Something big just happened on September 17th…
Expedia (NASDAQ:EXPE) , the number one online travel booking company, bought Orbitz (NYSE:OWW), the number three company, for $1.6 billion, which helped Expedia possess nearly 3/4 of the U.S online travel market.
This was obviously a monopolistic deal, but seriously, was it worth acquiring Orbitz for $1.6 billion?
Let’s take a closer look at Orbitz.
In 2001, five major airlines, including United Airlines, Delta Airlines, Continental Airlines, Northwest Airlines, and American Airlines, teamed to form and launch an online travel firm called Orbitz. And in two years, the firm went public, which was an incredible tale of the industry. In 2006, Orbitz was the first U.S. online travel company to provide a WML-only mobile website for users to check flight statuses and average wait time for taxi line, to view weather and traffic conditions, and to search for hotels and parking space near airports. As an e-commerce business, Orbitz kept focusing on mobile technology; the company also redesigned its mobile website and created a native app for iOS and Android operating system because the organization knew that smartphones would be the future trend.
However, its rivals were also catching up with some new native apps.
In 2012, Orbitz understood that if the company wanted to beat its competitors up with apps, it would need to concentrate on three things: speed, capacity, and scalability. Thus, Orbitz decided to improve its app by getting rid of browser screens and integrating the entire search and reservation process. The company also hired Atmosphere Research Group and C+R Research to do speed tests for all travel e-commerce sites and apps.
“The study found that Orbitz iPhone app users were able to book a round-trip flight to Hilton Head, South Carolina, a hotel reservation, and a car rental in slightly more than seven minutes, twice as fast as people using its iPhone app competitors.”
Orbitz had to come up with more new ideas to keep itself at the top of the travel industry on all app platforms. Therefore, in 2013, the firm created Orbitz Rewards, which was a free join program that rewarded travellers for booking flights and hotels. The reward is Orbuck (real money), which could be used only on Orbitz website and apps so that travellers would come back. In 2014, the company also launched Orbitz Labs in order to analyze data and drive more bookings. Without a doubt, Orbitz won the APPY Award 2014 for best travel app.
So, how much is Orbitz worth?
Well, based on Expedia’s calculation, Orbitz is worth $1.6 billion, but I think the value of the company is more than that.
By looking at Orbitz’s history, we know that the firm is “an expert” in e-commerce rental sites and apps. So if Expedia also wants to use short-term rentals in order to compete with Airbnb in the future since Airbnb is becoming a big threat for the online travel market, Expedia will need e-commerce rental experience from Orbitz. And currently, Airbnb is valued at over $25 billion. So how much is Orbitz really worth?