The Increasingly Condensed Travel Industry

The global travel industry is a major player in the global economy, accounting for 9.5% of the world’s GDP and employing 266 million people. Many consumers also deal with the industry on a regular basis, whether traveling on business trips or for vacations. With the large size of the industry and the constant demand, the travel industry is highly competitive and constantly evolving. Recently, this competition has led to consolidation in many sectors of the industry, such as the hotel, airline, car rental, and online travel sectors. Many of the biggest companies in these sectors are buying out their smaller competitors, seeing economies of scale as a strategy to maintain their leadership role in the industry.

One example of the travel industry’s consolidation is the online travel market, which is down to two major companies, Expedia and Priceline. The third major company, Orbitz, was acquired in February by Expedia in a $1.33 billion deal that is now awaiting regulators’ approval. Assuming the deal goes through, Expedia will own 15 travel brands, including Hotels.com, Hotwire, and Travelocity, while Priceline will own six, including Booking.com and Kayak. With only two companies dominating the online travel market, some have expressed concerns about consumers and the lack of competition, worrying that prices will increase for travelers. Most experts do not think this is a big concern in the online sector, and expect regulators to approve the deal, but also point out that these concerns are being heard much more often around the travel industry than in years past.

Competition concerns have not stopped mergers and acquisitions in the other sectors of the global travel industry, which have seen many mergers, similar to the online travel market. The airline industry has gone through several high profile mergers in the past decade, while the hotel industry is also dominated by companies that own many different brands. As the world becomes more and more globalized, the travel industry is realizing that a focus on size and market power is the path toward success. Whether this strategy benefits consumers is another question, and one that will be asked more and more in the coming years, as it seems there is no end in sight for consolidation in the travel industry.