Online travel company Expedia is buying Orbitz for about $1.3 billion in cash, just a month after acquiring Travelocity for $280 million. The acquisition, announced Thursday morning in a press release, means Expedia now operates some of the most well-known online travel destinations. The deal values Orbitz at $12 per share, almost 25% more than the closing price on Wednesday.
Expedia has now acquired two of its biggest competitors in less than a month’s time. In January, it bought Travelocity, while reports swirled that Orbitz was also up for sale.
The online travel market has been seen for years by analysts as in need of consolidation, as the marketplace had become crowded by startups seeking to attract the same consumers.
Expedia executives also indicated that acquisitions like this are a protective move. “One of the reasons why we’re so interested in owning and powering best travel brands in the world, at the top of the funnel [is]… making sure we can fight our way to the top of the funnel, making sure we don’t get squished down by someone like Google who has a lot of traffic at the top of that funnel,” said Khosrowshahi.
Buying up these companies is not only about competing in the funnel. “One of the most significant challenges we have as a company is what we call ‘The War for Global Talent,’” said Khosrowshahi. “You never want to be too dependent on one market. You can imagine the Seattle market is a very competitive market for talent. The Orbitz team is a highly functional team.” It’s also based in Chicago. “To have have center of talent in Chicago…is a significant thing,” added Khosrowshahi.
The consolidation movement started in Europe in 2010, as private equity firms bought and merged some of the continent’s most popular online travel sites. Read more…