Expedia Buys Orbitz as Online Travel Consolidation Escalates

Online travel booker Expedia has agreed to buy competitor Orbitz Worldwide for about $1.3 billion, its second acquisition of a competitor in a month.

The deal will give Bellevue, WA-based Expedia (NASDAQ: EXPE) access to consumer brands such as CheapTickets and HotelClub, broadening Expedia’s international reach, the company said in a statement. The news comes just after Expedia purchased Travelocity for $280 million from Sabre Corporation (NASDAQ: SABR) in January.

Expedia and its chief rival Priceline (NASDAQ: PCLN) have been fiercely consolidating the online travel-booking marketplace in recent years. Connecticut-based Priceline acquired Kayak (NASDAQ:KYAK) in 2013 for $522.4 million in cash and 1.5 million shares of stock.

Expedia, which owns brands including Hotels.com, Hotwire, and Trivago, also purchased Australian-based Wotif.com last year for A$703 million ($612 million U.S.). In addition to owning other websites such as booking.com, Priceline made a strong move in the online reservation world in 2014 when it acquired restaurant-booker OpenTable for $2.6 billion.

Priceline’s CEO Darren Huston, who took the helm at the start of 2014, is willing to consider making more acquisitions, too, he told The Wall Street Journal in December.

Expedia’s acquisition of Orbitz is not surprising given Orbitz’s interest in selling itself and the potential cost savings from combining the two businesses, according to analysts at RBC Capital Markets. Despite the deal being positive, there is some risk associated with acquiring so many well-known brands so quickly, the analysts wrote in a note this morning.

“We would also highlight the increased execution risk associated with yet another EXPE acquisition and with the management of a now very large number of brands, several of which have been deteriorating in terms of market share and fundamentals,” the analysts wrote.

Part of the cause for consolidation has been a need to capture customers in a mature industry.

“Online travel agencies are exploring new ways to reach more people—acquisition and investments,” Henry Harteveldt, a travel industry analyst at Hudson Crossing, told The New York Times in 2013.

Not all of the consolidation has been through blockbuster deals; Travora Media sold itself off in pieces in 2013.

And back in 2011, EveryTrail, a Palo Alto, CA, startup that helped users create multimedia travel tours using their GPS smartphones, was purchased for an undisclosed price by another then-subsidiary of Expedia: travel review website TripAdvisor. Only a few months later, Expedia spun off TripAdvisor (NASDAQ: TRIP) in an IPO, and the Boston-area company has generally grown ever since. Look for more intense competition between Expedia, Priceline, and TripAdvisor in the months to come.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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