Consolidation continued to sweep the travel industry today, as Expedia announced that it had agreed to buy rival Orbitz for $1.3 billion in cash, or $12 per share. Just last month Expedia snapped up Travelocity for $280 million, and in November it acquired Australian travel company Wotif Holdings Ltd for $612 million.
“This is a scale business,” Expedia president and CEO Dara Khosrowshahi told analysts this morning. “This transaction fits squarely with our strategy to own and power the very best travel brands in the world.”
Expedia, once the online travel industry leader, has been competing neck-and-neck with Priceline, which has claimed market share over the last year thanks to its growth in international markets. Google’s expanding travel search functionality, referral sites like Hipmunk, and owner-operated destinations like Starwood Hotels also pose a threat.
Amid this fragmented landscape, where fickle customers ruthlessly price shop, Expedia and its online travel agency counterparts have decided to play a scale game, building largely duplicative booking sites and aggressively marketing their deals.
The transaction “will immediately add a portfolio of well-recognized brands, which will help us compete for the attention of travelers,” Expedia chief financial officer Mark Okerstrom said. In addition to its namesake brand, Orbitz owns CheapTickets, Ebookers, and a variety of other sites.
Khosrowshahi and his executive team dismissed analysts’ questions about potential regulatory barriers to closing the transaction. “This is a huge industry, highly fragmented,” he said, claiming that Expedia’s share would be in the single digits if the company were stacked against the travel industry as a whole, rather than other online travel agencies.
Expedia, which went public in 1999, also owns Hotels.com, Hotwire, and a dozen other brands. Expedia shares, which had fallen 8.4% this year, rose 8% to $84.50 when news of the deal broke this morning.