The Era of Web2 Oligopoly

In 1882, Rockefeller established the Standard Oil Trust and became famous for monopolizing the oil industry in the United States. He predicted the era of automobile popularization and set up gas stations across the country, eventually owning 92% of the gas stations in the U.S. He was also known for ruthlessly driving competitors out of business. As a result, Rockefeller is known as the person who led to the enactment of antitrust laws in the U.S. Rockefeller was able to quickly form a trust and rise to dominance in the oil industry because the oil supply process at the time was complex and unorganized. By acquiring small businesses and transforming them into a systematic large enterprise, and by connecting distribution and production lines, Rockefeller significantly reduced oil production and distribution costs. At the same time, he monopolized enormous wealth, facing severe checks from competitors, and eventually had to split his oil company into several companies due to U.S. government regulations. The monopoly of traditional companies' pipelines began to lose its power with the advent of the internet. Consumers gained access to various information and choices about prices and products through the internet. However, the travel industry changed in a similar but new way.

The travel industry also grew significantly with the development of transportation means such as airplanes and trains. However, visitors still lacked information about transportation and accommodation. Travel agencies grew significantly to provide information about numerous scattered accommodations and transportation options in different regions. But these travel agencies' foundations were shaken with the advent of OTAs. OTAs, or 'Online Travel Agencies,' started as sites that primarily allowed searching for accommodations and flights.

From the current perspective, OTAs are typical Web 1.0 businesses. Users seemed to gain information and choices by filling in prices, dates, types of seats, or rooms on the site and purchasing as long as there were remaining quantities, but they could not participate in the data itself. Later, services such as updating travel reviews and real-time consultations were introduced, bringing various platforms to the OTA market. However, the market began to change when Priceline in the U.S. acquired Booking.com in Europe for $113 million in 2005. As large OTAs grouped together and absorbed each other's strengths, a few platforms dominated most of the online travel market. In fact, four sites—Booking Holdings, Expedia, Airbnb, and Trip.com—account for 97% of the online travel market. The shares are Booking Holdings (36%), Expedia (28%), Airbnb (18%), and Trip.com (15%).

Therefore, OTAs seemed to give users the upper hand in choice and information in the market, but they transformed into a form monopolized by platforms. This has led to growing conflicts between the OTA industry and global hotel chains. Early OTAs started by charging hotels a 5% commission.

As market dominance gradually shifted from hotels with offline sales bases to OTAs with online sales channels, commissions began to range from a minimum of 10% to over 20%. Additionally, various policies started transferring the burden of advertising costs to hotels, leading to a phenomenon where hotels and airlines supply at lower prices, but customers still purchase at the same prices. Furthermore, with various OTA services actually being operated by three or four subsidiaries, the prices listed on the sites began to synchronize uniformly. This resulted in users no longer needing to search multiple sites, thus limiting their choices.

Despite this, the possibility of weakening this oligopoly system is very low because OTAs monopolize the data of hundreds of thousands of accommodation facilities worldwide.

In fact, the entire OTA market is expected to grow from $520 billion in 2020 to $980 billion in 2027, in line with the global travel boom. This estimate from Statista Mobility Market Outlook predicts a growth of 89.8% over seven years.