Emergence of Google and TripAdvisor booking helps pave way for Orbitz takeover by Expedia – Travolution.co.uk

The prospect of massive online travel consolidation has been triggered after Expedia won approval from US competition authorities to take over rival Orbitz for $1.3 billion.

The US Justice Department said a six-month investigation had found no evidence that the merger would lessen options for consumers. It noted that Orbitz is a relatively small source of bookings for airlines, car rental companies and hotels. Hotwire and Hotels.com are owned by Expedia, which also purchased Travelocity in January for $280 million. That paved the way for the acquisition of Orbitz, which reported $10 billion in bookings last year for air fares and hotels. Orbitz Worldwide owns ebookers in the UK together with cheaptickets.com and hotelclub.com. Booking.com, OpenTable and Kayak are owned by Expedia’s rival Priceline.

The American Hotel and Lodging Association had argued that the merger would create a “duopoly” between Expedia and Priceline, which will now control 95% of the online travel-marketplace, a business that generates $152 billion a year, the Washington Post reported.

But Bill Baer, head of the Justice Department’s anti-trust division, said: “We know online travel booking is important to US consumers and to the airlines, car rental companies and hotels that serve those consumers.

Over the course of a six-month investigation, lawyers and economists from the antitrust division reviewed tens of thousands of business documents, analysed transactional data from the merging companies and from other industry players and interviewed over 60 industry participants of various types and sizes. “The antitrust division investigated the concerns that have been expressed about this transaction. We took those concerns seriously and factored into our analysis all of the information provided by third parties. At the end of this process, however, we concluded that the acquisition is unlikely to harm competition and consumers. “There are several reasons for this conclusion. First, we uncovered no evidence in our investigation that the merger is likely to result in new charges being imposed directly on consumers for using Expedia or Orbitz. So we focused our investigation on the commissions Expedia and Orbitz negotiate with airlines, car rental companies and hotels. “Second, we found that Orbitz is only a small source of bookings for most of these companies and thus has had no impact in recent years on the commissions Expedia charges. “Many independent hotel operators, for example, do not contract with Orbitz, and those hotels that do often obtain very few bookings from its site. In addition, beyond Expedia and Orbitz, travel service providers have alternative ways to attract customers and obtain bookings.

Source: Emergence of Google and TripAdvisor booking helps pave way for Orbitz takeover by Expedia – Travolution.co.uk

The Online Travel Industry: Investing Essentials

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The Online Travel Industry: Investing EssentialsBy Asit Sharma | More Articles August 25, 2014 | Comments 0Barajas Airport, Madrid. Source: Jean-Pierre Dalbera under Creative Commons license.The speed at which the Internet evolves can make milestones from 10 or 15 years ago seem worthy of encasement in a glass museum display. Take this quote from Priceline Group’s first annual report after its 1999 IPO:

Priceline.com commenced its service with the sale of leisure airline tickets. The number of airlines participating in priceline.com’s airline ticket service has increased to a total of 10 domestic airlines and 20 international airlines.

The online travel industry has grown exponentially since those heady days when Priceline managed to sign up 20 international carriers, not to mention pitchman William Shatner. While traditional travel agencies, especially those that cater to business travelers, haven’t disappeared, most of us now find it second nature to book travel on our desktop computers, laptops, and mobile devices.

What is the online travel industry?

Companies that facilitate purchases of flights, hotel rooms, rental cars, and travel-related activity over the web comprise the online travel industry. The industry includes well known travel services such as ExpediaTravelocityTripAdvisor, and Orbitz Worldwide. It also encompasses newer, smaller companies, often competing on the basis of incremental innovations. For example, travel site Hipmunk.com presents airline query results in a visual format, ranking results not only by price but also by travel length. 

How big is the online travel industry?

The online travel industry is a subset of the global travel and tourism industry, which, according to Statista.com, had a direct impact of $2.2 trillion on global GDP in 2013. U.S. revenues of online travel companies were estimated at $157 billion in 2013. Revenues of the global online travel industry, sometimes referred to as the global “digital travel industry,” are estimated to be between $400 billion-$500 billion annually. With increasing Internet usage worldwide, we can expect this market to continue to expand, especially in developing markets such as Latin America.

How does the online travel industry work?

Corfu, Greece. Source: iwiseguy71 under Creative Commons license.

The online travel industry is divided into three primary categories: suppliers, online travel agencies (or OTAs), and aggregators. Suppliers are the airlines, hotels, and rental car companies offering their services to businesses and individuals. Suppliers sell services directly to consumers via their own websites, but also widely utilize OTAs and aggregators to market their inventories. OTAs provide suppliers’ pricing to consumers and fulfill online orders. Aggregators provide a means for web users to compare prices of OTAs and suppliers for specific travel queries, routing users to back to these organizations for purchases.

In recent years, major OTAs like Priceline and TripAdvisor have extended their revenue base by purchasing aggregators, blurring the line between the two business models. Priceline owns aggregators Kayak.com and Booking.com. TripAdvisor counts Airfarewatchdog.comand BookingBuddy.com among its properties.

OTAs and aggregators rely on both organic and paid search (i.e., searches for travel sites on search engines like Google) as well as other advertising spends to capture customers. Priceline and Expedia are by far the largest digital advertisers; according to e-commerce research organization eMarketer, Priceline’s 2013 global spend of $1.8 billion was equal to over half of all digital travel advertising spend in the U.S.

What are the drivers of the online travel industry?

Several trends and financial factors drive the online travel industry. Most prominent is global economic growth. As you might expect, rising discretionary incomes play an important role in the industry. However, as OTAs receive commissions on sales, the direction of hotel room rates and airline rates also affects revenues. Rising average daily hotel room rates since the recession of 2009, for example, have benefited OTAs’ top-line revenue.

Meta-search, the process by which an online travel site includes results of several different OTAs on a single page for easy comparison, also drives this industry. The convenience of meta-search results has propelled the rise of aggregators and is partially responsible for the recent popularity of aggregators as acquisition targets by traditional OTAs.

Perhaps the most noticeable trend driving the online travel industry is the shift from desktop computing to mobile phones and tablets. The general tilt in the population toward “mobile” usage is having a marked impact on the online travel industry. According to industry research group PhoCusWright, mobile phones and tablets made up 20% of online travel spending in 2013. As this share of the total industry rises, OTAs and aggregators will invest significant resources to optimize their interfaces for mobile devices.

The growing tendency for digital apps to foster consumer-to consumer transactions will also influence the online travel industry in the near future. Home sharing site airbnb.com raised nearly $500 million of private venture capital investment in 2014, at an impressive valuation of more than $10 billion. The interest of Silicon Valley in pioneers of the sharing economy like airbnb indicates that new breeds of travel sites — bypassing both suppliers and OTAs — have the potential to unsettle the business model of this still-young industry.

Finally, long-term capacity trends in the airline industry will drive online travel opportunities for years to come. Expansion in the online industry has occurred in tandem with the falling cost per mile of air travel to consumers, as airlines have revamped their fleets with lighter, more fuel-efficient aircraft and focused on lowering fixed costs and increasing profitability. Air travel is vital to the online travel industry, as healthy aviation traffic drives not only sales of flights, but hotel stays and rental car bookings as well.

via The Online Travel Industry: Investing Essentials.

Expedia Inc EXPE Cashing in on Growing Travel Market | Tech Insider

expedia-logo-300x150Expedia Inc NASDAQ:EXPE has released its second quarter results for the fiscal year 2014, beating analysts’ expectations which helped the stock to advance by 5% in the aftermath. In a segment on CNBC, Dara Khosrowshahi, Expedia’s CEO has commented on the company’s strong second quarter results, saying travel market is expanding and “online” takes an ever increasing chunk of it.

The travel company has seen its gross bookings number rise to $13 billion in the second quarter and its revenue increase by 24% year-on-year. Room nights grew at a pace of 20%, hitting a record, and adjusted earnings per share jumped 60% year-on-year.  Such positive results give the company an opportunity to spend more on marketing and investment, which in turn brings more customers and revenue, according to Khosrowshahi.

“Right now we are in a pretty good spot within a competitive marketplace. […] We are seeing our marketing spending going up faster than revenue but these are big scale businesses when you’re talking about $13 billion of gross bookings in one quarter, so we are able to scale off of our fixed expenses. So I think it is a great situation when you can spend aggressively into marketing but still increase profits […],” he added.

Last week, Expedia Inc NASDAQ:EXPE’s competitor Priceline Group Inc NASDAQ:PCLN announced the acquisition of OpenTable Inc NASDAQ:OPEN for $2.6 billion in cash, in a deal that marked its expansion into the restaurant business. Asked if  Expedia Inc NASDAQ:EXPE has similar plans, Dara Khosrowshahi said that such a move is not in the cards at the moment, as there are still plenty of opportunities in the travel market, which is a $1 trillion dollar-industry and growing. He has disclosed instead that the company plans to look for growth in Europe and Asia.

via Expedia Inc EXPE Cashing in on Growing Travel Market | Tech Insider.

Booking.com launches rental site Villas.com

May 13.2014

Major product extension for Booking.com as it launches its first standalone brand in the guise of Villas.com.

The Priceline-owned accommodation giant officially unveiled the site this week in a bid to capture more of the vacation rental market beyond its existing coverage on the main Booking.com brand.

The Villas.com site has almost 150,000 properties listed, covering villas, apartments and rental homes.

The company says it  built the site because it understands the “big difference between booking a room in a hotel and planning a do-it-yourself vacation”.

Although Villas.com has significantly fewer properties than HomeAway (the US-based rental pioneer currently has around 952,000), customers will be able to book all properties from within the site (with instant confirmation, according to the website) rather than often having to secure reservations through the owner or a third party offline.

In some respects the new Villas.com is a simple re-skinning of the Booking.com site with only relevant properties – it has the same functionality, filtering tools and image galleries, although there are some minor differences to the design and user experience.

Airbnb logo

Airbnb logo (Photo credit: Wikipedia)

It is the strategy to provide a dedicated site for the product itself which is likely to capture the attention, not least with HomeAway, TripAdvisor and Airbnb gaining traction (and making acquisitions) in recent years.

Such a move will also not come as the biggest surprise to those watching the sector and seeing the rise of other players.

Booking.com has been gradually adding more vacation rental properties to the main site for the best part of 18 months, adding to the small numbers of bungalow and cottage rentals it had featured for many years.

In January 2013 it struck a deal with InterHome to start plugging in properties from around the world (an initial 2,500 was announced at the time).

It is unclear as yet if Booking.com is contracting all 146,000 properties itself or has simply extended the existing vacation rental agreements it has to bolster the portfolio number.

Villas.com claims to have around properties featured from some 25,000 destinations in 176 countries around the world. Many of the properties listed have guest reviews imported from the existing Booking.com website.

via Booking.com launches rental site Villas.com.

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Why Priceline’s peers are struggling to maintain operating margins » Market Realist

By Smita Nair • Apr 29, 2014 9:00 am EDT 

Operating margins

Priceline and its peers such as Expedia (EXPE) and Orbitz Worldwide (OWW) have been investing in marketing and promotion, technology, and personnel in an attempt to improve long-term operating results, but these expenses have pressured operating margins. Priceline’s management said on the earnings call that “operating margins were impacted by 146 bps of deleverage and offline advertising mainly related to our Booking.com TV campaigns in the U.S. and Australia and the inclusion of KAYAK offline advertising.” Although Priceline has managed to efficiently improve its margins, its peers have struggled.

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In 2013, Priceline’s total online advertising expense was approximately $1.8 billion, up 41.2% year-over-year. A substantial portion of this was spent internationally through Internet search engines, meta-search and travel research services, and affiliate marketing. The company has worked on building brand awareness for Booking.com, Priceline.com, Agoda.com, KAYAK, and Rentalcars.com via aggressive marketing and promotion campaigns. It said it uses online search engines (primarily Google), meta-search and travel research services, and affiliate marketing as primary means of generating traffic to its websites. It also invested approximately $127.5 million in offline advertising via television, print and radio.

Priceline said its online advertising ROIs were down year-over-year for 2013. Its online advertising as a percentage of gross profit has increased due to lower returns on investment (ROIs) from online advertising, brand mix within the group, and channel mix within certain of its brands. Plus, its international brands are generally growing faster than U.S. brands, and usually spend a higher percentage of gross profit on online advertising.

Priceline CEO Darren Huston said in a Bloomberg interview that the company spends more on search ads on Google, and that results from Facebook (FB) and Twitter (TWTR) haven’t worked out for the company. Huston said in the article that the ad spending would be modified to include TripAdvisor Inc. (TRIP), the KAYAK travel search engine, and Expedia’s (EXPE) search site Trivago. When asked about the emergence of Google as a potential competitor, Hudson said he was not worried, adding “Google of course respects us as an advertiser.”

Expedia mentioned in its annual filing that its marketing channels include social media sites such as Facebook (FB) and Twitter (TWTR). The marketing initiatives also include promotional offers and traveler loyalty programs such as Welcome Rewards and Expedia Rewards that are recorded under its expenses. Orbitz (OWW) said in its annual filing that its marketing expense increased 16% or $39.5 million to $292 million, due largely to the growth of its private label distribution channel, which increased affiliate commissions by $23.5 million, and search engine and other online marketing of $32.7 million.

via Why Priceline’s peers are struggling to maintain operating margins » Market Realist.

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Why TripAdvisor and Priceline Wish Facebook Ads Performed Better – Skift

Both Priceline and TripAdvisor have expressed their disappointment in recent months in the value of Facebook advertising. Pictured, TripAdvisor CEO Stephen Kaufer at the PhoCusWright Conference in November 2010. PhoCusWright / Flickr.com / Flickr.com

Both Priceline and TripAdvisor have expressed their disappointment in recent months in the value of Facebook advertising. Pictured, TripAdvisor CEO Stephen Kaufer at the PhoCusWright Conference in November 2010. PhoCusWright / Flickr.com / Flickr.com

Priceline Group CEO Darren Huston’s lament that Facebook and Twitter can’t do what Google advertising can when it comes to driving travel transactions is not news to TripAdvisor, which complained of the same shortcomings five months ago.

At the time, TripAdvisor CEO Steve Kaufer said using Facebook to promote its Cities I’ve Visited Ap leads to better monetization, but Facebook falls short in driving transactions in the way that Google Adwords does.

“We weren’t able to get the same traveler in shopping mode to come over to TripAdvisor in any scale that matched Google,” Kaufer said, referring to advertising on Facebook, when speaking at an investor conference in November 2013.

Unlike Huston, Kaufer didn’t address the effectiveness — or lack thereof — of advertising on Twitter at the time.

The independent statements of Kaufer and Huston are a blow to Facebook advertising as a travel-transaction-booster. Both TripAdvisor and the Priceline Group were previously rooting hard for Facebook advertising to succeed as both companies look for other ways to advertise in addition to Google’s platform.

TripAdvisor, in particular, has engaged in lots of disputes with Google when it felt Google was pilfering TripAdvisor reviews and artificially limiting traffic to TripAdvisor in favor of Google promoting its own travel products.

In addition, TripAdvisor was once considered Facebook’s best friend in travel because of TripAdvisor’s Cities I’ve Visited Facebook app, with Facebook even citing TripAdvisor’s promotions on Facebook in its IPO registration papers.

Read MoreBrand USA’s 47-to-1 Return on Investment Claim Attracts Doubts Even Among Supporters

Travel companies do have an alternative to Google, though, in one growing channel — travel metasearch through companies such as Kayak, Trivago, Skyscanner, and TripAdvisor, among others.

You only have to look at the Priceline Group’s acquisition of Kayak for $1.8 billion, and Expedia’s acquisition of Germany’s Trivago for $564 million in cash and 875,200 shares to see how Priceline and Expedia were looking for an advertising hedge against Google’s dominance.

Many travel industry companies hoped that alternative would be Facebook, but so far Facebook hasn’t delivered in the view of some major players, at least.

Facebook declined to comment on the issue.

via Why TripAdvisor and Priceline Wish Facebook Ads Performed Better – Skift.

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