Amazon could disrupt online travel industry next, Morgan Stanley says

Amazon founder and CEO Jeff Bezos. Photo / AP

A top Wall Street firm says Amazon could generate significant profits if it entered the internet travel business.

Financial services company Morgan Stanley stated that the travel sector would be a great business opportunity for the e-commerce giant, according to CNBC.

Amazon has a large customer database who could spend money on a potential travel offering. Statista estimates that the e-retailer has more than 310 million active customer accounts worldwide.

"Online travel has proven to be immune to Amazon disruption so far. But as we have seen with other categories, that doesn't mean Amazon won't try again, and they should," said analyst Brian Nowak.

"Amazon's focus on selection/service, pricing, and frictionless payment that drive conversion and stronger user economics also translate directly to travel."

Nowak said travel represents an annual market of US$480 billion ($658b) in the US alone, and estimates Amazon could make US$600 million of profits a year if it builds an online hotel business roughly half the size of Expedia.

The analyst estimated online travel companies such as Booking and Expedia spend about US$620m a year each to acquire their global hotel room inventory - a figure that wouldn't be a large investment for a company who's profits topped the US$1b mark for the first time last month.

"Our rough ad efficiency analysis (ad spend/transaction) speaks to Amazon's ability to drive repeat/direct traffic…as its estimated $0.75 ad spend/transaction is a fraction of what Booking/Expedia spend," Nowak said.