The Expedia Orbitz Merger: What It Means For Travelers

Last week, Expedia announced a $1.6 billion acquisition of market competitor Orbitz, in a deal that consolidates two of the travel industry’s most well known brands.

The deal, which was announced last Thursday, is still pending shareholder review and comes just weeks after Expedia purchased another big-name competitor, Travelocity, for $280 million.

Expedia’s growing portfolio of travel companies now includes Hotels.com, Hotwire.com, and Asia Pacific based travel company Wotif Group.“We are attracted to the Orbitz Worldwide business because of its strong brands and impressive team,” said Expedia CEO Dara Khosrowshahi in a statement announcing the deal. “This acquisition will allow us to deliver best-in-class experiences to an even wider set of travelers all over the world.”

But what does this really mean for the consumer?

Related: Expedia Buys Orbitz for $1.33 Billion

(Photo: Nick Ut/AP Photo)

Well, first we have to understand how the Online Travel Agency (or OTA) industry is structured.

In 2015, only 15 to 16 percent of the total volume of travel purchases are made using OTAs like Expedia and Orbitz. That is actually a surprisingly low amount. But in that sector there are now, due to the merger, two clear powerhouse leaders: Expedia and Priceline, which up until last week, was the market leader in Internet travel bookings.

“There are tons of other ways for travel to be purchased,” explains Rocketrip CEO and founder Dan Ruch. “So if you think about the volume of travel purchased through Expedia or Orbitz, compared to total spend, it’s not that much. But inside that slice of the pie, it’s now a two-horse race.”

Having just two main ‘distributors’ creates a form of duopoly, potentially giving those businesses the power to squeeze suppliers (hotel companies) to provide better rates, due to a now-increased market share.

“Expedia, with Orbitz, now has more buying power,” continues Ruch. “And by that, I mean they have more power to go and negotiate more favorable margins. Not only for themselves, but for their customers as well.”

However, according to travel expert Gautam Lulla, president of TravelTripper.com, these cost savings are unlikely to ever be truly felt by the consumer.

Related: 10 Secrets the Airlines Don’t Want You to Know

(Photo illustration: Joe Raedle/Getty Images)

“Consumers won’t see too much of a difference in price,” explains Lulla. “Although the consolidation means that Expedia will have more leverage to get hotels to give them better rates, they likely don’t want to go down that road.”

“What you will see is Expedia utilizing its new strength to try and sell more hotel-plus-flight packages and chip away at the market share held by its biggest rival, Priceline.”

So the price reductions will only benefit Expedia, and not the end customer.

“No matter which of the ‘storefronts,’ for want of a better phrase, that a consumer is engaging with, whether it be Expedia or Orbitz, the content or offering with regards to inventory and pricing, is going to be the same,” says Cheryl Rosner, CEO of Stayful and former president of Expedia Corporate. “But from a brand perspective, or a loyalty perspective, they can merchandize the same inventory for different loyalty programs.”

Essentially, they will be repackaging the same hotel rooms with the same rates in different ways, depending on which site a consumer is using.

Aside from potentially driving down rates, experts say that Expedia and Orbitz may also be able to create synergies between their brands to offer better package deals. “For the consumer, Expedia will be able to leverage Orbitz’s expertise on flights and cross-pollinate with Expedia’s strength in hotels,” Lulla explains.

Related: No More Fees, Please! 5 Airline Extras We Can’t Stand (and Some We Don’t Mind)

Plus the sharing of company data can help them perfect their offerings across the two brands. “The company will know more about consumers’ travel purchases, particularly on airline tickets where Orbitz is strong, and cross-sell hotel stays. Expedia will be able to offer consumers better deals and opaque packages that include the price of the hotel and flight all together,” says Lulla.

However, flight prices alone are not likely to be impacted because, as Bloomberg put it, “the economics of the situation is in hotels.”

“The margins in airline travel are already really small, so there is very little room there for them to change,” explains Ruch.

Unfortunately, there is usually a loser in these situations — and in this case it is likely to be the hotels. Smaller, privately owned hotels to be exact. “Consolidation among distributors means that hotels will have less leverage in negotiating contracts with them,” explains TravelTripper’s Lulla. “Larger brands such as Hilton and Marriott will be fine; it’s the independent and boutique hotels that have more of the disadvantage.”

Especially considering a large percentage of boutique and independent hotel bookings are made through OTA’s — most of which take up to 30 percent commission. “A lot of the hotels that we work with are very concerned about being leveraged for higher payments,” reveals Stayful’s Rosner.

So for travelers planning a trip, whether you plan to use Expedia or Orbitz or not, this merger is unlikely to have very little tangible effect, if any. But the one thing it may do is bring about some innovation from the brands’ competitors, much like we have seen in recent years with the growth of TripAdvisor and companies like Airbnb making more of a mark on the marketplace. “Companies that haven’t traditionally been in the booking space, such as TripAdvisor and Amazon, are testing out new models for selling hotels, and disrupters like Airbnb and HotelTonight are also changing the game,” concludes Lulla. “They are keeping the two giants on their toes.”

WATCH: Expedia Facing Regulation Issues in Proposal to Buy Orbitz

Let Yahoo Travel inspire you every day. Hang out with us on Facebook, Twitter, Instagram, and Pinterest. And check out Yahoo Travel’s original video series A Broad Abroad.