In a bid to expand its exposure in the region, online travel-booking company, Expedia Inc. EXPE invested $270 million in Decolar.com.
Founded in 1999, Decolar is an online travel company that operates in Latin America. The company plan vacations and book hotel rooms, airline tickets, packages, rental cars, cruises and tickets to various places of attractions around the world.
The investment will give Expedia a minority stake of about 20% in the Decolar parent company, strengthening the 12-year partnership between the two. Per the new deal, Expedia will be able to access Decolar’s hotel supply in Latin America, thus expanding its reach in the region. In turn, Decolar’s customers will get a broader selection of hotels at better deals.
To counter the increasing competition in the online travel industry, Expedia has been making acquisitions and entering into strategic alliances. The company continues to expand the inventory, especially in international markets, and maintain its leading position in the domestic space with higher inventory and strategic deals.
In Jan 2015, Expedia purchased Travelocity for $280 million to gain a wider reach in the online travel market. In February, the company entered into an agreement to acquire rival Orbitz Worldwide, Inc. for $1.6 billion, or $12 per share. In November, last year, it acquired Australia-based Wotif.com Holdings Ltd, to strengthen its foothold in the Asia-Pacific region, while boosting international revenues. Prior to that, in June, Expedia agreed to acquire a European online car rental company — Auto Escape Group — to expand into the European car rental market.
The overall travel market is robust and evolving very rapidly. We believe that these alliances, investments and acquisitions will help Expedia grow in the future and deliver above-market growth rates.
However, the company is facing stiff competition from players like Priceline.com PCLN and Orbitz Worldwide OWW. Also, Google GOOGL has entered the travel search and booking market with the ITA Software buyout in 2010, making the industry all the more competitive.
Expedia has a Zacks Rank #4 (Sell).
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