The Travelocity brand has not been particularly strong for a while now, despite the marketing efforts of their travel gnome. The company – owned by travel giant Sabre – has been shedding divisions in recent months, including their Zuji brand in Asia, their business travel segment in the United States and Holiday Autos in the UK. Their latest move, however, might just be the most surprising: Travelocity’s main search features will be powered by Expedia starting in 2014. What once were two cut-throat competitors are now going to mostly be the same operation, marketing under different brand names but powered by the same technology behind the scenes.
The net result of this move is that effectively the two companies are merged. Yes, Travelocity will retain their marketing arm so the gnome really isn’t going anywhere yet. And their executives claim that they will provide different sales and promotions to keep the pricing and offerings different. But that seems quite the dream state, really, rather disconnected from reality. Especially in the airfare market where the fares are generally the same across the board excluding OTA-imposed fees, it seems unlikely that this move will really keep competition strong. And, depending on certain conditions in the coming months, it may be possible for Expedia to acquire Travelocity assets in the future as part of this deal.
It is hard to see this as a positive for consumers. On the one hand, the larger buying power of the consolidated organization means a theoretically more powerful negotiating position for the company, meaning better discounts or lower rates. But there is no reason to believe that those savings will be passed along to the consumers, especially when there is less competition which would have otherwise necessitated such end-user benefits. This is not officially a merger, at least not yet. But it does raise a number of questions as to just how consumers will be able to comparison shop in the future with the loss of a major competitor in the space. To be fair, this is hardly the first time a major travel engine has used different brand names powered by the same systems to “compete” over customers. Hotels.com is just another skin of the Expedia platform, as is their European arm, Venere.com. Priceline and Orbitz (and their other brands) still remain as major competitors, but the major OTA market is definitely shrinking.
Much like regular travel agents, the OTA market involves low margins and lots of price-sensitive customers. There is very little in the way of loyalty and the customer service costs are not trivial. It is understandable that they’d want to consolidate their operations to cut costs. But that doesn’t necessarily translate into good news for customers. And, unlike the AA/US merger, the DoJ is not likely to get involved in this one.
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