March 26, 2013

Will Trivago help increase Expedia’s footprint in the European hotel market?


As per PhoCusWright, the top five OTAs - Priceline, Expedia, Lastminute.com, Ebookers and ODIGEO - contribute more than 60% to OTA bookings in Europe. Priceline’s booking.com was the main driver of OTA growth in Europe in 2011 and 2012 and is currently estimated to account for 6% of the European hotel market.

Though Expedia attracts a higher number of unique visitors in Europe compared to Priceline, the latter is known to have a wider presence in the European hotel market. Priceline’s booking.com was the main driver of OTA growth in Europe in 2011 and 2012 and is currently estimated to account for 6% of the European hotel market. [5]

Priceline’s business is more hotel-focused compared to Expedia. While hotel bookings contribute 97% to Priceline’s total revenue, the segment accounts for 74% of Expedia’s earnings. Hotel bookings is the fastest growing segment in the online travel market and with more than 20% revenue margin (revenue earned by OTAs as a percentage of gross hotel bookings), it is also the most profitable compared to airlines (~2%) and car rentals & cruises (~9%).

Trivago has managed to double its revenues each year since 2008. Building direct relationships with hotels has been one of its key strategies. Trivago has an inventory of more than 600,000 hotels over 140 booking sites in 23 languages across 30 countries in Europe. With close to 20 million unique monthly visitors, Expedia claims that Trivago was one of the fastest growing channels which generated rising traffic for its website last year.

Though the two companies will operate as separate entities after the acquisition, we think that 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.

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