Posted on: September 10, 2012
Another Big Three
If consumers had to choose between competition and a multiplicity of choices, what would they prefer?
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It's a difficult question because in many minds, competition and choice are the same thing. Having many choices in the marketplace is one of the byproducts of healthy competition, right?
Ordinarily we would agree with that, but the car rental industry in the U.S. might be giving us the best example so far of how a travel industry segment can become more and more concentrated, while preserving at least the illusion of choice.
Stroll through the arrivals area of most mega-airports in the U.S. and you'll find seven or eight brands, maybe more. But if the Hertz acquisition of Dollar Thrifty goes through as planned, the top three companies will end up with about 95% of the U.S. car rental market, either directly or through their licensed franchisees. For many consumers, this high level of concentration will continue to be masked by the preservation of all the familiar consumer-facing brands.
This is not a new phenomenon, nor is it new to travel. Both the hotel and cruise industries, for example, are dominated by big firms with multiple brands that cater to different market segments, much in the way that Detroit's old Big Three dominated the U.S. auto industry in the previous century.
In this century, however, the phrase "the big three" is finding more and more uses in travel.
We know of no reason why the Federal Trade Commission should stand in the way of this transaction, but we wonder where the travel industry goes from here.
Wherever it goes, we hope it heeds a lesson from the history of Detroit's Big Three and the Big Three of American broadcasting. There may be advantages to being big and there may be advantages to having a big three, but there are no guarantees on either count.