Now that Expedia (NASDAQ:EXPE) has bought out rival travel booking web platform Orbitz (NYSE:OWW), a familiar debate regarding the desirability of consolidations has surfaced. You have to remember that the fewer players there are in the market, the higher is the likelihood that prices will go up or selections will be severely curtailed. It is safe to say that, at this point in time, the online ticket-booking and travel-booking industry hasn’t been completely monopolized. However, the recent consolidations do give industry observers reason to worry.
You have to remember that, prior to the Orbitz deal, Expedia also bought out Travelocity. The number of players is definitely decreasing. Is this necessarily a good thing for consumers? Should we get worried?
Again the debate falls into familiar territory. On one side, you have boosters saying that this produces economies of scale and better bargaining power by platforms on behalf of consumers. The hope is that, since these online platforms have so much buying power, they can put pressure on airlines and hotels to give them their best rates. This may be wishful thinking.
If the market has consolidated so much where there are only two major players, the remaining players have all the incentive in the world to keep prices artificially high, or otherwise, not compete as much. The consumer loses at the end. If you need proof regarding this, just look at how things have played out in the cable industry. While these acquisitions of Expedia are definitely a good move from the perspective of investors, it might not necessarily be a good deal for consumers looking to book their next vacation’s airline tickets and hotel rooms.