Expedia’s acquisition of the Wotif Group will catapult the global retailer to the forefront of the Australian online travel market where it has, until now, been trailing local heavyweights, says an industry expert.
The $703.1 million deal announced yesterday will encompass all Wotif brands including Wotif.com, lastminute.com.au, travel.com.au, Asia Web Direct, LateStays.com, GoDo.com.au and Arnold Travel Technology. If approved, it will be completed in the last quarter of 2014.
PhocusWright analyst Chetan Kapoor told Travel Today that Expedia has been consolidating its position in other markets through moves such as its acquisition of metasearch site Trivago. However, it has made less impact in the Asia Pacific region – an issue that will be addressed if the sale is approved.
However, Kapoor stressed that the tie-up will not be without its challenges, with Wotif profits falling 12% to $51 million in the 2013 fiscal year.
“The most crucial would be to reverse Wotif’s single-digit TTV and revenue growth,” he said. “With Booking.com making inroads in Australia coupled with foreign exchange trends to the mix.”
“This could put a dent on Expedia’s financial results, at the cost of gaining top spot in the market.”
But Wotif’s slowdown also means that the timing of the deal “couldn’t have been better”, according to Kapoor.
‘Wotif’s stock has been trading below $3 since mid-December, allowing Expedia to take advantage of its valuation,” he said.
Under the deal, Expedia will gain access to Wotif’s local accommodation content while Wotif’s own international expansion will be aided by the global scale of its new owner.
“Once fully integrated, the Wotif-Expedia combine could put pressure on suppliers for improved margins given their global scale of distribution,” Kapoor said.
Synergies between Arnold Travel Technology and Egencia could also signal significant expansion in the corporate arena. Although Egencia bookings currently only account for around one-tenth of Expedia’s worldwide sales, Kapoor stressed they are growing at a faster rate than its leisure sales business.
