¨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.¨
This post is the second part of a two-part blog on travel industry consolidations. The first part talks about airline consolidations.
If you are lucky enough like most Fifty-Plus Nomads to travel around the world or live abroad, chances are you’ll see the effects of travel industry consolidations on the travel experience.
Travel Industry Consolidations: Online Travel Agencies
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).
Travel Industry Consolidations: Car Rentals
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 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.
- 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).
Travel Industry Consolidations: Cruise Lines
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.
Travel Industry Consolidations: Hotels
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 in 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).
- providing specialized consumer experiences.
What are the Effects of Travel Industry Consolidations on Consumers?
Some travel experts support consolidation. They believe consolidation creates:
- Financially more robust corporations with more purchasing power.
- Comprehensive loyalty programs that can benefit travelers.
However, other experts caution that there’s a long history of consumers not benefitting from mergers and acquisitions. In most industries, customers benefit when competitors fight fiercely to please consumers, not conspire against consumers’ interests. Consolidation may help a company’s bottom line, but it does not benefit consumers more often than not.
It appears that travel industry consolidation after Covid will become more and more a fact of life.
Travel Economics 101 Posts
Here are several posts designed to give Fifty-Plus Nomads a basic idea of how Travel Economics works. Being armed with a better economics education should make you a better travel consumer. (You can read the posts in any order) .
- Travel Alliances are Essential: But Are They Worthwhile for Consumers?Travel industry alliances are essential to the business´s survival. However, alliances have both good and bad implications for consumers
- Ancillary Travel Fees: Why Are They Increasingly Becoming An Industry Lifeline?More and more the travel industry depends on the sale of other products to expand and maintain its profitability. Expect to be bombarded with hints to buy other things (ancillaries) on your next cruise, flight, etc.
- The Long and Complex History of the Travel Industry and the InternetThe internet has changed the travel industry probably more than another industry. This article discusses how these changes affect the consumer.
- 3 Travel Industry Cost Savings Techniques: The Good, the Bad, and the UglyThe travel industry has made several changes to save costs in recent times. Some like using more fuel-efficient planes do not affect consumers that much. Others like reducing staff have made the experience worse for consumers.
- Business Travelers Versus Leisure Travelers: The Ultimate Airline ShowdownThe travel industry gets most of its clients from leisure travelers. However, it makes more money from business than leisure passengers. The airlines put up with us leisure travelers because they couldn’t survive without us. However, they don’t hide their preference for business travelers.
- Why Are There So Many Connecting Flights? A Discussion of Why Airlines Love the Hub-Spoke Model More than ConsumersUnbeknownst to most consumers, the cause of most of our airline-related complaints is the hub-spoke model. Unfortunately, however, the hub-spoke model is also essential to the airline industry’s financial viability.
- Airline Schedule Changes: Why Don’t Airlines Keep their Promises?Learn why airlines change their schedules after you buy your tickets and what you can do about it.
- How Much Travel Taxes and Fees Do Consumers Pay For Airfare, Hotels, and Other Travel Services?The amount and number of travel taxes, fees, and other charges added to your bill will probably surprise you. Many are hidden and like everything else, taxes keep going up.
- Airline Consolidation: Consumer Disadvantages and AdvantagesThe airlines have consolidated so fast in the USA and Canada that only 5 players dominate the market. Learn what this means for consumers.
- 4 Travel Industry Consolidations (Non-Airlines): Consumer’s Nightmare or Benefactor?Probably the most significant change in the travel industry in the past couple of decades has been the industry’s rapid consolidation. Read this post to discover how few travel players really exist in the market today. and how this rapid consolidation has affected consumers.
- Why the Sharing Economy Has Become So Popular in the Travel Industry?The sharing economy like Uber and Airbnb has made a major influence on the travel industry and will continue to affect the industry far into the future.
- Third World and Chinese Travelers: The Biggest Future Travel TrendThe biggest change affecting the travel industry is the gigantic increase in emerging countries and Chinese travelers. These travelers will change the future face of tourism more than anything else.
- The 3 Reasons Travel Prices Are So Radically Different than Other Products: Perishability, Capital Costs, and Yield ManagementHave you ever wondered why travel products seem to be priced so crazily? Learn the three economic factors that contribute to the pricing of travel products: perishability, high capital costs, and yield management.
- Travel Economics 101: Learn How the Industry Works and Save Yourself Money and HeadachesPaul Heller, the Fifty-Plus Nomad founder, has developed a series of posts about travel economics. Reading these posts will help Fifty-Plus Nomads deal with some of the problems with the travel industry they are likely to encounter during their long-term, round-the-world journeys.