Can Expedia Take More Share In The European Hotel Market With Trivago Deal?
Expedia’s collaboration with Trivago will increase its visibility in the European market which in turn will lead to rising user traffic on its website.
Leading US-based online travel agency (OTA) Expedia (NASDAQ:EXPE) announced its acquisition of German meta-search engine Trivago in December 2012. Expedia plans to acquire a 61.6% share in Trivago for an estimated 477 million euros of which 434 million euros will be in cash and the remaining in Expedia’s stock. The acquisition is expected to close in the first half of 2013.
In addition to marking Expedia’s entry in the meta-search space, we believe that Trivago will help increase the company’s footprint in the European hotel market. Conducting more than 100 million hotel searches annually, Trivago is one of the leading meta-search engines for hotel bookings in Europe. While growth in the U.S. travel market has slowed, European markets offer immense growth opportunities for OTAs. The European online travel sales is expected to grow at a CAGR of 5.7% till 2016 compared to 4.8% CAGR for the US online travel market. In our view, a higher share in the European travel market will augur well for Expedia’s valuation.
In this article we discuss the factors that make Europe an attractive market for OTAs and discuss how Trivago can help Expedia leverage growth opportunities in the region.