Horizontal And Vertical Integration: Made Easy

Last updated: 8 October 2026

Horizontal and vertical integration are important concepts in all businesses, including those operating in the tourism industry.

An important management strategy, horizontal and vertical integration allows companies to be more competitive in the marketplace. But how does this actually work?

This article explains what horizontal and vertical integration are, the advantages and disadvantages of both, why such integration happens, and real-world examples of horizontal and vertical integration in the travel and tourism industry.

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Video: Horizontal and vertical integration made easy

Horizontal And Vertical Integration Made EASY! Advantages, disadvantages and examples.

What is horizontal integration?

Horizontal integration is a competitive strategy that companies use. It refers to the acquisition of business activities that are at the same level of the chain of distribution in similar or different industries.

To put it simply, horizontal integration is when a related business merges with another business operating in the same level of the production chain. For example, a ski-based tour operator may merge with a tour operator which specialises in summer sun holidays.

These are different organisations, which operate at the same level.

There are many reasons that a company in the tourism industry may choose to integrate horizontally, such as:

When the industry is growing
When mergers allow better value for money to be achieved
When competitors lack expertise
When the company can manage the operations of the bigger organisation efficiently, after the integration

Advantages of horizontal integration

Horizontal integration can be advantageous because it can enable economies of scale to be achieved (i.e. they can get better value for money). The bigger, horizontally integrated company can often achieve a higher production than the companies merged, at a lower cost.

Mergers help to provide organisations with increased power in the marketplace, whilst enabling the organisation with the opportunity to capture new markets. The company becomes larger, has a bigger market share and faces less competition.

Horizontal integration can also allow organisations to penetrate new markets in different geographical areas. This is particularly relevant in travel and tourism, where operations occur around the globe.

Disadvantages of horizontal integration

Whilst there are benefits of horizontal integration, however, there are also disadvantages.

Organisations often encounter problems when they grow. Allowances need to be put in place for restructures and recruitment of new staff where appropriate.

There are also legal implications when merging companies, and these differ from country to country. Large mergers are often reviewed by competition authorities, such as the UK’s Competition and Markets Authority (CMA), the European Commission or the US Department of Justice, which can block or impose conditions on deals that would reduce competition. It is important that the organisation looks into any legal requirements that will be expected of them.

The decision whether to adopt vertical or horizontal integration has a long-term effect on the business strategy of a company and therefore the decision to do so must not be taken lightly.

Horizontal integration in tourism examples

Travelopia is a good example of a tourism organisation with lots of horizontal integration.

Travelopia describes itself as one of the world’s largest collections of specialist travel brands, with more than 50 independently operated businesses. This means that the organisation can offer a wide variety of products that sit at the same level of the chain of distribution. So, whilst brands such as Exodus Adventure Travels and the yacht charter companies Sunsail and The Moorings offer very different holidays, they all operate at the same level under the Travelopia umbrella.

Another good example of horizontal integration in travel and tourism is the Virgin Group.

The Virgin Group has owned many different companies throughout the years and some have been more successful than others.

A good example of horizontal integration within the Virgin Group is its airlines based in different parts of the world. Virgin Atlantic is based in the UK, Virgin Australia is based in Australia and Virgin America was based in the USA (until it was merged into Alaska Airlines in 2018). All of these companies were at the same level of the distribution chain, but were different companies. Today, Virgin Australia is owned by other investors and uses the Virgin brand under licence.

You can learn more about the Virgin brand here.

Horizontal integration is also common in the hotel and airline sectors. For example, Marriott International’s acquisition of Starwood Hotels & Resorts in 2016 created the world’s largest hotel company, and Alaska Airlines completed its acquisition of Hawaiian Airlines in 2024.

What is vertical integration?

Vertical integration is the opposite of horizontal integration.

Diagram showing horizontal and vertical integration in the tourism chain of distribution

Vertical integration is a competitive strategy identified when a company takes over one or more other companies that are at different levels in the chain of distribution.

Many companies choose vertical integration to allow for total control of all aspects of their business. This may include the manufacturing of their products right through to sales, for example.

Advantages of vertical integration

There are several benefits of vertical integration in travel and tourism.

By maintaining control of the supply chain, organisations have greater control. They can regulate and manage all aspects.

For example, TUI puts together its holidays via its tour operations and then sells them via its own travel agents and website. They then put tourists on aircraft that are owned by TUI and tourists are greeted in their destination by TUI representatives- this demonstrates a smooth and consistent process throughout, where all aspects are owned and managed by TUI.

Vertical integration helps an organisation to weather the highs and lows of business and enables it to diversify its income. If one part of the business isn’t doing so well, there is the hope that the other areas of the business can compensate for this or to help absorb the loss. Likewise, if one area is doing particularly well, the money made from this can be invested in any areas of the business that require investment.

Vertical integration can also increase barriers for new entrants and help to reduce competition.

Disadvantages of vertical integration

There are also some downsides of vertical integration.

Less competition means that prices may rise for consumers and that standards may drop.

The organisation may also have less flexibility as they must maintain a level of production in order to continue operations.

It can also be difficult for an organisation to be good at everything. Sometimes an organisation can do one thing particularly well, but then other areas may not have the same high standards (i.e. they may be great at making delicious sandwiches but not so great at offering customer service at the dining table).

Vertical integration in tourism examples

TUI is one of the biggest travel companies in the world. TUI Group operates its own tour operators, travel agencies, airlines, hotel brands (such as TUI Blue and Robinson), cruise ships and destination services, and generated revenue of more than €23 billion in its 2024 financial year. Since the collapse of Thomas Cook in 2019, the UK package holiday market has been dominated by TUI and Jet2 – another vertically integrated company, which owns both the airline Jet2.com and the tour operator Jet2holidays, and which has grown to become the UK’s largest tour operator.

You can learn more about the organisation TUI and its different branches here.

Within the umbrella organisation, TUI owns many different companies. Some are at the same level (horizontal integration) and others are at different levels (vertical integration).

As described earlier, TUI has many companies that are at different levels of the chain of distribution. This includes its tour operations, travel agents, airlines, hotels and in-destination services.

Disney is another organisation that has a history of both horizontal and vertical integration. It owns film studios and television networks as well as theme parks, hotels, Disney Cruise Line and merchandise, which means that a single film can generate revenue across many different parts of the business.

Why has horizontal and vertical integration happened?

Horizontal and vertical integration has happened throughout all sorts of business around the world, including travel and tourism.

One reason for this is that the suppliers who work with companies or the distributors who work with the end product are unreliable. Therefore some organisations see it as easier to simply do these things themselves.

Money is also an important factor. Working with outside companies can often be more costly than doing it yourself. Suppliers and distributors may have big profit margins and this is money that can be saved if organisations take over these operations themselves.

Some companies simply have the resources available for horizontal and vertical integration to occur, making expansion a logical next step.

And lastly, when a specific industry grows considerably, as the travel industry did for many years prior to COVID-19 and again during the strong post-pandemic recovery, then there is more scope for organisations to expand through horizontal and vertical integration.

Horizontal and vertical integration: To conclude

As this article has shown, horizontal and vertical integration are competitive strategies often used in business. Whether a company seeks to merge with other companies at the same (horizontal) level or at different (vertical) levels, there are many advantages both to the consumer and to the organisation itself. There are, however, also some disadvantages that need to be managed.

Horizontal and vertical integration: FAQs

Below are answers to some of the most common questions about horizontal and vertical integration.

What is the difference between horizontal and vertical integration?

Horizontal integration is when a company merges with or acquires another business at the same level of the chain of distribution, such as one tour operator buying another. Vertical integration is when a company acquires businesses at different levels, such as a tour operator owning an airline and travel agencies.

What is an example of vertical integration in tourism?

TUI is the classic example. It owns tour operators, travel agencies, airlines, hotels, cruise ships and destination services, so it controls the holiday from booking through to the customer’s stay. Jet2, with its airline and tour operator, is another example.

What is an example of horizontal integration in tourism?

Examples include Travelopia’s portfolio of specialist tour operators, Marriott’s acquisition of Starwood Hotels & Resorts in 2016 and Alaska Airlines’ acquisition of Hawaiian Airlines in 2024.

What are the advantages of vertical integration?

Vertical integration gives a company greater control over quality and the customer experience, helps to diversify income, can reduce costs paid to suppliers and distributors, and creates barriers to entry for competitors.

What are the disadvantages of horizontal and vertical integration?

Disadvantages include restructuring challenges, legal and regulatory hurdles, reduced flexibility, the difficulty of being good at everything and, for consumers, the risk of higher prices and lower standards if competition is reduced.

Horizontal and vertical integration: Made easy