Online travel industry to grow
The global online travel industry’s booking revenues are currently estimated to exceed $1.2 trillion. With the growth in disposable income worldwide, travel affordability is set to increase. Also, more people are shifting to online booking, as consumers take advantage of its convenience. The online travel industry is poised for solid growth going forward.
Growth with acquisition
Both Priceline (PCLN) and Expedia (EXPE) have grown through acquisitions. The spree was started by Priceline in 2004 with the acquisition of Active Hotels and of Booking.com in 2005. The Booking.com acquisition is touted as one of the most successful acquisitions in the industry.
Chinese online player Ctrip.com (CTRP) has followed a similar route. It recently acquired metasearch leader Skyscanner in a deal worth $1.7 billion. Priceline, which owns a part of Ctrip, helped finance the deal with an investment of $700 million. With its metasearch brands—Kayak, Momondo, and Skyscanner (through Ctrip)—Priceline seems to have a larger share of the pie, leaving little on the table when Expedia goes shopping.
Expedia’s management seems to be confident of its current portfolio, as Trivago still has the lead in hotel bookings in Europe and is trying to do the same in Asia and North America.
New players emerge
There are many players trying to break the Priceline-Expedia duopoly in the online travel market. Google (GOOGL) has tried to do so numerous times, but it has been unsuccessful. However, its recent venture, Google Flights, has managed to gain traction. Google’s search engine capabilities give it the power to highlight its product over other players, which has been Expedia’s concern for the last few quarters.
TripAdvisor, with its recent launch of the Instant Booking feature, is another player trying to gain a share of the huge online travel pie.
Investors can gain exposure to Priceline by investing in the PowerShares DWA Consumer Cyclicals Momentum ETF (PEZ), which invests 6.1% of its holdings in Priceline. PEZ has no holdings in Expedia (EXPE), TripAdvisor (TRIP), or Ctrip (CTRP).