The travel industry is abuzz with chatter about a merger between travel powerhouses, Stella* and Jetset.
The two companies are proposing a merger that would see them join together to form the biggest network of travel agencies across Australia.
The ACCC is now investigating the proposed merger to ensure it doesn’t limit competition. Their initial findings raised a host of concerns.
In theory, a merger that creates a business with more power in fewer hands is bad.
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Should consumers be concerned?
My internal alarm bell isn’t going off in the case of this proposed merger and I don’t think consumers should feel alarmed either. I base this on three main reasons: stability, choices and ease.
Firstly, I think it will actually help reduce the risk to the consumer by creating a stronger and more stable competitor in the market place. Stella lost a swag of money last year, and this isn’t healthy for consumers. (Ansett collapse anyone?) If the merger results in a stronger travel industry, everyone wins.
Secondly, whilst travel agencies are greatly utilised by consumers booking holidays, there are other channels that suppliers can choose to sell their products through. So from Intrepid’s perspective as a supplier we don’t feel threatened by the proposed merger. To be frank, if the merged entity tries to get too heavy with us, we’ll just go around them.
Thirdly, the travel industry is a relatively easy industry to enter. The barriers to entry are low and new players are always emerging. New entrants are often leaner competitors than incumbents and can quickly carve out a place in the market. You only have to look at the success of Wotif and Webjet to appreciate this! Plus, suppliers support new entrants because they create competition in the market for their products.
In today’s globalised world ‘consolidation’ has become a bit of a dirty word. No one needs to wash their mouth out in this case. In my opinion, the merger doesn’t impact the consumers and so long as that remains the case and people buy holidays, I’m a happy man!
* Most Aussie travellers would know Stella’s key businesses, Harvey World Travel and Travelscene American Express. Jetset has three main businesses Jetset, Travelworld and Qantas holidays.
Darrell Wade is co-founder and CEO of Intrepid Travel