Then There Were Two: Expedia To Acquire Orbitz

Close on the heels of its acquisition of Travelocity, Expedia Inc. revealed plans to acquire Orbitz Worldwide for about $1.6 billion.

The boards of directors of both companies have approved the deal but it still requires shareholder and regulatory approval.

In the universe of online travel agencies, the move leaves two behemoths at the top: Expedia Inc. and the Priceline Group.

But despite Expedia’s size and market presence, chief executive Dara Khosrowshahi told analysts that it is still a small player in the whole of the travel distribution landscape.

“We’re making sure we don’t get squished by a Google,” he said.

The fragmentation of the distribution industry should help the deal pass regulatory muster, Khosrowshahi said.

An opportunity for traditional agents
Travel analyst Henry Harteveldt believes the deal may provide an opportunity for traditional travel agencies.

“Suppliers are not at all happy about this deal,” Harteveldt said. “Furious” is an apt description of how they feel, he added.

“They don’t like Expedia having so much control and clout.”

Unexpected conversations?
Airlines are facing challenges in selling their high-margin ancillary products, and they see traditional agencies that are willing to help them, according to Harteveldt.

“Travel agencies may find themselves having conversations with suppliers that they weren’t having before,” he said.

Those suppliers “are by no means going to be walking into every agency with flowers and chocolates – they will still encourage direct bookings — but suppliers know that there is a segment of consumers who don’t care about brand, and agencies have the potential to benefit from that.”

Orbitz: ‘actually managed very well’
Meanwhile, Expedia had high praise for its latest acquisition target.

“This is different from Travelocity,” Mark Okerstrom, executive vice president and chief financial officer, said. “This is a business that was actually managed very well.”

In particular, “the Orbitz Partner Network and the loyalty program are testaments to how this company has been run,” he said. “There’s going to be a lot of best-practice sharing.”

Lots and lots of companies
Expedia owns many companies. Among them are Expedia.com; Travelocity; Hotels.com; Hotwire, which offers opaque deals; Egencia, a corporate travel management company; eLong, a mobile and online travel provider in China; Venere.com, an online hotel reservations specialist in Europe, and Trivago, a hotel metasearch company.

It also owns the Wotif Group, which operates travel brands in the Asia-Pacific region, including lastminute.com.au , travel.com.au, Asia Web Direct, LateStays.com, GoDo.com.au and Arnold Travel Technology; Expedia Local Expert, a provider of online and in-market concierge services, activities, experiences and ground transportation; Classic Vacations, a luxury travel specialist; Expedia CruiseShipCenters, a network of 180 franchise locations in North America, and CarRentals.com.

Priceline owns Priceline.com; Kayak, a travel metasearch company; Booking.com, the world’s largest online seller of hotels; Agoda, an online hotel site that serves the Asia-Pacific market; rentalcars.com, and OpenTable, a restaurant reservations website and mobile app.

Although Priceline has fewer brands, Booking.com makes it the larger company.