Expedia has agreed to buy vacation rental site HomeAway Inc for about US$3.9 billion in cash and stock, in a move that could ramp up competition with apartment-sharing start-up Airbnb.
Expedia, the world’s largest online travel agency by bookings, expects the deal to close in the first quarter of 2016 subject to regulatory approval. It expects the takeover will hurt its earnings per share next year but boost results in the long run, Reuters reported.
The news marks the largest acquisition in Expedia’s history and the latest in a buying spree since 2014, in which the company bought Orbitz Worldwide for US$1.3 billion and Travelocity for US$280 million.
More importantly, the deal brings into focus the rise of alternative lodging, a market that Expedia values at around US$100 billion. It agreed to pay a roughly 20 percent premium above HomeAway’s share price.
S&P Capital IQ analyst Tuna Amobi called the purchase ?transformational,? saying it lets Expedia ?participate in the sharing economy, which might be the next frontier? for leisure travel.
While Expedia now markets hotel rooms, overlapping little with Airbnb, analysts have warned that competition with the start-up could become fierce by 2018, according to Reuters.
Airbnb is expected to double bookings to about 80 million nights this year alone. By contrast, Expedia booked some 150 million nights in 2014.
Expedia chief executive Dara Khosrowshahi said HomeAway will become ?more aggressive? in marketing urban apartment shares that face off with Airbnb.
By contrast, beach and ski rentals account for a large portion of HomeAway’s bookings.
HomeAway’s business model has also differed from that of Airbnb, which lets homeowners add listings for free but charges travellers a service fee. Transactions occur on site.
HomeAway instead lets homeowners and property managers pay to advertise listings, with many transactions occurring off-site. However, it has announced that all listings would be available for direct booking by the end of next year, and it is adding a traveller fee.
?We are going to help HomeAway accelerate in its transition from a listings model to a booking model,? Khosrowshahi said, adding this will help it compete with Airbnb.
Expedia expects HomeAway to operate somewhat autonomously. It believes HomeAway will earn about US$350 million in 2018 before interest, taxes, depreciation and amortization, up from US$119.3 million in 2014, both on an adjusted basis.
Expedia to take on Airbnb with HomeAway acquisition
