In a conference call with analysts, Expedia CEO Dara Khosrowshahi noted that, despite having a major online presence, his company is “only a small player” in a $1.3 trillion travel market that includes giants like Google and many newcomers. Expedia’s bookings account for only 4% of global travel spending.
On the heels of its $1.3 billion acquisition of rival Orbitz Worldwide, Expedia is a “small player” no more.
The deal adds the Orbitz brand and sites including CheapTickets and HotelClub to a lineup that already includes names such as Hotels.com, Hotwire, Trivago, and Australia's Wotif. com. Expedia is also in the process of buying Travelocity for a reported $280 million.
The purchase of Orbitz places Expedia ahead of The Priceline Group in travel bookings, although Priceline would still be larger by revenue and stock market value. Besides its namesake website, Priceline owns Booking.com, Kayak, and restaurant-reservation site OpenTable.
With the acquisition, Expedia gains Orbitz’s highly regarded technology, especially in searching airfares — Orbitz launched in 1999 by five of the largest U.S. airlines to counter the advent of online travel agencies including Expedia. It went public in 2007.
Khosrowshahi said the marriage would allow his company to “continue to innovate and deliver the very best travel experiences to the widest set of travelers, all over the world.”
Loyalty360 CEO and CMO Mark Johnson said it will be interesting to see how / if these companies remain unique / consistent to their brands.
“The challenge will be to have uniqueness in the sites that remain consistent to their core customers, yet the fact that the technologies (search) will more than likely not be unique, so looking for a different deal on both sites (as there used to be great value in doing so) will no longer yield results,” Johnson said.
Johnson said what’s unique is that Orbitz was created by a consortium of airlines to protect /add value to their own sites, and throughout this process, it gleaned a great deal of insight and was able to shift behavior to get consumers to buy direct, yet hotels have struggled to follow suit.
“The value proposition is quite strong for the hotels as they have a fungible commodity that needs to be used or lost,” Johnson explained. “Yet the goal is (or should be) to use the third-party sites to create the initial engagement and then once that customer is on property to create an impetus (through great experiences, engagement and service) for that consumer to join the loyalty program offering of the specific hotel, moving them into an “exclusive dialogue” with the brand.”
After years of investment, airlines and hotels are doing more business through their own websites. Other websites that scan the Internet for travel deals from multiple sources have become the first stop for many travelers. And new services like the do-it-yourself rental business Airbnb Inc. are cutting into the hotel-room market.
“There’s always new players that are coming in,” Khosrowshahi said. “Competition is fierce. These types of acquisitions, of companies with a strong brands and a loyal customer base, are really about making sure we can get to the top of the funnel.”
With the Orbitz acquisition, Expedia would become the biggest player in the travel retail area with a market share of more than 6%, just ahead of Priceline’s nearly 5% share, according to Euromonitor International.