Expedia Updates: Shareholders OK TripAdvisor Spin-Off, United Signs Deal
The past week, we witnessed some interesting developments at the leading online travel agency, Expedia (NASDAQ:EXPE). The company announced that its stockholders overwhelmingly approved the spin-off of its media and advertising arm, TripAdvisor. TripAdvisor constitutes almost 24% of our $31 price estimate for Expedia’s stock, making it the second largest value driver for the company after hotel bookings. The spin-off presents an opportunity to unlock Tripadvisor’s value which has until now been overshadowed by Expedia’s relatively sluggish performance. It will also allow Expedia to concentrate on its core travel bookings business, given the largely different dynamics of the travel media business operated by Tripadvisor. We discussed the implications of the spin-off in an article. (See Expedia Shareholders Should Cheer the TripAdvisor Spin-Off)
In other major developments, Expedia entered into a new multi-year agreement with United Airlines (See Expedia Signs New Multi-Year Agreement with United Airlines, Press Release, Dec 6) and also announced a major update to its popular Expedia Hotels app for the iPhone and Android OS, which adds full support for iPad and Android tablets (See Just Tap and Go: Expedia Introduces Expedia Hotels for iPad and Android Tablets, Press Release, Dec 8). Both the initiatives are expected to help Expedia expand its reach and customer base.
See our complete analysis of Expedia stock here
The agreement with United will provide travelers booking on Expedia.com and Hotwire with access to all United and Continental fares, schedules and inventory. This is expected to have a favorable impact on Expedia’s market share in OTA airline bookings by attracting travelers hunting for United or Continental’s experience and from an increase in booking options in general. Additionally, United will be giving its customers online access at united.com to nearly 145,000 hotels via the Expedia Affiliate Network (EAN). This means more hotel bookings for Expedia as travelers buying tickets from United’s website become interested in making hotel reservations along with the air ticket purchases. As per our estimates, Hotel Bookings contribute to 55% of the value for Expedia’s stock while accounting for a much higher 90% of the value for competitor, Priceline.com (NASDAQ:PCLN).
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The availability of the Expedia Hotels application optimized for tablets will also help the hotel bookings growth at Expedia by acting as an additional booking channel and leveraging the tablet market boom. The tablet-optimized launch comes at a time when travelers are choosing more and more to bring their tablet on trips, rather than a laptop. Scott Durchslag, president, Expedia Worldwide says, “There is no device better suited for enjoying your Expedia experience than a tablet. Travel is intrinsically a mobile experience, so as more consumers use mobile devices, Expedia.com will become like a personalized travel assistant that is always with you wherever, whenever, and however you want to discover, plan, book, or enjoy travel. If you want the perfect room at the right price, without delay, Expedia Hotels for iPad or Android really delivers.”
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