The first half of 2009 will see continued consolidation in the travel industry. The big and strong will be getting bigger and stronger and the small will face a tough time. Industry consolidation at the same time will be up against increased consumer search for better bargains.
Travel industry consolidations will limit choices
The airlines have already started the consolidation trend. In the United States, they are consolidating openly with actions such as the merger of Delta and Northwest and US Airways and America West. In Europe the airlines are merging under the banners of Lufthansa, and Air France/KLM.
The big international airlines stateside are also consolidating surreptitiously through airline alliances with obscure governmental rules and regulations that govern their business interactions. Some of those alliance regulations currently being debated in Washington would allow a group of airlines to bargain collectively with suppliers and price uniformly to consumers.
As these airlines band together, offering fewer brand options for consumers, they are also aggressively downsizing their route systems and cutting capacity. This is squeezing consumers even more and offering them less choice.
Online travel agencies (OTAs) have begun to feel the pinch. Rumors are flying that there may be a consolidation of some of the biggest names in the online travel agency world. The current shuffle of retiring executives and reassigned senior managers is ample evidence of profit stress in these agencies from Expedia to Travelocity to Orbitz.
Tour operators on both sides of the Atlantic are cutting back on offerings. There is an estimate of a more than a 10 percent reduction in organized tour offerings for the coming year.
Even with this shrinkage, bargains will abound as the airlines, tour operators and travel agencies compete for consumers. Some pundits are predicting lower prices for vacations to Europe and major American destinations are already in bargain mode.
Consumer search for bargains and deals will increase
Together with the contraction on the supplier side of the equation, consumer search for travel bargains will expand. Whereas they may have looked at four Web sites before making a decision on their vacations and flight bookings in 2008, they will be looking at probably at least six in 2009.
The more one searches, the better bargains appear. As some major online agencies combine, new ones will start and competition will continue. However, it will take more searching and a shift in consumer patterns.
Consumer search through travel vacation opportunities on the Web will see a shift as well. I believe more and more Web users will begin to see the benefits of dynamic packages and non-standard packaging of connecting flights.
Supplier sites run by airlines and hotels have recently become much more aggressive in their pricing and are rarely undercut by online travel agencies as they were in the past. However, these hotel and airline sites are limited to one brand. As bargains appear that combine brands, supplier sites will either adapt or lose business.
For example: Expedia can now combine the lowest fare offered on a supplier site such as American Airlines or Continental Airlines with the lowest prices available for hotels offered separately by Marriott or Westin or Best Western. That kind of dynamic packaging is not available from the supplier sites.
Other online booking sites such as Cheapoair.com, cheaptickets.com or cheapair.com find ways to combine airline flights of non-alliance airlines or they mix a departure on one airline with a return flight on another to create a bargain that is simply not available through proprietary airline booking sites.
Last summer my air transportation to Venice combined a non-stop American Airlines flight from Boston to Paris with an Alitalia (code share with Air France) flight from Paris to Venice. Even though the airlines were not in the same alliance, they managed to check my bags through from Boston directly to Venice and by combining these two flights, cheaptickets.com saved me more than $220 over the offerings available on any traditional airline site.
Even though the travel landscape may change with consolidation in some areas, new opportunities for consumers will be discovered through better use of the remaining OTA sites as well as hotel and airline sites.
Where, once upon a time, I urged travelers to search at least three airline sites for bargains before booking, today’s Web world demands a better look at changing flight combinations that will land travelers better bargains. Plus, whenever possible, try to create a dynamic package by combining air, hotel and auto rentals with one non-affiliated online travel agency for more savings.
Charlie Leocha is the President of Travelers United. He has been working in Washington, DC, for the past 14 years with Congress, the Department of Transportation, and industry stakeholders on travel issues. He was the first consumer representative to the Advisory Committee for Aviation Consumer Protections appointed by the Secretary of Transportation from 2012 through 2018.
