Expedia Buys Orbitz for $1.6B in Cash | Hacker News Reader

Expedia Buys Orbitz for $1.6B in Cash

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3 weeks ago, Expedia acquired Travelocity for $280M.

http://dealbook.nytimes.com/2015/01/23/expedia-buys-traveloc...

This Orbitz deal ($1.6B) makes the Travelocity deal ($280M) look cheap.

I need to check my sources, but I believe the Travelocity deal excluded much of Travelocity's technology, it was just a brand-name purchase.

Edit, sources:

> Sparks was brought in a couple of years ago to turn around the company, which needed a wholesale upgrading of its back-end systems in order to make a go of it, but apparently the transition fell short. [1]

[1] http://skift.com/2013/08/22/travelocity-gives-in-sites-to-be...

Expedia was already powering the Travelocity backend back in 2014 as part of a strategic deal because travelocity had failed to modernize their stack. . The latest acquisition simply bought the brand.

Very good idea not to get the mess of Travelocity technology.

Aren't Expedia, Orbitz, and Travelocity some of the biggest online travel sites?

Yes, but Priceline is bigger, hence the buyouts to be able to compete better.

All these sites seem to use the exact same backend services, so it's difficult to care. About the only site I use regularly is hotels.com because they have a loyalty scheme (book 10 nights, get 1 free) - and even then I'm sure there's some catch I'm not aware of that makes them the same as everyone else.

This is true in general terms, but the reality is that these sites are charged to use backend services, so they cache results. So how smart the cache invalidation and refresh process is matters a lot to a user, especially during times when there is a lot of contention (think pre-christmas). If there is anything that makes a user bounce, it's telling the user that there exists a ticket for a given price, and the user discovering otherwise after clicking through or starting the payment process.

Then there are a lot of providers who have APIs but are not part of a large backend service. Hotels especially are notorious here.

Furthermore a lot of providers still don't have APIs (yes, in this day and age) and need to be scraped, and will agree to doing so - the better you scrape the more alternatives your users get.

But yeah. In an ideal world what you're saying would be true. And I agree that this is probably a userbase acquisition - market consolidation move rather than a tech one.

disclaimer: used to work at kayak.

It's actually a big deal in the travel industry. Yes, for the most part they are all the same. Online travel sites have negotiated contracts with the hotels that prevent them from selling their inventory at lower prices to anyone else, so you're not going to get a much better deal where ever you book.

The big thing here is this makes the Expedia umbrella by far the largest distribution channel for online hotel reservations. It gives them quite a bit of leverage when negotiating contracts with the hotel chains in the future. Especially when they are responsible for something like 35% of all the hotels' reservations.

While the rates are generally the same because of the rate parity agreement these OTAs have with hotels. One way you can get a better deal is booking direct with the hotels. Hotels can offer loyalty rewards, which is not covered by the rate parity agreement, as well as additional on property benefits. My company, https://universalpoints.com offers a 5% cash back that you can earn on your first stay at participating hotels for booking direct with the hotel. We are also working on adding a service where you can use the cash you've earned for reduced room rates and upgrades.

If the no lower prices thing is true, how come comparison engines like triage have such wildly varying prices? Are different bookers taking hits on their margins to drive business?

When a hotel signs a contract with an OTA (Online Travel Agency), it is (was) a common practice to include a 'price parity' clause, i.e. the hotelier cannot send different prices for the same offer to different websites, and the OTA agrees on not modifying the final price specified by the hotelier.

But the reality is that: - Not all the hoteliers update all the rates simultaneously (through a channel manager, for example) - Some the hoteliers are not selling the same rooms or rates (breakfast, cancellation options...) in all the OTAs. - Certain OTAs that are just re-selling inventory from wholesalers and the commission applicable to an offer can be modified by the OTA at its will.

There are more 'shady' tricks that can lead to different prices for the same hotel, but it would be too long to write all of them in a post.

> There are more 'shady' tricks that can lead to different prices for the same hotel, but it would be too long to write all of them in a post.

I'd love to see a blog post on this, and would gladly send beer/coffee money your way to see it!

I am currently working in an OTA and I am not in a position where I can openly share certain things, so I am sorry that blog post wont see the light soon.

But, I can share some pricing strategies that I've noticed that our competitors are doing, for example:

1) Different prices for different countries, example:

http://www.amoma.com/hotel.php?id=30800&key=2015022020150221... and open it again in english, using an incognito window (important): http://www.amoma.com/hotel.php?id=30800&key=2015022020150221...

2) Most of the hotels set the price using their local currency, and when the prices are converted to the customer currency, every OTA can decide to be optimistic or pessimistic. They could even decide to use a different conversion rate depending on the booking windows (number of days to checkin).

3) Price parity clause can be avoided if the price is not 'public' (http://www.osborneclarke.com/connected-insights/blog/hotels-...) so now most of the OTAs are trying hard to get the users logged in before booking. Once the user is logged in, the prices are not 'public', so the OTA can lower their commission slice of the price.

4) Some hotels have a specific (cheaper) rate for 'package bookings' i.e. the room is booked together with another service (flight, car rental...). But some OTAs decided that a flight booked earlier was enough to offer a 'package rate' to the customer. See: http://www.tnooz.com/article/expedia-playing-hardball-hotel-...

Thanks for the beer, we may have an opportunity to drink it together in the future.

Most large hotel chains have a best price guarantee which states the hotel's official website will have the lowest advertised price you can get anywhere else (e.g. expedia).

But, non advertised prices can be lower such as on Hotwire, where you don't know which hotel you are reserving, you only get to choose the price and have to stay wherever Hotwire makes the greatest margin.

If you do find a lower advertised price for a specific hotel, you can usually call their 800# and get it price matched and something extra.

http://www.marriott.com/hotel-prices/travel.mi

http://www.starwoodhotels.com/bestrate/index.html

http://hiltonworldwide.hilton.com/en/ww/ourbestrates/guarant...

http://www.hyatt.com/hyatt/specials/offers/offer-details_hot...

https://www.ihg.com/hotels/us/en/customer-care/lowest-intern...

The catch, in my anecdotal experience, is that third parties have terrible integration with the hotels. In some cases, they fax a reservation using a company credit card, to pay on your behalf. End result is some percent of the time, this gets messed up and you end up dealing with an annoyed person on check in that sometimes ends up having to get the agency on the line to sort it out.

Same for flight bookings. I've never found the attraction of booking through third parties; it only adds a failure point. Maybe small or specialized agencies are the exception, like Amex's travel service (which, I think, used a platform like Expedia's, but they had fantastic phone options and would always go figure stuff out on my behalf.)

I agree in many cases, but two cases in which I book through the third-party sites:

1. For hotels, where the hotel itself doesn't actually have an online-booking system. Not very common in the U.S., but common among smaller hotels in Europe. Often a third party (most often booking.com) is the only way to book these hotels online.

2. For flights, where Orbitz or Expedia are able to put together a multi-airline itinerary that I can't get those airlines' own sites to return. The last time I used Orbitz was for this reason: it was able to come up with a round-trip ATL-CPH with Delta one way and KLM the other way, with a good price and times that were convenient for me. The fare rules work because they're partner airlines (so it ends up billed as a round-trip, not two one-ways), but I couldn't manage to get either the KLM or Delta websites to offer me that combination, despite quite a bit of fiddling.

Indeed, the only thing I use the third-party sites for is search. For example, to get a quick overview of which airlines have flights to the place I'm going to, or what the available hotels are and their relative prices. And then I go and book directly through the airline or hotel. The price difference is usually minimal or non-existent, and it drastically reduces opportunities for problems.

> The catch, in my anecdotal experience, is that third parties have terrible integration with the hotels. In some cases, they fax a reservation using a company credit card, to pay on your behalf.

I know for a fact Hotel Tonight does this, as I've seen the fax from the front desk clerk with their corporate mastercard number (partly redacted) on it.

As a world traveler the only time I've ever had with booking a hotel is when I used a hotels own website. One advantage of using a third party site is better ui. And if you use a large enough site, they have their own customer support

I've always found that if I know and book ahead of time I can get a massive deal on hotels simply by calling the front desk. It's usually 10-30% cheaper than booking with any service online. I'm not sure why this is the case but if there's a service that can get me front desk rates, I'd be more than happy to switch.

Hell, even if the direct hotel booking is a little more expensive, I still go that route. I've been burned by hotels referring me to Expedia when problems arose. They can't do that when you're direct booked. I still use the travels sites for shopping purposes, then visit the hotel's site directly when I've made a decision.

(Maybe I should be staying at better places)

hotels.com is owned by Expedia

Yes, all the sites use the same backend. But customers just like you are fiercely loyal to their brand.

Tis means that hotels in the Us and Europe now effectively have only two partners to consider for distributing their inventory. This means less competiton to drive commissions and prices down. Bad news for the consumer. Good analysis on Skift with more details: http://skift.com/2015/02/12/its-expedia-against-everyone-els...

The origins of Expedia

"And Bill said, ‘No let’s start it inside Microsoft. And if it wants to be free we’ll consider it.’"

http://www.wired.com/2013/06/rich-barton-empowers-people-and...

Rich Barton went on to found Zillow. He's cut an impressive path.

According to Forbes, hotels represent 97% of Priceline's revenue with 23% margins. Car rentals and cruises represented 9% margins and airlines at 3% margins.

Assuming Expedia and Orbitz have similar profiles, then this is really a market share fight to capture the largest pool of hotel transactions.

http://www.forbes.com/sites/greatspeculations/2013/01/10/bre...

Yes, the SO works for one of them. The employee discount can go up to 50% for hotels and pretty much nothing on flights.

Does anyone know why there's such a huge disparity in these different types? I'd think the revenue would start getting driven down toward the value added, and I can't imagine the value added by a website varies so much between plane tickets, car rentals, and hotel booking.

Airlines are already operating on such razor-thin margins that it's not surprising that Priceline can't extract much profit from those deals.

I interviewed at a travel company last year. It was interesting because they didn't do any of the backend booking stuff (for flights), but instead seemed to like to direct you to other sites to book and then take a referal cut if you buy. This was a weird business where the person buying the travel was the product (I didn't like it).

Expedia is one of the direct bookers. I use them. The UI is not pretty but functional enough.

I think Hipmunk (the site founded by some of the Reddit founders) works like that. It's not unusual though. Here in the UK, things like insurance and utilities are increasingly sold in this way (we call them "price comparison" sites). I believe(?) Shazam also makes most of its money by referrals to iTunes and Amazon.

that is how kayak and tripadvisor make most of their money too. Ever notice how photo galleries for hotels on tripadvisor open new windows? they're making sure you have their cookie when you book it on hotels.com, expedia, booking.com, etc later.

Surprised there are no anti-trust concerns.

In this article from Reuters [0] their CFO stated that they only hold a single digit market share in the travel industry.

"The possibility of antitrust issues was played down by Expedia's Chief Financial Office Mark Okerstrom who said, "It is a $1.3 trillion industry and is highly fragmented ... We are only a small player and our overall share is in single digits.""

[0] http://www.reuters.com/article/2015/02/12/us-orbitz-worldwid...

That's a ridiculous argument by their CEO.

That is like saying Microsoft Office only holds a single digit percentage of revenue in the technology sector. It might technically be true, but it is irrelevant. MS Office has a monopolist hold on the office software space.

Monopolies aren't defined by someone who controls an entire sector (a "sector" is arbitrary anyway) it is when one specific company controls one commodity or service (see Google Search, which both the EU and US have called a monopoly).

Expedia absolutely has a monopoly on travel price comparison sites now. However it only becomes an antitrust complaint when they leverage that position into other markets (e.g. like Windows with Internet Explorer, or Google with Google+).

So while I don't think Expedia has broken any laws, yet. I will say that if they started using their newfound position for leverage I'd hope the US and EU governments stepped on them pretty fast.

"it is when one specific company controls one commodity or service"

There are plenty of office alternatives, including open office.

Here is a list of 10: http://www.digitaltrends.com/computing/best-microsoft-office...

Google also has competition: Bing, Yahoo, and Baidu to name a few.

"Expedia absolutely has a monopoly on travel price comparison sites now."

There are many other travel comparison sites. How can they possibly have a monopoly?

Ridiculous, maybe, but it shows he knows exactly what he is doing, and it should be totally expected. Peter Thiel talked about this in Sam's startup class:

"...anyone who has a monopoly will pretend that they are in incredible competition ... The basic lie you tell as a monopoly is the market you’re in is much bigger than it looks."

- Lecture 5: Competition is For Losers http://startupclass.samaltman.com/courses/lec05/

same logic as google

• Google owns about 67% of the global search market

• Google owns less than 3% of the global advertising market

• Google owns less than 0.24% of the global consumer tech market

http://www.businessinsider.com/peter-thiel-google-monopoly-2...

why would there be? priceline is already bigger than expedia.

source: know people who work at both places and internet. https://www.google.com/finance?q=NASDAQ%3APCLN&ei=j8zcVNvlGo...

https://www.google.com/finance?q=NASDAQ%3AEXPE&ei=1czcVIimKr...

look at profits and market cap.

Should clarify that "Priceline" is primarily Booking.com, not the amusing pricing opacity company out of CT (even if they did make the good decision to buy Booking.com years back).

Do you have a source that most of their traffic is from booking.com?

From Priceline's annual report in 2013 (the 2014 version is not released yet) filed with the SEC[1]:

    During the year ended December 31, 2013, our international
    business (the substantial majority of which is generated by
    Booking.com) represented approximately 85% of our gross bookings
    (an operating and statistical metric referring to the total dollar
    value, generally inclusive of all taxes and fees, of all travel
    services purchased by our customers), and approximately 94% of our
    consolidated operating income.

Disclaimer: I work for Booking.com, but it's not like SEC reports are privileged information. That Booking.com is most of the Priceline group is obvious to anyone who looks up SEC filings.

1. http://ir.pricelinegroup.com/secfiling.cfm?filingID=1075531-...

Priceline breaks down their financials into domestic and international bookings, based on the location of the unit doing the booking. Booking.com is based in Amsterdam so is counted as international bookings, along with agoda.com and some rental car service. Priceline is domestic. For the latest quarter, the booking numbers were $12B foreign vs $1.7B for domestic.

I work for them.

Who uses Priceline? Do they have any other brands besides their main one? I always thinking of them as that "name your own price" thing, the mechanics of which never appealed to me.

'While the online travel booking space is still fairly crowded, Mr. Moore said that the deal will still receive “a substantial amount of scrutiny” from antitrust regulators. He cites the Federal Trade Commission’s study of Zillow Inc $3.5 billion acquisition of Trulia Inc as a good comparison. The deal which was announced in July 2014 is still being reviewed by regulators.'

http://blogs.wsj.com/moneybeat/2015/02/12/investors-like-the...

It seems as though the whole travel industry is excited about the news:

EXPE - 90.45 +15.64% OWW - 11.65 +21.05% PCLN - 1092.83 +3.09% TRIP - 82.03 +21.94%

Worth noting as well that the deal was based upon 115M Orbitz shares @ 12/ each, which makes it a $1.38B. The $1.6B represents the enterprise value.

I applied for a Job at Orbitz yesterday and today this news came. Orbitz ratings are pretty solid on Glassdoor and that makes them one of the best companies to work for in the Chicagoland area, hope it remains the same after the merger.

Fun fact: Rich Barton founded both Expedia and Glassdoor.

I've worked for orbitz for 7 years , good place to work , don't know what the outcome of this acquisition will be tho.

This is probably a fair indication of what might happen

http://www.smh.com.au/business/wotif-boss-and-other-staff-ge...

In all cash deals like this, is there just a bank wire transfer that's made in the purchase amount from one company's account to the other's once everything has been approved and the deal has closed?

I can't answer your question directly, but I'm reminded of a story a friend once told. He was a new lawyer at a large firm. He was helping with a large deal and the bank couldn't get a hold of the lawyers listed above him. The bank called him and said "Is this $12.5 million transfer approved?" Do which he said yes, and 1 second later, 12 million dollars was moved from one account to another. So perhaps, with some authorization calls, it is as simple as a wire transfer.

My brother once put in a 1M EUR transaction instead of 1M HUF he wanted and it went through without a hitch... even though his account didn't have that sort of money or even anything close to that. That was weird and disconcerting.

Geez, to have that authority. Crazy.

A simple SWIFT transaction (wire payment) is generally enough, though in order for the actual transaction to move, there are confirmation and settlement procedures. All of which depend on the company and bank policies (for example, American Companies are all by law offered the option to use 4-eye verification processes to prevent a single person from making a tx, two to confirm etc etc).

Giarc's story is the confirmation process, likely being chased down by the back office at the bank as they go through the various procedures that minimize fraud and mistakes involved when moving large sums of cash.

If FX is involved, then they'll likely need to purchase the sum in a different currency (if they do not already have cash in that currency) and use the result to settle in another bank account. For example, an American company purchases 15 million euro to settle in a German bank account that belongs to the purchased.

I worked for a law firm in Australia representing a resources company. This company had decided to buy a mine. I saw a bank statement, with an initial deposit of $200 to open the "checking" account, an ATM withdrawal, and then on the date of settlement, 12 deposits of "US$100M" each from entities like "Chase Manhattan Holdings" and other corporate banks.

The end result was a balance somewhere in the order of $1.5B AUD - the number overflowed the little shaded box for balances.

Perhaps entirely unsurprisingly, the case that this bank statement was being used in? "ATO vs [Client]" (ATO being the Australian Tax Office) for "deficiencies in income declaration"...

There's probably a whole loop of transfers with one or more Double Irish arrangements, some Dutch sandwich and in the end all the money finds its way to the Cayman Islands or Swiss banks.

i've been using kayak instead for quite a while now. Expedia bought them yet? Nope, looks like Priceline did. Well, it's still a good site last time I checked.

Really interesting strategy Expedia has, having these new brands benefit from Expedia's tech stack.

Is Orbitz still running lisp code?

Anyone know if Orbitz is still built on lisp as pg famously documented so long ago?

A lot of job listings here: https://twitter.com/OrbitzTalent?original_referer=https%3A%2...

A quick scan of the software engineering positions did not, however, uncover any Lisp-related jobs.

ITA is built on lisp.

http://en.wikipedia.org/wiki/ITA_Software

Orbitz, along with Kayak and many others, is an ITA customer.

So they put their money in bags and give it to them?

Wait until they buy Homeaway next..

Homeaway focuses on vacation rentals and is in a very different market than Expedia and Orbitz.

It's not out of the realm of possibilities, but Expedia and Orbitz are much closer competitors than either would be with Homeaway.

There is a lot of back story you aren't aware of.

This is not an "if" it's a "when".

They have been in bed together for years now. This is coming from someone who works specifically in the Vacation Rental industry.

Expedia syndicates HomeAway listings on their site now.

At Homeaway's most recent national conference it seemed pretty clear that this was the first step in acquisition.

Or perhaps AirBNB.

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