Acquisition of Travelocity by Expedia: Bad For You, the Consumer?
E xpedia, Incorporated can now add Travelocity to its portfolio of Internet travel web sites, as it has agreed to purchase its now-former rival from Sabre Corporation for $280 million in cash.
Expedia and Travelocity have had a marketing agreement since 2013 “in which Expedia Inc’s technology powered platforms for Travelocity’s U.S. and Canadian websites, while Travelocity drove additional web traffic to Expedia”, according to this article reported by Jeffrey Dastin for Reuters. “Travelocity is likely to maintain its unique brand within the umbrella of Expedia…”
Facing pressure from industry newcomers, “Travel websites have responded to the competitiveness by offering discounts and loyalty programs”, according to this article written by Chelsey Dulaney of The Wall Street Journal.
Because Travelocity was considered a “legacy” Internet travel agency — along with Expedia, Orbitz and Priceline — that caused me to wonder: as with consolidation in the commercial aviation industry, could this acquisition be bad for consumers? Could this mean fewer discounts and tighter restrictions of loyalty programs offered by Internet travel agencies? Is the supposed decreased inventory of this latest sale an indication of things to come?
With exceptions, that scenario might not happen immediately — if at all. The main reason is that the barriers of market entry are significantly more difficult in commercial aviation — due to high cost of capital and strict regulations by governments, to name a couple of factors — than those of Internet travel agencies, which means that it is more likely for a new start-up company to compete and keep the pressure on existing Internet travel agencies than it is for a new airline to be launched.
Then again, Eastern Airlines has been in the process of returning to commercial aviation, as I first reported back in 2009 — although the airline is still not yet officially in operation and a flight still not yet flown. Meanwhile, PEOPLExpress has all but failed in its second life, as none of its aircraft have flown in greater than three months.
Launching an Internet travel agency is not exactly easy, though. One factor is that you need to have access to a global distribution system — or GDS — provider such as Travelport or Amadeus in order to access the thousands of airfares available; and you need a robust Internet web site to be able to handle traffic and the technology necessary for success…
…and even the global distribution system industry had experienced consolidation over the years: Apollo, Galileo and Worldspan are all trademarks of Travelport.
I digress, though. What are your thoughts about the acquisition of Travelocity by Expedia?