After acquiring a competitor weeks ago and just announcing plans to buy another one, Expedia may look like the dominant player in online travel, but its CEO argues the deals are necessary to battle another rival: Google.
Expedia offers online booking services for flights, car rentals and hotels under brands such as Hotels.com and Hotwire.com, and plans to beef up its business with Thursday's $1.6 billion proposed acquisition of rival Orbitz, which offers similar services and operates sites such as CheapTickets.com.
Snatching up Orbitz will give Expedia the customers it needs to fend off companies that have muscled their way into the online travel agency space, including Google, said Expedia CEO Dara Khosrowshahi during a webcast held to discuss the Orbitz deal. Google, along with traditional travel industry players like hotels, are all trying to establish themselves as the best option for consumers looking to book travel.
In 2010, Google agreed to buy ITA Software, a maker of airfare search and pricing software, for about $700 million, a deal that instantly made rivals and antitrust watchdogs cry foul. The U.S. government challenged the acquisition, and ultimately Google and the Department of Justice signed a consent decree in October 2011, clearing the way for the deal. That agreement, which imposes a number of requirements on Google to protect competition in the market, expires in October of next year. Google, which declined to comment, competes against Expedia with its Flights search engine.
With Orbitz's customers, Expedia improves its visibility and brand recognition among people looking to book travel online, said Khosrowshahi. Google can tap its deep pockets to "squish competitors to the bottom of the funnel" in the online booking space, he said. Expedia, on the other hand, needs to acquire well-known brands and their customers to grow.
A few weeks ago, Expedia purchased Travelocity, another online booking site, for around $280 million. That deal, along with Thursday's Orbitz acquisition news, shouldn't raise anticompetitive fears among regulators because new players crop up constantly, and Google is the most talked about company in the industry, he said.
The boards of Expedia and Orbitz have signed off on the deal, which still needs approval from shareholders and government regulators.
Another major player in this market is Priceline.com, which owns Kayak.com. Khosrowshahi didn't mention it during the webcast.