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Online Travel Consolidating Rapidly

Posted on Wednesday, Aug 26th 2015

The online travel industry is seeing rapid consolidation as Priceline and Expedia look to dominate the industry in the face of competition from new rivals like Google. While Priceline is expanding into new areas with acquisitions like OpenTable, Expedia has been on an acquisition spree to gain scale.

Priceline’s Financials

Priceline’s (NASDAQ: PCLN) second quarter revenues grew 7.4% over the year to $2.28 billion, close to the analyst estimate of $2.29 billion. Gross travel bookings for the quarter increased 10.5% to $14.96 billion. EPS was $12.45 versus $12.51 a year ago and analyst estimate of $11.85.

Priceline continues to see strong growth from its international operations. During the quarter, they saw a 30% growth in international bookings while US bookings languished at 0.7%. Globally, room nights booked grew 26.2% over the year with to 113.1 million. Rental car business reported a 17.2% growth in rental car days.

By segment, Agency revenues grew 7.3% over the year to $1.58 billion. Merchant revenues fell 3.7% to $546 million and other revenues improved 85% to $152 million.

For the third quarter, Priceline expects revenues to grow 1%-8% over the year. Priceline forecast an EPS of $22.95-$24.45 compared with analyst forecast of $22.78.

Priceline’s Acquisitions

Priceline acquired travel booking site Rocketmiles for $20 million in February 2015. Rocketmiles is a hotel booking startup that offers frequent-flier miles to its customers for booking hotel rooms using its app and website. The deal is expected to give the company a stronger edge over its competitors in loyalty programs.

In May 2015, Priceline acquired PriceMatch for an undisclosed sum. PriceMatch is a leading cloud-based data and analytics solution for hotels and is expected to be integrated into BookingSuite, the software and services division of Booking.com.

Priceline’s stock is trading at $1,178.81 with a market cap of $59.77 billion. It hit a 52-week high of $1351.80 following its strong 2Q 15 results.

Expedia’s Acquisition Spree

Expedia’s (Nasdaq: EXPE) second quarter revenues grew 15% over the year to $1.65 billion. EPS of $0.89 was also ahead of the market’s expected earnings of $0.84 for the quarter.

Gross bookings for the quarter grew 20% over the year to $15.06 billion with hotel room nights improving 35% over the year, driven by 50% growth in international room nights.

The strong growth was driven by both Expedia’s (EXPE) core online travel agency (or OTA) business and Trivago. Core OTA revenues increased by 23% to $13.69 million compared to $11.17 million a year ago.

Merchant revenues increased 10% to $1.06 billion while Agency revenues improved 26% to $452 million, and advertising and media revenues improved 18% over the year.

During the second quarter, Expedia added nearly 27,000 properties to its global portfolio, taking the total to 257,000.

In May 2015, Expedia sold its 62.4% equity stake in eLong for $671 million to Ctrip. They also reached an agreement over cooperation for certain travel products in specific geographies.

In January 2015, Expedia agreed to buy travel booking site Travelocity for $280 million in cash. Expedia will be adding another well-known name in the travel industry to its portfolio of Hotels.com, Hotwire and CarRentals.com. Travelocity claims to serve about 20 million travelers every month.

Following this deal, Expedia announced its plans to acquire Orbitz for about $1.3 billion in cash or $12 per share. Expedia will own the Orbitz portal as well as CheapTickets, HotelClub, and the corporate travel site Orbitz for Business. Analysts expect that the Orbitz deal will increase Expedia’s share in the travel retail market by 6%.

Expedia’s stock is trading at $108.42 with a market cap of $15.39 billion. It hit a 52-week high of $126.79 following its strong results.

Orbitz’s Financials

Orbitz’s (Nasdaq: OWW) second quarter revenues declined 3% over the year to $239.6 million. Gross bookings declined 8%, with the decrease driven by lower revenue per air and vacation package transaction and partially offset by higher revenue per hotel transaction.

During the quarter, overall revenues from hotels improved 10% to $99.4 million. Revenues from air bookings declined 14% to $61.08 million. Vacation package revenues declined 14% to $37.17 million. Advertising revenues decreased 4% to $14.56 million and other revenues fell 3% to $27.36 million.

Orbitz’s stock is trading at $11.21 with a market capitalization of $1.26 billion. It touched a 52-week high of $11.83 in March this year.

TripAdvisor’s Financials

TripAdvisor’s (Nasdaq:TRIP) second quarter revenues grew 25% over the year to $405 million, missing the analyst estimate of $413 million. EPS was $0.54 compared to market estimates of $0.55.

Revenues from the Hotel segment grew 13% over the year to $343.0 million and accounted for 85% of the total revenue. Revenues from the Other segment soared 210% to $62.0 million.

By product, revenues from click-based advertising at $266 million grew 13% and accounted for 66% of its revenues. Subscription and transaction revenues improved 94% to $99 million. They reported more than 375 million average monthly unique visitors on their site, up 30%.

By region, revenues from North America increased 31% to $211.0 million, the EMEA region increased 19% to $127.0 million, the Asia-Pacific region increased 14% to $48.0 million, and Latin America grew 46% to $19.0 million.

TripAdvisor’s Acquisitions

TripAdvisor recently acquired Sydney, Australia-based Dimmi for an undisclosed sum to extend its global restaurant reservation business into 12 countries. Dimmi’s content will be added to TripAdvisor’s restaurant division TheFork.

TripAdvisor expanded its relationships with hotel chains like the Marriott International, Mandarin Oriental, Langham Hospitality, and Americinn, adding these chains to the TripAdvisor instant booking platform. The market reacted well to the news of the Marriott deal, soaring 15%. Their stock is trading at $66.54 with a market capitalization of $10.51 billion. It hit a 52-week low of $66.27 this week while it hit a 52-week high of $104.44 in August last year.

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