.com, agoda.com and Cheapflights etc. Dealing in the travel industry, the firm was established in 1996, with its headquarters located in Connecticut, United States. The firm generated strong revenue of 15.06 US billion dollars and has an employed workforce of almost 26,400 as per the year of 2019 (BookingHoldings, 2019). From the perspective of the global travel industry, the consideration of Porter’s five forces would be of great help for developing policies to generate a wider and deep look at the firm’s position in the industry.
Booking Holdings – Competitive Rivalry in the Market
The travel industry is considered to be one of the most complex sectors globally to cater to the growing travelling needs of the society in context to business or vocational. As a result of this increase, several companies and corporations have captured the market to cover the need for hotels, travel packages and rentals, resulting in fierce competition among established players. Technological advancements have further increased the competition among firms to attract consumers in different ways. The major competitor of the firm is Expedia, HRS and MakeMyTrip based on the relative market share of online travel agencies. Booking Holdings is considered to be the leading player in the European online travel agency sector in terms of market share of 67.7 per cent, while at the same time other companies have captured 12.8 and 6.3 per cent of the market share as of 2019 (Statista, 2021). Therefore, the presence of such big firms in the industry makes the competition level more complex.
Booking Holdings – Threat of Substitutes
The threat of having substitutes is typically low to moderate in the travel industry because of the availability of different platforms available for travelling purpose which can affect the consumer in terms of price and time. In this circumstance, the substitutes could be hotels and airlines websites to eliminate the fees involved in booking via travel agencies. However, they do not give the services that the buyer is looking for and may incur a great deal of time and effort to look at different sites. Another substitute could be a travel agent for the consumers if he or she has good information about requirements. However, still, the lack of convenience and nature of travel agent do not impact much on travel agencies as they provide detailed options with comparison (Cantallops and Salvi, 2014). Hence, posing a low to moderate risk of substitutes.
Booking Holdings – The Threat of New Entrants
The threat of new entrants in the travel industry is considered low as there are loads of big firms already operating globally and have maintained the barriers to entry high enough to keep most new entrants away. There are indeed upfront costs associated with the establishment of systems and technology setup. Existing companies in the sector have built an economy of scale, better relationships with the hotels and car rental firms making it more difficult for competitors to gain good market penetration. Moreover, the significant advertisement and marketing costs are another form of hurdles in entering the market (Snider and Williams, 2015). Hence, reducing the way of entry for new firms in the sector.
Booking Holdings – Bargaining Power of Buyers
The Bargaining power of consumers in the context of the travel industry is moderate because there are so many channels available for picking up travelling and tourism that execute the needs. Buyers in the industry are those who are interested in corporate travel groups, leisure agencies activities, individual consumers and anything else that has to do with having a good time. Consumers either individual or in groups always look for low prices and services as per their needs. Consumers’ power increases as they know market pricing and ranges, in addition with the switching cost being low influence the negotiation power among different firms (Moreno et al., 2017). Keeping in view such a method, buyers’ bargaining power is considered moderate in the industry.
Booking Holdings – Bargaining Power of Suppliers
The Bargaining power of suppliers in the industry is low to medium. Because the suppliers are usually governmental firms, hotels and airlines that provided the information regarding the availability and promotion of bookings. However, these suppliers rely much on the travel agencies to distribute and grow a large number of their product among customers which means they have limited means of distribution in the sector. Playing a vital role in balancing the bargaining power at both ends. Big firms can show an influence on the industry’s system dynamics and can swing the supply chain (Hua et al, 2019). Hence, the bargaining power of suppliers is medium in the context of the travelling sector.
References:
Moreno, F.M., Lafuente, J.G., Carreón, F.Á. and Moreno, S.M., 2017. The characterization of the millennials and their buying behavior. International Journal of Marketing Studies, 9(5), pp.135-144.
Hua, N., Hight, S., Wei, W., Ozturk, A.B., Zhao, X.R., Nusair, K. and DeFranco, A., 2019. The power of e-commerce. International Journal of Contemporary Hospitality Management.
BookingHoldings, 2019. Annual Reports | Booking Holdings. [online] Booking Holdings. Available at: https://ir.bookingholdings.com/financial-information/annual-reports.
Statista, 2021. Online travel agency (OTA) market share in Europe 2019 | Statista. [online] Statista. Available at: https://www.statista.com/statistics/870046/online-travel-agency-ota-market-share-in-europe/.
Cantallops, A.S. and Salvi, F., 2014. New consumer behavior: A review of research on eWOM and hotels. International Journal of Hospitality Management, 36, pp.41-51.
Snider, C. and Williams, J.W., 2015. Barriers to entry in the airline industry: A multidimensional regression-discontinuity analysis of AIR-21. Review of Economics and Statistics, 97(5), pp.1002-1022.