¨Every industry, as it comes to a certain level of maturity, there is consolidation. In that consolidation, some fall, but the men will always be there. It is the boys that get sloughed, I would say.¨
Expedia has been gobbling up other online travel agencies for 15 years now. Today about 80% of the US online travel agency business is held by just two major players: Expedia and the Priceline group.
Online travel agencies are not as plentiful they appear. Expedia owns 12 travel brands, including Travelocity, Hotwire, Hotels.com, Carrentals.com, Orbitz, and Egencia. Priceline owns Priceline, Kayak, and Booking.com. (Expedia recently bought HomeAway, probably best known for its VRBO-Vacation Rentals by Owners- the largest, vacation rental online site, after Airbnb).
Just three corporations own nine major car rental firms:
- Avis budget group operates Avis, Budget, and Payless (and Zipcar)
- Enterprise Holdings operate Alamo, Enterprise and National
- Hertz Global Holdings operate Dollar, Hertz, and Thrifty
These three companies alone have approximately 90% of the car rental market in the US (up from 65% in 2005). They also
- Operate over 30,000 worldwide locations in almost every country on earth.
- Have increased their market share outside of the US by acquiring several rental car companies outside of the US in the past ten years.
Interestingly, there is little evidence that this lack of competition has substantially resulted in increased costs to consumers. There are two reasons for this:
- the three companies have developed brands in the last several years that are price-sensitive to leisure travel markets and
- car rental companies are facing some competition from the car-sharing market such as Uber and Lyft. (Some travelers, particularly business customers, rather than renting a car now use car-sharing services to go between meetings and their hotels).
The following three corporations control approximately 80% of the cruise market:
- Carnival Cruises owns nine lines, including Carnival, Costa, Cunard, Holland America, P&O, Princess and Seabourne. (Carnival Corporation alone controls around half of the market and owns over 100 ships).
- Norwegian Cruise Holdings own Norwegian, Oceania and Regent Seven Seas
- Royal Caribbean Cruises own six lines, including Celebrity and Royal Caribbean.
Several different corporations own the remaining 20% of the market. The most significant other players are MSC and Disney cruises.
While Caribbean cruises still make up about half of the industry, the last ten years have witnessed an incredible increase in routes in the rest of the world, mainly the Mediterranean.
In addition, the number of cruisers has increased markedly over the past ten years. Nonetheless, there still appears to be considerable room for growth as more and more travelers discover cruising and the number of avid cruisers increases.
Seven companies own more than 80 major brands. (In many cases the sister companies are not direct competitors; but in some cases, they are):
- Carlson Rezidor operates eight brands, including Country Inns, Park Plaza, and Radisson.
- Choice Hotels operate 11 brands, including Clarion, Comfort Inn, Econo Lodge, Quality, and Rodeway Inn.
- Hilton operates 11 brands, including Conrad, Doubletree, Embassy Suites, Hampton, Hilton, Homewood Suites and Waldorf Astoria
- Intercontinental Hotels operate 11 brands, including Candlewood, Crowne Plaza, Holiday Inn, Intercontinental, and Staybridge.
- Marriott/Starwood operates 27 brands, including Courtyard, Fairfield Inn, Marriott, Renaissance, Residence Inn, Ritz-Carlton, Springhill, Le Meridien, Sheraton, St. Regis, W Hotels and Westin
- Wyndham operates 14 brands, including Baymont Inn, Days Inn, Hawthorn, Howard Johnson, Knights Inn, Ramada, Super 8, Travelodge and Wyndham.
- Accor, the most significant player in the hotel industry outside of the US, has 26 brands including Raffles, Fairmont, Sofitel, Novotel and Pullman, Ibis, Formule 1, Swissôtel, Mercure and Adagio.
Lodging is the largest segment of the travel industry. As such, there are many players in the industry. (As well as many small, individually owned hotels, B&Bs, motels, etc.).
In a few markets, the above-noted chains hold the majority of the lodging market. However, as a whole, the industry is not nearly as dominated by a few companies as other parts of the travel industry.
Possible Future Lodging Consolidations
That said, consolidation is more active in the lodging market than most other parts of the industry. The 2016 merger of Marriott and Starwood left it as the dominant player in several large markets, such as Minneapolis and Mexico City, particularly in North America.
We should expect to see more and more consolidation mainly since there are still many chains and individual hotels left for the dominant players to acquire. That said, hotel chains will probably not dominate the lodging industry because:
- They will face increasing competition from the sharing economy, especially Airbnb, and
- The smaller, individual hotel and chains will be able to stem off pressure from more significant players in the industry by:
- concentrating on improved customer service (meaning good reviews on sites like Trip Advisor); and
- providing specialized consumer experiences.
What are the Effects of Industry Consolidation on Travel Consumers?
Some travel experts support consolidation. They believe consolidation creates:
- financially stronger corporations with more purchasing power; and
- comprehensive loyalty programs, that can benefit travelers.
However, most experts caution that there’s a long history of consumers not benefitting from mergers and acquisitions. In most industries, customers are best served when competitors fight fiercely to please consumers, not conspire against consumers’ interests. Consolidation may help a company’s bottom line, but more often than not, it does not benefit consumers.