Today's print issue of Travel
Weekly contains the final installment of Travel+Money, one of the
most ambitious editorial projects this publication has undertaken.
We set out to do what no one had done before: Explain the often
complex economics of the travel industry to ... the travel
As it turns out,
there are probably more differences than commonalities in the
underlying economic forces that drive the sectors of our
When consumers take
a vacation, they may purchase travel elements from a (traditional
or online) travel agency, fly to a destination, pick up a rental
car, drive to a hotel and end up on either a cruise or a
To the consumer,
it's seamless, and although all the companies involved in this
travel experience want the vacationer to have an enjoyable
experience, that desire to please the consumer may be the only
thing these businesses have in common.
Hotel companies? If
they don't understand real estate, they're out of business. Renting
out cars is only half the battle for car rental companies; the
other half, knowing when to buy or sell the autos in their
inventory, will make or break them. For cruise lines, the critical
factor is sailing full; rate and yield are determined by capacity
considerations, not the other way around.
must be gluttons for punishment to enter an industry that has, in
aggregate, not yet turned a profit. Travel agencies search for ways
to live by the ever-changing rules set by all the others in the
industry, and those agents who have survived -- some thriving --
have done so by morphing and morphing and morphing
For tour operators,
the rules are simple: Bundle travel components and mark them up.
But making money on this simple formula seems to confound all but
the most creative, hard-working entrepreneurs.
And as for the
reservations systems, well, read for yourself in our final
The fate and
fortunes of all these sectors, each with its own, distinctive
business model, are both fluid and intertwined.
chemistry and physics of our industry that determine how the
component pieces interact and where money flows may help explain
why it is shaped as it is, a mix of sectors rather than a unified
About 10 years ago,
there was a serious movement afoot to create "roll-ups," vertical
companies that would join travel agencies, reservations systems,
hotels, car rental companies, tour operators and airlines in
Hertz, Hilton International and the forebear of Westin survived
under the Allegis umbrella for a period. Cendant struggled for more
than a decade, piling on travel companies as it tried to find
economic synergy among its hotel brands, car rental companies,
reservations systems and online agencies before throwing in the
stories, Libgo and Amex, tend to keep it simple, combining only
tour operations and travel agencies. Carlson pushes the limits with
interests in hospitality, a cruise line and travel
the new aggregator, may have learned the lessons of the past.
Although it has been acquiring a collection of travel properties,
it makes no noises about trying to find a master strategy for
leveraging its travel brands. It appears simply to have invested in
a portfolio of travel products.
It was, in part,
the recognition of the differences among the sectors in our
industry that led to our decision to publish the Travel+Money
series. And it's our hope that at the end of the day, a better
understanding by each sector of what makes the others tick
economically will lead to the types of transactions, deals and
partnerships that lift the industry as a whole.