At first glance, the online travel booking industry seems pretty competitive. You can book airplane tickets and hotel reservations using Expedia, Travelocity, Orbitz, Priceline, Hotels.com, Hotwire, and Kayak, among many other sites. The problem is that all of these brands are owned by three big companies — Expedia, Orbitz, and Priceline.
As this chart from the travel site Skift shows, the online travel industry used to have four big players. But earlier this year, Expedia bought Travelocity, reducing competition down to three big companies. Now Expedia wants to acquire Orbitz, which could give Expedia control of as much as 75 percent of the online travel booking market in the United States and only one major competitor.
As the Washington Post's Brian Fung notes, the hotel industry is lobbying the government to stop the deal. And federal regulators could block the transaction using antitrust laws. The question is whether critics can convince them that the deal would be bad for consumers.
This is a market where size really matters; the larger Expedia gets, the more leverage it has in negotiations with hotels, airlines, and others who provide travel services. Hotels fear that Expedia's growing share of online bookings will allow the company to charge providers larger booking fees — fees that hotels will ultimately pass along to customers.
And this is a relatively mature industry, so it won't be easy for new companies to build competing sites. Google has recently shown some interest in the market, but so far has chosen not to compete directly with Priceline and Expedia by offering online bookings. So if the government lets Expedia buy Orbitz, we could wind up with an online travel duopoly for the foreseeable future. That could be bad for both the travel industry and travelers.