Editor's Note: ASTA's 2014 Journalist of the Year James Shillinglaw has been writing a regular weekly column for TravelPulse for some time now, but now, as part of our new Industry Insider section, we've asked him to provide more news analysis and commentary on the issues and stories of the moment. Here is his first offering, based, as he says with great humility, on his fairly limited 25 years covering the travel business.
I wrote about this topic earlier this week, but I keep wondering just what is happening to the online travel market. To say it's consolidating is an understatement. There will now be just two companies, Expedia and Priceline, controlling the vast majority of the online travel brands in the market today. Indeed, by some counts Expedia will control two thirds of all third-party online travel business. That's starting to worry (and starting is probably not strong enough) a lot of hotels, particularly independent properties.
In a different era, the federal government might get involved and take a long, hard look at this transaction. But the fact is that online travel agencies are lumped together with all travel agencies, while online bookings are measured against all online bookings, including direct to supplier bookings. So on its face, Expedia won't have a majority share of travel bookings as a whole. But in its third-party online travel agency segment, it is now an even bigger giant than it already was.
Expedia also may be poised to start moving back into the airline market to get additional revenue. The irony here is Expedia began in 1996 as a way for consumers to book airline fares. Then, as airlines figured out they didn't want to pay high commissions to online travel agencies, Expedia turned to hotel sales, where it now makes most of its money, as does nearly every single other OTA.
What online travel agencies have done over the past 10 plus years is collect brands and consolidate, because their margins are relatively thin. Indeed, if you look at the major online players, brand ownership breaks down to this:
Expedia Inc.'s brands include Expedia, Travelocity, Hotels.com, Expedia Affiliate Network, Egencia, Hotwire, eLong, Trivago, Venere.com, CarRentals.com, Classic Vacations, Expedia CruiseShipCenters, Expedia Local Expert and Wotif Group.
Orbitz's brands, soon to be part of Expedia, include Orbitz, Orbitz for Business, CheapTickets, eBookers, HotelClub, Mr. Jet, RatestoGo, Asia-Hotels.com and Trip.
TripAdvisor, which was spun off from Expedia two years ago and now has what has been described as a "complicated" relationship with its former parent, has 24 other travel media brands, including tripadvisor.com www.airfarewatchdog.com, www.bookingbuddy.com, www.cruisecritic.com, www.everytrail.com, www.familyvacationcritic.com, www.flipkey.com, www.thefork.com (including www.lafourchette.com, www.eltenedor.com and www.iens.nl), www.gateguru.com, www.holidaylettings.co.uk, www.holidaywatchdog.com, www.independenttraveler.com, www.jetsetter.com, www.niumba.com, www.onetime.com, www.oyster.com, www.seatguru.com, www.smartertravel.com, www.tingo.com, www.travelpod.com, www.tripbod.com, www.vacationhomerentals.com, www.viator.com, www.virtualtourist.com, and www.kuxun.cn. Some of these brands are beginning to offer booking functionality as well.
Finally, Priceline Group's brands include Priceline, Booking.com, Agoda.com, Kayak, Rentalcars.com and OpenTable. It claims it has the lion's share of all online travel bookings worldwide, mainly due to its Priceline and Booking.com units.
That, in a nutshell, is what's happening to the online travel space today. Now, as I pointed out in my earlier column, this is great news and an even greater opportunity for traditional travel agents, whether they are working in a storefront, office, at home or remotely in some way.
Consumers just aren't going to need to go to a million sites to get what they think are great deals, because the pricing will be mostly the same. For their part, however, travel agents have access to most of the same rates that online travel agencies do, but they also have other fares and rates that aren't available to the public through the OTAs.
With that said, I do wonder about the power now concentrated in two online companies, Expedia and Priceline. In a growing economy, that power is dissipated to some degree, but if we go into another recession (and we will), it's likely the two online giants will have much more leverage with hotels, something that I'm not sure will be all that good for consumers in the long run.
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