Here’s Why Expedia Is Currently Focusing On Expanding Its Presence In Asia

June 6th, 2017 by Trefis Team
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By now, we know that between the two OTA leaders, Priceline and Expedia, the former is more international in the spread of its business with over 90% of its revenues coming from overseas markets. Expedia, on the other hand, has so far been mostly concentrated in North America. The consolidation of the North American online travel market with the help of acquisitions such as Orbitz, Travelocity, and HomeAway further strengthened its position in the the U.S. However, Expedia might have realized that the secret to growing further lies in emerging markets such as Asia. It is noteworthy to mention here that in its Q1 2017 earnings call, Priceline’s management had also hinted that the company was eating into the market shares of its competitors. Also, Priceline’s first quarter results revealed that the company is growing at a much faster pace than its closest rival, Expedia. For example, in Q1 2017, while Priceline’s room nights grew by 27.4% to 173.9 million, Expedia’s room nights grew by around 12% to 64 million. Hence, Expedia’s focus on Asian markets might be a move by the company to gain a bigger share of the online travel market pie.

Why Is The Asia Market Crucial For Online Travel Agencies?

According to Greg Schulze, Expedia Group’s senior vice-president for commercial strategy and services, the company is focusing on Asia owing to the fact that over 50% of the world’s millennials reside in the continent. Younger people are more tech-savvy and hence more prone to making online travel booking rather than depending on travel agents. Along with this, millennials also prefer traveling on their own rather than packaged tours as provided by most brick and mortar travel agencies. Online travel bookings give them the flexibility to plan and book their travel needs in a customized manner. Market research company, Euromonitor  International, claims that the Asia-Pacific market is currently the fastest growing region for online travel agents.

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Expedia Needs To Follow Its Rivals And Grow In Asia

Expedia is yet to develop a stronghold in the region. Priceline has a dedicated travel site, Agoda.com, for the Asia Pacific region along with its Booking.com, the most popular online accommodation booking platform in the world. Ctrip, the leader in China’s online travel market and currently the second largest OTA in terms of market capitalization, has also said that it is focusing on capturing more markets in Asia currently, as these have a higher scope of growth than some of the already established markets in the West. Ctrip, notably has over a 26% stake in India’s OTA Leader, MakeMyTrip. With India’s population about to become the largest in the world, Ctrip wants to take advantage of the growing Indian travel market as well, which according to its CEO is currently at a stage where China was 10 to 20 years back.
Expedia Is Gearing Up For Asian Expansion
 
Expedia is taking steps to grow its Asia presence. Its regional headquarters in Singapore has grown in manpower and increased investments in technology, notable among which was the launch of its “innovation lab” in April.
Expedia’s annual $1 billion investment in technology and its team of over 5,000 engineers and data scientists ensure that the company will try to capture more of the market through its technological edge in the future. Coupled with this, Expedia’s strategic acquisitions, like the recently acquired HomeAway, gives it the capability to compete directly with not only online travel agents but also home sharing companies like Airbnb. We believe Expedia will use its strengths to its advantage to grow substantially in the Asian market in the near future.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Expedia

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