Are the big three online travel agencies about to become the big two … or one?
Maybe. There are signs that something is in the works.
Michelle Peluso is out at Travelocity. Steve Barnhart is out at Orbitz. And late last year, two key Expedia executives — Paul Brown and Dermot Halpin — left the company during a reorganization.
It goes without saying that the online travel agencies are in serious trouble and that consolidation — industry-speak for one company gobbling up another — is imminent.
At a time like this, I always turn to my friend the Professor for insights, but he’s also at a loss for words.
One Expedia insider has told me that a merger is likely, and soon. And that leaves me to wonder — who’s gonna eat whom? And what will it mean for travelers?
I don’t know. On balance, I don’t think consolidation of any kind is good for consumers. More competition usually leads to lower prices. So my instinct tells me that if, say, Expedia were to buy Travelocity, that prices would go up.
If that happened, the companies would couch the action as a “win-win” for shareholders and customers. But who would they be kidding?
Keep an eye on the big three online agencies during the coming weeks. I have a feeling something is about to go down.
{ 3 comments… read them below or add one }
And one interesting other potential side effect of a merger…how will pending future reservations be merged? My guess is, not as well as the two agencies would hope.
Chris–how do you feel that pricing will go up? The agencies (for the most part) do not control the product or the pricing. If anything pricing might go down a bit. If the travel suppliers are getting more share from a single vendor that vendor’s backend compensation will likely increase and allow them to compete more effectively.
I do not see any prices rising in almost any market this year. Retailers in general are terrified that consumers are now used to 75% off being the standard.
Tend to agree with John F about pricing. The main reason the OTAs are under threat is the strong inroads suppliers have made in the business and the direct business they’re getting as a result. OTAs were able to take advantage of a unique situation after 9/11 when suppliers were in a very weak position and then still rapidly growing OTAs, mainly based on their air sales, introduced the merchant model and gained near control over suppliers for some time. The last two to three years the situation has been reversed.