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 industry.

As it turns out, there are probably more differences than commonalities in the underlying economic forces that drive the sectors of our industry.

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 tour.

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.

Airline executives 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 again.

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 installment.

The fate and fortunes of all these sectors, each with its own, distinctive business model, are both fluid and intertwined.

The complex 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 whole.

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 various combinations.

United Airlines, 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 towel. 

The success 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 agencies.

Blackstone Group, 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.

Comments

From Our Partners

Crystal Cruises – What’s Next, 2020 & the 30th Anniversary Collection
Crystal Cruises – What’s Next, 2020 & the 30th Anniversary Collection
Watch Now
HAL_AlaskaCruising_Hero
Capitalizing on a Peak Year for Alaska Cruising
Read More
2020 Elite Island Webinar
More Family Fun in St. Lucia @ St. James’s Club Morgan Bay
Register Now

JDS Travel News JDS Viewpoints JDS Africa/MI