Expedia Inc. on Friday made official what the industry
suspected would happen, buying Travelocity from Sabre for $280 million in cash.
Expedia already had controlled much of Travelocity
for the past year, using its booking platform to
power the site. Selling Travelocity was “a next logical step,” Sabre CEO Tom
Klein said.
With the acquisition, Expedia assumes Travelocity’s branding
and marketing in addition to the transactional part of the business it already
was managing. Expedia CEO Dara Khosrowshahi called Travelocity “one of the most
recognized brands in North America."
Expedia hasn’t spelled out what it will do with the Travelocity
brand, but Expedia has maintained the brand identity of plenty of its
divisions, including Hotels.com, Hotwire and Trivago.
Expedia’s share of U.S. online travel market held steady at
42% in 2012 and 2013, and would’ve jumped to 56% factoring in Travelocity, according
to a report released in December by Phocuswright. However, the company might
have lost share last year with Priceline Group aggressively marketing Booking.com
in the U.S.
“Booking.com has grown tremendously in the U.S. during the
last two to three years, so Travelocity gives [Expedia] additional market reach
and pull, especially in the air market,” said Douglas Quinby, Phocuswright’s vice
president of research. “There’s very strong brand recognition for Travelocity.”
Priceline’s share of U.S. online travel spending jumped to
19% in 2013 from 16% the prior year, ostensibly at the expense of Travelocity,
whose market share fell 2 percentage points to 14%, according to Phocuswright. With
Americans spending about $47 billion a year through online travel agencies,
that might have meant a swing of more than $1 billion between Priceline and
Travelocity alone.
Meanwhile, Orbitz, which is reported to be for sale, faces
an even steeper battle against Expedia and Priceline.
While Orbitz has almost one-fifth of the U.S. market, it has
gained little momentum overseas. Priceline and, to a lesser extent, Expedia
continue to boost bookings and revenue from outside of the U.S. while making the technology investments needed
to bolster profit margins.
As for Sabre, the company shed what had been a money loser
and removed itself from the retail business, freeing more resources to expand
its business-to-business offerings. Fellow GDS operator Travelport sold most of
its stake in Orbitz last year.
“They’re not consumer businesses,” said Quinby. “The GDSs
are really about growing non-air travel technology and focusing on the
underbelly of travel transactions.”