Keep an eye on Asia for next wave of major online travel consolidation
The first two decades of online travel were filled with merge and acquisition activity within and between the US and Europe.
Starting in the late nineties with Travelocity’s acquisition of Preview and reaching a peak in the mid naughties with the Expedia/Hotels.com merger, Lastminute.com acquisition by Travelocity and the Orbitz/Ebookers/HotelClub acquisitions by Cendant.
Big dollar deals covering America and Europe. As we enter the third decade of the online travel I strongly suspect we are seeing the rise of Asian firms as acquisition targets and as potential acquirers.
When I suggest M&A activity in Asia, I am not just talking about the buying of Asian online travel companies by large European or US companies. I am also referring to Asian firms with money to spend and a target list to spend it on.
- Rakuten – is the largest online travel company in Asia and one of the largest ecommerce companies in the world. Based in Tokyo, Rakuten is generating around $2.5billion in gross bookings. 90% plus of it within Japan
- Wotif – is the dominant force in online travel in Australia. They are on track to sell $1billion in travel this year, 85% of it in Australia or New Zealand.
- Ctrip – is the biggest travel agency in China. Generating $3.7billion in GBs per year (according to PhoCusWright). Critically the vast majority of the sales are offline through a 12,000 seat call centre rather than online. I normally hear that 70% of their sales are offline but have also heard talk that the offline percentage could be as high as 90%.
In the last three years these companies have been very active in buying companies.
In 2008, Wotif bought Sydney based travel.com.au/lastminute.com.au and (separately) Thailand based AsiaWebDirect. The AWD (though a English language business) is Wotif’s first push for demand outside Aus/NZ
In 2009, Ctrip bought EZTravel, the number one domestic player in Taiwan. In December of that year Wotif also bought GoDo, an activities and services provider.
Rakuten has done three big deals in 2010 and we are only halfway through the year. Rakuten’s parent company launched a JV with China search giant Baidu, purchased US based Buy.com for $250 million and had $250 million left over to buy Euro ecommerce site PriceMinister (all separate deals).
None of these deals are specifically travel-related but they are indicative of the companies desire to push beyond Japan. The company has even announced a English By 2012 Pledge that will see English become the official language of the company in two years.
Also this year, Ctrip has announced plan to buy offline Hong Kong Travel Agency WingOn (to provide them with ticketing and fulfillment services in Hong Kong). And In a move reminiscent of a 1980s European tour operator, Ctrip has started buying up hotel interests across China. [NB: Tnooz post on both those deals]
Three years of deals from three companies
The reasons behind these deals are clear: each of the companies is very different but they share the common traits of being dominant in their home market and unable (mainly through market factors) to replicate outside of their home market the elements that drove that dominance.
Hence the need to use the big domestically generated cash-lows to fund international growth.
I predict that there is more to come; that we should expect to see more deals by these companies in the next three years. I would also not be surprised to see one of these companies make a major play through a big ticket acquisition in either Europe or America.
Tim Hughes is an online travel industry executive who has been blogging since June 2006 at the Business of Online Travel (the BOOT).
The BOOT covers analysis of online travel industry trends, consumer and company behaviour and broader online/web activity of interest to online travel companies (with a bias towards Tim’s home markets of Asia and Australasia and with the odd post on consuming and loving travel thrown in).
In late-2010 the BOOT clocked its 1,000th post, 200,000th visitor and 300,000th page view.In his work life he is the CEO of Getaway Lounge - a premium travel deal site based in Australia.
Tim has worked for both Orbtitz and Expedia. Prior to the travel industry Tim was a commercial lawyer and venture capitalist. Tim’s views are his alone and not necessarily the views of Getaway Lounge or any of its investors.