Good to know that I’m not alone in thinking the meta travel search engines have a pretty good business model. Piper Jaffray’s Safa Rashtchy writes in this week’s Industry Note:
Industry Commentary: Domestic Online Travel Agencies Remain Challenged; Look Internationally for Growth
The domestic travel market continues to be under pressure from suppliers, with traffic to those sites increasing while the traffic to agency sites continues to decrease. While domestic travel market is under heavy pressure, we believe international travel markets still represent a solid growth opportunity. We note that one of the key distinctions between the two markets is the much lower margin structure prevalent in international markets, which makes the agency model more sustainable. In the U.S., however, Exepdia-type 20%-25% margins are destined to be hit hard, as we saw from EXPE’s results in Q1, showing a 40% y/y decline, including a decline in raw margins. This is in line with our thesis that in the United States the suppliers will continue to gain share of the market and the only sustainable models will be lead-generation (comparison sites such as Mobissimo) or lower margin or opaque models (such as Priceline).
Nice to see Mobissimo mentioned (SideStep and Kayak usually get all the love). Could be because of Mobissimo’s focus on international.
May 16th, 2006 at 1:49 am
Don’t forget that SideStep launched travel in the UK/Ireland earlier this year! SideStep’s international offering is looking pretty good these days.