The online travel website industry appears to be consolidating further after it was announced this morning that Expedia will buy rival Orbitz Worldwide in a deal worth $1.3 billion. Expedia will be paying Orbitz shareholders $12 a share in cash, which represents a 25% premium from Wednesday’s close. Aside from Orbitz’s regular flagship website, Expedia will be acquiring its other websites along with it such as ebookers.com, CheapTickets.com, and more. During premarket trading, Orbitz is up 21.50% to $11.68 and Expedia is up 10.60% to $86.69.
Expedia continues to “unclog” the online travel market
Not too long ago, it seemed as if there was so many different travel websites out there and they all placed a TV ad at one point or another. With all that competition and certainly no stagnant rise in customer demand, it was time that something ought to be done. That is why Expedia has been slowly buying up other travel website companies in the industry; in an effort to gain more customers and to continue being a top destination for travelers. Last year, Expedia bought Australian travel company, Wotif Holdings Ltd. In a deal worth $612 million (703 Australian Dollars). Furthermore, Expedia also acquired Travelocity from Sabre Corp. in a deal worth $280 million. Keep in mind that the company already controls Hotels.com, Hotwire, Trivago, CarRentals.com, Classic Vacations, Egencia, and eLong.
Expedia reports weak fourth quarter
The travel website giant reported fourth quarter earnings on February 6th and it certainly was not pretty. Expedia reported that year over year, its fourth quarter profits dropped -30%. Management blamed a stronger US Dollar and increased spending in China. Analysts were estimating earnings per share at $1.00 on revenue of $1.37 billion. Expedia reported earnings per share of $.50 on revenue of $1.36 billion. Full year 2014 results came in at $2.99 earnings per share on revenue of $5.76 billion. Full year revenue rose 21% year over year.
Vanguard’s move into PE may change the landscape forever
Expedia’s eLong, its China-based business, lost $27 million during the fourth quarter and demand from Europe sank due to a strong dollar. On the other hand, with 50% of their revenues made from here in the US, the low oil prices and US Dollar strength are working to Expedia’s advantage. However, the company did downgrade 2015 guidance over forecasts of continued currency exchange headwinds and lower demand through other parts of the world.
Overall, Expedia continues to help consolidate the online travel industry with its latest purchase of Orbitz Worldwide. While it is still in second to Priceline as the world’s largest travel site, Expedia is certainly hoping that its spending spree over the past year will yield more customers and, in turn, lead to higher earnings. However, 2015 appears to be another rough year for the company, as management lowered guidance on currency woes, but the company is certainly bolstering its portfolio of travel websites and market share.