Online Mergers Begin In Travel Sector

It looks as if the expected batch of mergers in the online travel sector has begun with the purchase of Expedia by USA Networks Inc. The Internet and TV cable company says it plans to become the world’s online travel powerhouse by taking control of the world’s second largest online travel agency and a leading online supplier of vacations and cruises.

Although no such deals are expected locally, albeit on a much smaller scale, there is no doubt that the plethora of travel-related sites here at some time in the future will be forced to close or merge.

In the meantime, the deal to acquire Expedia, which is worth about $1.5 billion, allows original owner Microsoft to cash in on the profitable and fast-growing entity it launched in 1996. Microsoft owns 70% of Expedia, which had gross bookings of $1.8 billion in 2000.

USA Networks says it also plans to acquire National Leisure Group, a 15-year-old company that provides private-labeled cruise and vacation packages, including those offered online by several airlines as well as Expedia and Yahoo! Travel.

Presently, USA Networks has a controlling stake in Hotel Reservations Network, the fourth largest online travel agency. Hotel Reservations, which specializes in hotels, has a multi-year partnership with Expedia rival Travelocity. Expedia and Hotel Reservations had combined online gross bookings of $2.1 billion, or 14% of the online travel market in 2000, according to PhoCusWright Inc.

By comparison, Travelocity, the largest online travel agency, had gross bookings of $2.5 billion last year. But Expedia has been growing at a fast clip this year, and plans to announce that gross bookings for its fiscal fourth quarter ended June 30, 2001 will reach $802 million, up 78% year-over-year and up 19% from the third quarter.

The acquisition signals a major leap forward in convergence of traditional and interactive media -along with its other cable channels, USA Networks is to launch a new cable television network called USA Travel Channel- which has been pondered and discussed for several years by media outlets.

USA’s assets include USA Network; SCI FI Channel; Home Shopping Network; Ticketmaster, which operates Citysearch and Match.com; as well as Hotel Reservations Network.

For the calendar year 2001, the USA Travel Group is expected to generate approximately $4 billion in gross bookings.