Expedia’s Adds Mobile Horsepower to Amp up Growth
Expedia (NASDAQ:EXPE), the world’s largest online travel agency by booking volumes, has added yet another dimension to its growth strategy by going after the mobile travel space to boost its traffic. The company has launched a slew of mobile applications to capture a larger slice of the travel market on the back of the smartphone revolution in its key markets. Expedia competes with other leading online travel companies such as Priceline (NASDAQ:PCLN) and Orbitz (NYSE:OWW).
We value Expedia with a $30.60 Trefis price estimate, implying a premium of ~10% to its current market price.
Why go mobile?
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1) Hug reach
Mobile has a greater reach than the Internet today (4.8 billion mobile users vs. 1.7 billion Internet users) especially in emerging markets such as India where penetration of personal computers is low and mobile Internet on handsets is a popular choice amongst consumers due to its affordability and portability. Reacting proactively to this opportunity can thus help OTAs in increasing their presence in the offline market.
2) The smartphone revolution
According to a recent Deloitte survey, business travelers are increasingly turning to their smartphones to research and book travel. It reports that 63 percent of business travelers earning more than $150,000 a year have web-enabled smartphones. This represents a sizable opportunity for OTAs to capture, by developing a suite of mobile phone apps.
Products/partnerships undertaken in mobile
1) Mobile app for Hotel booking
Expedia has launched a free app ‘Expedia Hotels’ for iPhone and Android users allowing them to book hotel rooms from their mobile devices.
2) iPhone app launch by Egencia
Egencia, the corporate travel arm of Expedia, launched an iPhone app equipped with user-friendly features like Smart Itinerary, Flight and Destination Alerts, Flight Schedules for business travellers, early this month.
3) Acquisition of Mobiata
Expedia acquired the creator of best selling mobile travel applications, Mobiata, late last year. The deal is expected to accelerate the company’s ability to enable mobile travel shopping and booking across multiple platforms.
4) Partnership with Nokia through TripAdvisor
TripAdvisor (now spun-off from Expedia) formed a partnership with Nokia in July 2010, which resulted in an Ovi app for Nokia’s Ovi Store and integration of the TripAdvisor service into Nokia’s Ovi Maps, thereby allowing travellers to search for popular hotels, restaurants and also find the cheapest airfares available.
How could this impact Expedia’s valuation?
Expedia received ~4% traffic through mobile bookings and this fraction will only increase with growth in the smartphone using population that we currently projected to be at least 70 mn by end of 2011 and rise to 110 mn by end of 2015 for the U.S. alone.
Owing to the smartphone revolution and Expedia’s efforts to increase its presence in the mobile travel space, the company stands to benefit in more ways than one. By leveraging the mobile media, Expedia gets access to the the pool of customers who were earlier users of offline travel services, but now have access to the OTA services through their mobile apps. Besides, Expedia gets the opportunity to save any attrition from its current customer base who are active users of smartphones and may prefer mobile bookings over online bookings, as could be the case for Business travelers or customers with last minute booking needs.
Overall, Expedia has an opportunity to improve its current market share of hotel and airline ticket bookings through its mobile travel strategy, as OTAs proliferate into the offline segment of the travel market. A potential upside to the current price levels exists for Expedia as the market dynamics shift and the rewards from the strategy accrue.