Vertical integration has long been a part of the travel industry, with airlines and hotels often choosing ownership-based partnerships to control the customer journey from booking to check-out.
Having said that, as the industry evolves, many companies are moving away from these rigid structures, favoring more flexible, technology-driven models that offer greater agility and scalability.
This shift has significant implications for both businesses and travelers, influencing everything from pricing strategies to customer loyalty.
In this article, we’ll explore why traditional ownership models are falling out of favor, the challenges they pose, and what this trend means for the future of airline and hotel partnerships.
The symbiosis between air travel and accommodations has been evident since commercial aviation's earliest days. As airlines expanded their routes globally in the mid-20th century, travelers needed places to stay, creating a natural alignment that companies quickly recognized.
This mutually beneficial relationship led pioneering airlines and hotel groups to establish the first partnerships, laying the groundwork for what would eventually become sophisticated, integrated travel ecosystems.
While these early alliances were relatively simple in structure, they represented an important recognition that the traveler's journey extended beyond the aircraft door. Here’s a brief overview of how they began.
The 60s and 70s witnessed the first structured partnerships between airlines and hotels moving to formalized business arrangements. During this period, airlines would often direct passengers to partner hotels through in-flight magazines or crew recommendations.
In return, they’d receive commissions for successful bookings while hotels gained reliable streams of international guests who might otherwise struggle to find accommodations in unfamiliar destinations.
Pan Am's creation of InterContinental Hotels in 1946 stands as perhaps the most significant early example of this relationship, designed specifically to provide accommodations for crew and passengers in far-flung locations where quality lodging was scarce.
Such arrangements showcased vertical integration, enabling airlines to enhance their service offerings, especially in developing markets where standardized travel experiences were still emerging.
American Airlines' launch of AAdvantage in 1981, followed quickly by competitors' programs, revolutionized how travelers engaged with travel brands and created new opportunities for cross-industry partnerships.
These early frequent flyer programs focused primarily on flight rewards, but executives soon recognized the potential for expanding these schemes to encompass the entire travel journey, including hotel stays, car rentals, and other travel experiences.
The introduction of magnetic stripe cards and early digital databases enabled more sophisticated tracking of customer activity across partners, making it possible for travelers to earn airline miles for hotel stays and vice versa.
Pioneering programs like Marriott Rewards (launched 1983) and Hyatt Gold Passport (1987) began forging reciprocal earning agreements with airline partners.
This created early versions of the comprehensive travel ecosystems we know today, fundamentally changing consumer expectations about how loyalty should be recognized across the travel experience.
The formation of Star Alliance in 1997, followed by Oneworld (1999) and SkyTeam (2000), represented a fundamental shift in how airlines approached partnerships, prioritizing networks over individual bilateral agreements.
The alliance model offered significant advantages for business travelers in particular, who could enjoy more consistent recognition of their status and preferences across multiple travel providers.
However, these complex multi-party agreements also presented considerable challenges in creating truly seamless experiences.
This was a consequence of differences in company cultures, technological systems, and service standards, resulting in inconsistent customer experiences that undermined the promise of frictionless travel across alliance partners.
In the mid-20th century, several pioneering airlines ventured into hotel ownership, aiming to create seamless travel experiences through vertical integration.
Airlines saw hotels as a natural extension of their brand, offering passengers curated accommodations to complement their flights. This strategy promised enhanced customer loyalty and diversified revenue streams, aligning with the era’s burgeoning jet-set culture.
However, they underestimated the complexities of the hospitality industry, which demanded expertise in real estate, local regulations, and guest services—areas far removed from their core competencies in aviation.
These ambitious ventures faced insurmountable challenges ranging from operational mismatches to financial strain. Hotels thrived initially but struggled with inconsistent branding and economic downturns, leading to their eventual sale.
The following examples of now-defunct alliances highlight the perils of overextending into unfamiliar industries, offering lasting lessons for modern commercial aviation.
Le Méridien, now part of Marriott International's extensive portfolio, was majority-owned by Air France for over two decades.
Founded in 1972, the luxury hotel chain had expanded to 58 properties worldwide when mounting financial losses forced Air France to divest its 57% stake in 1994. The UK's Forte Hotels acquired the brand, adding it to a collection that included the Savoy Hotel in London.
After multiple ownership changes, Le Méridien eventually became part of Starwood Hotels & Resorts before Marriott's acquisition of Starwood in 2016 brought it into the world's largest hotel company.
Few travelers today realize that InterContinental Hotels Group (IHG), one of the world's largest hotel companies, was originally established by Pan American Airways in 1946.
Pan Am created the hotel chain with a strategic purpose: to provide high-quality accommodations for its crews and passengers in Latin America.
The chain's inaugural property was the Grande Hotel in Belém, Brazil, followed by expansion into major Latin American cities including Caracas, Buenos Aires, and Rio de Janeiro.
As Pan Am's financial situation deteriorated, the airline sold InterContinental to UK-based Grand Metropolitan in 1981, a full decade before Pan Am's eventual collapse in 1991. Today, IHG operates over 6,000 hotels globally across 18 brands.
Westin Hotels, now a prominent Marriott brand, has an intriguing airline connection in its history. Founded in 1930 as Western Hotels in Seattle, the chain was acquired by United Airlines in 1970 and rebranded as Westin in 1981.
In 1987, United Airlines Chairman Richard Ferris unveiled an ambitious plan to transform UAL Corporation into Allegis, a comprehensive travel conglomerate.
This vision would have integrated United Airlines, Hertz Rent-a-Car, Hilton Hotels, and Westin, all connected through the Apollo global distribution system.
The Allegis concept failed to materialize, and Westin was sold in 1988 to Japan's Aoki Corporation. A decade later, Starwood Hotels & Resorts acquired Westin, which eventually became part of Marriott International through the 2016 Starwood acquisition.
Throughout its history, Westin pioneered several hotel industry innovations, including being the first major chain to accept credit cards (1946), offer 24-hour room service (1969), and provide personal voicemail in guest rooms (1991).
Golden Tulip represents another example of airline-hotel integration. Founded by 6 Dutch hoteliers in 1962, the chain became a division of KLM Royal Dutch Airlines in 1975. However, after 23 years of ownership, KLM sold Golden Tulip in 1998 to the Krasnapolsky Group.
The chain's journey continued with its acquisition by NH Hoteles (Spain's second-largest hotel group) in 2000, and eventually, Golden Tulip became part of the Louvre Hotel Group.
In a significant industry shift, Chinese hospitality giant Jin Jiang International acquired Louvre in 2015, integrating Golden Tulip into the largest hotel network in China and one of the largest worldwide.
Switzerland's national carrier, Swissair, partnered with Nestlé in 1980 to create Swissôtel, launching with the acquisition of Hotel Le Président in Geneva. The partnership aimed to extend Swiss hospitality excellence globally.
When Swissair ceased operations in 2002 due to financial collapse, Swissôtel was sold to Raffles Hotels & Resorts.
This began a series of ownership changes: Raffles later merged with Fairmont to form FRHI (Fairmont Raffles Hotels International), which was subsequently acquired by AccorHotels in 2016. The brand continues to operate as a luxury offering within Accor's extensive portfolio.
Japan Airlines (JAL) established JAL Hotels as its hotel management subsidiary in 1970. The operation expanded in 1999 when JAL Hotels merged with Japan Airlines Hotel Co. Ltd., adding the Ginza Nikko Hotel and Kawasaki Nikko Hotel to its portfolio.
This airline-hotel relationship persisted longer than most, but ultimately met a similar fate. When JAL entered bankruptcy protection in 2010, it was forced to sell its 79.6% stake in JAL Hotels to Okura, another prestigious Japanese hotel group.
JAL International retained a minority 11.1% ownership, with the remaining shares distributed among banks and investors.
While the theoretical synergies of vertical integration remain promising, financial realities and changing consumer preferences have pushed the industry toward different collaboration models.
In 2025, the travel industry prioritizes flexibility and digital integration. Airlines and hotels now collaborate mostly through codeshare and loyalty ecosystems rather than shared ownership, reflecting a shift toward consumer-centric, asset-light models.
These arrangements provide many consumer benefits without the problematic financial and operational entanglements like those mentioned below.
The airline industry's notorious volatility created a precarious foundation for hotel ownership ventures, as cyclical downturns inevitably led to liquidity crises.
During these financial squeezes, hotels were frequently the first assets divested, representing valuable properties that could generate immediate capital to shore up struggling airline operations, regardless of their strategic importance to the company's long-term vision.
Pan Am's sale of InterContinental Hotels in 1981 represents a classic example of this pattern, as does JAL's forced divestiture of its hotel division following bankruptcy protection in 2010.
These high-profile cases demonstrate how airlines' financial instability consistently undermined their ability to maintain cross-sector investments, despite the theoretical appeal of providing end-to-end travel experiences.
The hospitality industry's wave of consolidation through the 1990s and 2000s fundamentally changed the game, creating mega-chains with unprecedented scale and market power.
Independent hotel groups owned by airlines struggled to compete with these emerging giants like Marriott (following its Starwood acquisition) and Accor, which could offer more extensive global footprints and increasingly sophisticated loyalty programs.
Simultaneously, airlines discovered that alliance-based approaches like Star Alliance and Oneworld offered many of the network benefits of vertical integration without the capital requirements and operational complexities.
These parallel industry trends created powerful incentives for airlines to divest their hotel holdings, redirecting capital toward their core transportation businesses while securing partnership arrangements with increasingly dominant hotel groups.
External economic shocks have repeatedly devastated the airline industry, forcing carriers to prioritize immediate financial survival over long-term strategic investments.
The 2008 global financial crisis, and the COVID-19 pandemic represent the most dramatic examples of this pattern, with each crisis triggering widespread asset sales as airlines sought to generate liquidity during periods of catastrophically reduced passenger volumes.
These economic pressures highlighted the fundamental misalignment between airlines' need for operational flexibility during crises and the inherently fixed, long-term nature of hotel investments.
When passenger numbers plummeted during the pandemic, airlines with hotel divisions faced a double exposure to travel disruption, while those that had downsized could focus exclusively on their core transportation recovery, creating a powerful post-crisis vindication of the divestiture.
Today's travelers increasingly value personalization, flexibility, and unique experiences over traditional brand loyalty, which works against the original rationale for end-to-end travel ownership models.
Modern consumers assemble their travel experiences from diverse providers based on specific preferences and requirements for each journey, rather than relying on a single corporate ecosystem to fulfill all their needs.
This shift in consumer behavior has been particularly pronounced among millennials and Gen-Z, who demonstrate less interest in conventional hotel experiences and greater willingness to mix loyalty programs across different travel providers.
The integrated ownership model, which assumed travelers would value consistency across their entire journey, has struggled to adapt to these evolving preferences that prioritize customization and variety over standardized experiences.
The rise of sophisticated travel booking platforms has fundamentally altered how consumers research and purchase travel services, creating new distribution channels that have displaced traditional airline-hotel referral systems.
These digital platforms have effectively inserted themselves between travelers and providers, capturing valuable consumer data and controlling the customer relationship in ways that diminish the advantages of vertical integration.
As data-driven personalization has become increasingly important in travel marketing, the technological sophistication required to compete effectively has exponentially increased.
Most airline-hotel conglomerates struggled to make the necessary technology investments across both businesses simultaneously, creating competitive disadvantages against specialized providers who could focus their digital transformation efforts in a single sector.
The travel industry has undergone a fundamental shift from asset ownership to value creation through strategic partnerships, driven by the painful lessons of failed conglomerates.
Today's most successful airline-hotel relationships embrace an ecosystem approach that prioritizes agility and specialized expertise, allowing each entity to focus on its core competencies while creating mutually beneficial touchpoints across the customer journey.
These asset-light strategies have proven particularly valuable during industry disruptions, as they distribute risk more effectively than traditional consolidated ownership structures. Examples include the following.
Modern loyalty collaborations have evolved beyond simple point transfer mechanisms into sophisticated ecosystems that recognize customer value across multiple touchpoints in the travel journey.
The most advanced programs now offer status matching, reciprocal elite benefits, and integrated milestone tracking that transcends individual brands.
Hilton Honors' partnership with Lyft, which allows members to earn hotel points for rideshare expenses, exemplifies this trend toward creating value in unexpected moments throughout the travel experience.
These cross-sector loyalty relationships deliver substantial data advantages that arguably exceed what could be achieved through corporate ownership.
By establishing consensual data-sharing frameworks governed by partnership agreements, companies gain visibility into customer behavior beyond their own platforms without assuming the risks and costs of acquisition.
Cathay Pacific's relationship with Shangri-La Hotels demonstrates this approach, with both companies leveraging shared insights to deliver personalized offers while maintaining operational independence and specialized excellence in their respective fields.
Financial partnership products have become the linchpin of modern travel ecosystems, generating substantial revenue streams that have transformed how both airlines and hotels view their collaboration strategies.
The economics are compelling: Chase reportedly paid approximately $330 million to Marriott in 2018 for their co-branded credit card agreement, while American Express's Delta partnership was valued at approximately $4 billion over the contract term.
Effectively, this created financial relationships that often exceed what could be achieved through corporate ownership models.
Arrangements like these have evolved beyond simple co-branded cards into sophisticated ecosystem plays that encompass payment processing, currency exchange, travel insurance, and even banking services.
Application Programming Interfaces (APIs) have revolutionized travel partnerships by enabling real-time connectivity between previously siloed systems, creating interesting opportunities.
Modern travel APIs support sophisticated functionality beyond basic booking, including ancillary service selection, real-time inventory updates, and complex business rules that maintain brand standards while enabling seamless cross-selling between partners.
Emirates' integration with Expedia through NDC (New Distribution Capability) APIs exemplifies this approach, allowing travelers to customize their entire journey within a single interface.
The API economy has democratized access to travel inventory, enabling specialized companies to create targeted solutions for specific market segments without the scale requirements of traditional distribution systems.
Innovative startups like Hopper, which leverages predictive analytics to recommend optimal booking times, and Freebird, which offers rebooking services during travel disruptions, can now access inventory from major travel providers through standardized interfaces.
This technological evolution has created an innovation ecosystem around core travel services that delivers customer value through specialization rather than consolidation—a stark contrast to the vertically integrated models of previous decades.
While the industry has largely embraced asset-light models, a few notable exceptions demonstrate vertical integration can still succeed under specific conditions.
These surviving entities typically share key traits: strong regional focus, specialized market segments, comprehensive destination expertise, and management teams with cross-sector experience.
The persistence of these models (primarily in Asia and Europe) reflects regional differences in business culture, regulations, and consumer preferences.
Northern European markets with package holiday traditions and emerging Asian destinations with developing tourism infrastructure continue to support full-integration approaches. The following exceptions highlight where traditional integration models may still offer advantages.
AirAsia's venture into the hospitality sector represented a distinctive approach to vertical integration, specifically designed to extend its disruptive low-cost carrier model into accommodations.
Unlike historical airline-hotel partnerships that focused on luxury or full-service properties, Tune Hotels embraced a "limited service" concept that stripped away traditional amenities in favor of essential quality at rock-bottom prices—perfectly complementing AirAsia's value proposition and target demographic.
This alignment of business philosophy and customer segment offered clear advantages over traditional airline-hotel partnerships that often struggled with mismatched positioning.
The venture's limited success despite its strong conceptual foundation highlights the execution challenges that plague even well-conceived integration strategies.
Tune's expansion decelerated significantly after initial growth, hampered by operational complexity, capital constraints, and intense competition from budget hotel chains and alternative accommodation providers.
The rebranding of its London properties as Point A Hotels in 2017 signaled a strategic pivot away from the original pan-Asia expansion vision, suggesting that even this carefully calibrated integration approach struggled to deliver sustainable competitive advantages in diverse global markets.
The European package holiday market has sustained integrated travel companies through its distinctive consumer preferences and regulatory framework, particularly the Package Travel Directive that creates specific legal protections for bundled services.
TUI Group has navigated this area successfully by maintaining tight vertical integration across 400+ hotels, five airlines with 150 aircraft, 1,600 retail locations, and numerous cruise ships and destination experience operations.
This comprehensive integration enables TUI to control quality throughout the customer journey while capturing margin at every touchpoint—a stark contrast to the asset-light approaches dominating other markets.
Thomas Cook's dramatic collapse in 2019 after 178 years of operation underscores that even established integration models face existential challenges in the modern travel ecosystem.
Despite similar vertical integration to TUI, Thomas Cook struggled with massive debt burdens, declining retail operations, and insufficient digital transformation—culminating in a £1.5 billion shortfall that led to its liquidation and the largest peacetime repatriation of British citizens as 150,000 travelers were stranded abroad.
Its subsequent resurrection as a digital-only brand without physical assets represents a telling industry shift, as even this storied name ultimately abandoned integration in favor of the asset-light model that dominates today's travel business.
HNA Group's meteoric rise and subsequent financial challenges represent perhaps the most dramatic example of ambition exceeding sustainable execution in travel integration.
The conglomerate's acquisition strategy differed fundamentally from historical airline-hotel partnerships by prioritizing financial engineering and global scale over operational synergies, resulting in a sprawling portfolio that included stakes in Hilton Worldwide, Deutsche Bank, Ingram Micro, and dozens of other seemingly unrelated businesses across multiple continents.
This approach represented a distinctly Chinese model of conglomerate building that emphasized rapid expansion and diversification over systematic integration.
The group's subsequent restructuring after accumulating approximately $86 billion in debt demonstrates the inherent risks in rapid conglomerate expansion without sufficient operational integration.
Despite acquiring prestigious brands like Radisson Hotel Group and significant stakes in NH Hotels, HNA struggled to create meaningful cross-selling opportunities or operational efficiencies across its portfolio.
The Chinese government's eventual intervention forcing divestiture of many assets suggests that even with strong state connections and access to substantial capital, the fundamental challenges of managing cross-sector integration remain formidable for even the most ambitious organizations.
As the travel industry moves into an era defined by digital agility and customer-centric innovation, the lessons from these early airline-hotel alliances offer valuable perspective.
They serve as a reminder that even the most promising partnerships can struggle when businesses stray too far from their core strengths.
Today’s most successful collaborations prioritize flexibility, technological integration, and data-driven insights over ownership, reflecting a broader industry shift away from heavy asset investments.
Though more airlines view hotels as no more than trophy assets today, the need for seamless travel experiences remains. The most successful companies won't be those attempting to own the entire journey, but those creating frictionless connections across it.