Would It Make Sense For Priceline To Acquire TripAdvisor?
Recently, there have been rumors about Priceline’s possible acquisition of TripAdvisor. In this piece, we look into the possibilities of this merger and the ways in which the acquisition might benefit Priceline.
What Are The Possibilities?
The last year has not been kind to TripAdvisor. While the company still grapples to lure consumers to use its Instant Booking platform through its marketing and branding initiatives, recently rumors have been rife about its possible acquisition by Priceline. However, given TripAdvisor’s history with Expedia (TripAdvisor spun off from Expedia in late 2011) and given their existing relationship through Liberty Interactive, the probability of Expedia wanting to reacquire TripAdvisor cannot be entirely ruled out. Liberty Interactive, owned by John Malone, has a 16% stake in Expedia and a controlling stake in TripAdvisor. Mr. Malone is a also a long time friend and business partner of Expedia’s Chairman, Barry Diller. Under these circumstances, it seems probable that if TripAdvisor was being sold, both Expedia and Priceline might fight it out in a bid to buy it.
But let us also not forget that Priceline has a stronger financial muscle and a chance to benefit significantly through this acquisition. Currently, the TripAdvisor platform includes over 435 million reviews (50% y-o-y growth) for 1.9 million accommodations, 4.2 million restaurants, and 730,000 attractions, and the platform enjoys 390 million average monthly unique visitors reflecting an 11% y-o-y growth.
Why Is It More More Probable For Priceline To Buy TripAdvisor?
- Firstly, Expedia has made numerous acquisitions over 2015 to consolidate the U.S. online travel market. Priceline, on the other hand, has almost 90% of its revenues coming from its international markets. Acquiring TripAdvisor will help it in growing a solid position in the U.S., as well.
- Secondly, other than its 2016 acquisition of the Momondo Group, Priceline has not made any big ticket acquisitions since it bought OpenTable in 2014. Its cash position is significantly stronger than Expedia – Priceline ended 2016 with cash and cash equivalents of nearly $14 billion compared to Expedia’s $2.5 billion.
- With its Booking.com being the largest and most popular accommodation platform in the world that is still growing exponentially, TripAdvisor’s Instant booking might be further strengthened to follow its cue, in case the acquisition takes place.
- TripAdvisor has a strong non-hotel segment that might expand Priceline’s existing portfolio. Currently, over 90% of Priceline’s revenues come from hotels, but TripAdvisor’s offerings in the restaurant booking and tours and attractions platform might help expand Priceline’s services thereby attracting more travel bookers.
- TripAdvisor’s restaurant booking platform, TheFork, is the largest in Europe spanning across 12 countries. Priceline has been struggling with the geographic expansion of its restaurant platform, OpenTable, outside of the U.S. Together, both these entities can form the world’s largest restaurant booking platform.
These are a few reasons why we feel Priceline might be greatly benefited if it thinks of acquiring TripAdvisor. Also, there is still a possibility of TripAdvisor making a turnaround on its own. However, Priceline has never officially come out to say that it is thinking of a takeover. We have to wait and see what unfolds for these OTAs in the future.
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