BUSINESS

Experts say consumers still have options amid deal binge in online travel; Expedia buys Orbitz

02/12/2015 08:34 EST | Updated 04/14/2015 05:59 EDT
NEW YORK, N.Y. - A wave of deals in the online travel industry has increasingly put some familiar names under two corporate umbrellas: Expedia and Priceline.

For now, industry executives and travel experts say, consumers won't notice much of an impact. They will still have plenty of options for booking flights, hotel rooms and vacation packages, including shopping directly with airline and hotel websites.

Expedia said Thursday that it is buying rival Orbitz Worldwide Inc. for about $1.3 billion. 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.

In a conference call with analysts, CEO Dara Khosrowshahi said that even though big in the online segment, his company is "only a small player" in a $1.3 trillion travel market that includes giants like Google and many newcomers. Expedia says its booking account for only 4 per cent of global travel spending.

The purchase of Orbitz would leap Expedia ahead of The Priceline Group Inc. 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. Then there are smaller players such as airfare-search site Hipmunk and last-minute deal site HotelTonight.

Khosrowshahi said he was optimistic that antitrust regulators would approve the deal.

Some analysts agreed. They said consolidation in the online travel industry is in the early stages, and it's an industry with low barriers to new entrants.

"In broad terms, the less players that you have, consumers have less choice ... and obviously less price competition is not good for consumers, but I don't think we're at that point yet," said Tuna Amobi of S&P Capital IQ. "There is still a tremendous amount of alternatives out there to make online travel reservations."

Daniel Kurnos, an analyst for The Benchmark Co., said the deal might even help consumers by giving Expedia more size to negotiate better deals with airlines and hotels.

Gary Leff, a travel blogger and co-founder of frequent flier discussion website MilePoint, said for most consumers, the deal won't make a big difference. He recommends that consumers use online travel agencies to comparison-shop, but unless there's a reason — such as an itinerary that includes more than airline — it's better to book directly with the airline or hotel.

That way, if you need to change a trip or there is some other problem, "it's a whole lot easier dealing just with the airline than with the airline and an online agency," he said.

Leff said the industry is evolving, and the winning companies will be those who develop the best mass technology for catering to an individual consumer's preferences — not just finding the cheapest flight.

Expedia will gain Orbitz's highly regarded technology, especially in searching airfares — Orbitz was started 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.

Expedia, based in Bellevue, Washington, said that it will pay $12 per share, a 25 per cent premium to Orbitz's closing price of $9.62 on Wednesday.

The boards of Expedia and Orbitz approved the sale, but approval would still be needed from a majority of Orbitz shareholders. Expedia said it couldn't predict when the deal would close.

Expedia had 2014 revenue of $5.76 billion. Priceline hasn't reported fourth-quarter results, but in the first nine months of 2014, it had $6.6 billion in revenue compared with Expedia's $4.41 billion. In travel bookings, Priceline had $39.64 billion, Expedia was right behind with $39.14 billion, and Orbitz had $9.69 billion.

Shares of Expedia jumped $11.35, or 14.5 per cent, to $89.57; and Orbitz shares rose $2.10, or 21.8 per cent, to $11.72. TripAdvisor soared too — up $15.13, or 22.5 per cent, to $82.40. Priceline gained $31.89, or 3 per cent, to $1,091.95.

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David Koenig reported from Dallas. He can be reached at http://twitter.com/airlinewriter