With Acquisition, Expedia Eyes Corporate Travel Biz

Travel site Expedia (Nasdaq: EXPE) has announced plans to buy a privately held business travel agency and use the acquisition as the core of an effort to enter the market for corporate travel.

Expedia did not disclose terms of its purchase of Seattle, Washington-based Metropolitan Travel, whose customer base includes Nordstrom and Starbucks, but it noted that the 20-year-old firm did US$150 million in gross bookings last year.

Expedia also said the acquisition will provide a small boost to earnings, starting in the third quarter. Shares of Expedia, which reached a new yearly high of $84.65 last month, were up $0.90 to $58.90 in early trading Wednesday.

Bellevue, Washington-based Expedia said the move will make it "the first technology-based travel agency to provide the full array of travel services needed by corporations."

Opportunity Knocks

By the end of the year, Expedia said, it will launch a customized version of its Web-based search-and-pricing platform aimed at corporations that need to reserve air travel, hotel rooms and car rentals.

The system also will let managers track the travel plans and expenses of employees, many of whom already favor Internet travel agencies. In addition, it will offer access to a 24-hour corporate customer service center.

The timing of the move might raise some questions. Business air travel has been slow to recover from the September 11th fallout, and many corporations have turned to videoconferencing and other alternatives.

Timing Right

But Expedia said it believes the timing is right.

"This is an opportune time to enter the corporate travel market," said Byron Bishop, Expedia's vice president of corporate travel and the head of the new division.

"Small and large corporations alike are raising concerns about the rising cost of corporate travel," Bishop said. "Meanwhile, their employees are opting for the convenience of online booking through agencies like Expedia."

Technology the Answer

Expedia can reduce costs for corporations, Bishop added, by providing in one place what many corporations now purchase from multiple vendors.

Forrester analyst Henry Harteveldt told the E-Commerce Times that providing technology solutions to customers is the ticket to driving overall travel sector recovery, which in turn requires more corporate business.

"Technology is what will get the travel sector going again," Harteveldt said. "Anything that makes it easier and controls costs is probably going to resonate."

And Forrester has singled out Expedia as the easiest-to-use online travel site. Expedia's marketing campaign already features a corporate travel scenario in which an employee chooses a shorter flight after imagining sitting next to an obnoxious coworker.

Waiting for Word

Expedia will report second-quarter earnings on July 23rd. The company is waiting to see whether USA Interactive, its majority owner, will press forward with a takeover attempt.

USA Interactive announced in early June that it would bid to buy control of Expedia as well as Hotels.com and Ticketmaster. But it later put the move on the back burner in the face of opposition from shareholders and boards of directors.

Rapid Consolidation

The travel space has been the site of rapid consolidation in recent months. In March, Travelocity agreed to be bought by parent Sabre Holdings, which earlier had purchased privately held Site59.com. For its part, Priceline bought the assets of LowestFare.com and struck several other online partnerships.

According to analysts, some of this activity might be a response to the rapid growth of controversial site Orbitz (NYSE: OWW), which in May announced it had filed for a $125 million initial public offering, despite a host of regulatory reviews still under way in Washington, D.C.

But observers have long forecast a shakeout of sorts in the travel sector, with one analyst predicting that as many as 80 percent of companies would fold or be swallowed up.