A report in the Financial Times Wednesday that Uber was exploring a purchase of Expedia has everyone in the travel industry talking. If Uber were to acquire Expedia Group, it would be the biggest shakeup the travel industry has seen in years.
And it would be Uber’s biggest deal ever. Uber has been dipping its toes into travel, but the company would be diving in head first if it bought a major online travel company.
To be clear, it’s all speculation at this point. An Expedia spokesperson told Skift on Wednesday that the company isn’t commenting. Uber did not respond to a request for comment.
Even if it was just a trial balloon, it raises other possibilities: Expedia, a big brand with a depressed stock price, could attract other potential acquirers or activist investors. (Here’s one argument for a deal by Amazon, a fellow Seattle-based company with deep pockets.)
Uber could seek out other targets. For example, it already has a partnership with Hopper, an Expedia competitor.
Skift analyzed multiple angles about what a potential deal would mean for the companies and the larger travel industry, roadblocks along the way, and more.
1: What Do We Know About The Deal?
No formal approach has been made to Expedia, and there are currently no active discussions with Uber.
Uber approached advisers in recent months to examine the feasibility of an Expedia deal, the FT said, citing sources.
Any approach would likely be “friendly,” with Uber CEO Dara Khosrowshahi likely recusing himself from deal talks. Khosrowshahi was Expedia Group’s CEO from 2005 to 2017, overseeing major acquisitions during that time, and has stayed a non-executive board director. Khosrowshahi is a protégé of Expedia’s executive chair Barry Diller, who owns roughly 29% of Expedia’s voting power.
Uber has a market cap of roughly $170 billion, and Expedia’s is now just above $20 billion, after a 5% jump Thursday on the news of Uber’s interest.
2: Why Would Uber Want Expedia?
A successful acquisition could take Uber multiple steps toward becoming a superapp — to the extent that such an app would be allowed in the West.
It’s a single app with multiple services, often rideshare, transport, e-commerce, banking, messaging, food delivery, and social media all in one place. DiDi Global in China or Grab in Southeast Asia are examples, but the U.S. has not managed to develop one yet.
Uber has been venturing more into travel primarily through partnerships with travel companies. Hopper provides a connection so that Uber can sell flights. Omio provides a connection for selling trains and buses in the UK and Spain.
Uber has also been experimenting with boat rides, shuttles to events, and now a shuttle from Manhattan to the LaGuardia Airport. And it’s increasing investment in business travel.
Plus, there’s Uber Eats and grocery delivery.
Expedia has flights, hotels, short-term rentals, car rentals, and more through its many brands, including Expedia.com, Hotels.com, and Vrbo.
All together, that would be a lot of products.
3: What Would it Mean For Booking Holdings, Airbnb and Hotels?
An Uber-Expedia merger would turn the travel industry on its head.
Uber is already the largest rideshare service, and it’s used much more frequently than Expedia. If Uber suddenly started selling hotels and short-term rentals, for example, then consumers would be exposed to those products more frequently than they are today.
“The travel landscape is very fragmented, very fractured, consumers have to go to many sites to book the various parts of one trip,” said Pranavi Agarwal, senior research analyst for Skift. “If everything you’d need to book is already on an app — especially an app you already use every day to buy your groceries, your taxi, your food delivery — why wouldn’t you also naturally gravitate towards that app to buy other aspects of your life, such as travel?”
And that could be a threat to other companies in those respective sectors.
“This Uberpedia, whatever you want to call it, could be a huge threat to online travel,” Agarwal said. “If Uber is now selling hotels and selling travel, that’s a huge competitor to Booking, Airbnb, even Hilton/Marriott. This could be a game changer for online travel.”
4: Is It A Smart Move For Uber?
It’s tough to efficiently combine companies and would distract Uber from its core business. Big mergers can create a drag in the near term.
A quick take from analysts at Bernstein says they would have expected Uber to focus on more partnerships — not large M&A deals — as it ventures further into travel.
“We would rather see the company reinvest capital organically into its core business lines and explore adjacencies in travel via OTA partnerships, which we believe would be far more capital efficient,” the report said.
Agarwal brings up a similar question: “Why does Uber need to acquire a company like Expedia when they could just have B2B partnerships?”
Or, if Uber wants to own its travel products, maybe it would be more effective to acquire multiple strong individual products. To Agarwal, Expedia’s most valuable brand is Vrbo. But it lags in other areas, like experiences, where Klook and GetYourGuide have an edge.
Over the past day, Expedia stock is up 5%, and Uber stock is down 2%. For perspective: Since the start of the year, Expedia stock has increased 6%, and Uber has increased about 38%.
Considering Expedia’s downturn this year, Uber would get a discount compared to a deal with Booking. If Uber really does want to purchase an online travel company, it might have an easier time with existing partner Hopper, in part because it’s a smaller company (yet still quite large).
5: Is Expedia Stronger Alone?
Expedia Group has had a challenging stretch: It has had to lower forecasts at different points this year, citing a slower-than-expected rebound in some of its brands and lower travel demand.
Much of that has come from the company’s tech migration over the past couple of years that brought its three core brands and their data into one place. That led to some decreases in business as the company was focused on the migration.
The company also paused the rollout of its redefined loyalty program as it figures out how to expand beyond the U.S. and UK.
All of that work has come at the cost of market share, but now the company is working to rebuild.
Considering all of that work, Bernstein analysts don’t believe that an acquisition has been on the table for Expedia.
If it comes to light that Expedia is open to selling, however, it could bring in plenty of potential buyers, including other large travel players, as well as large non-travel investment firms.
6: What Other Value Would Expedia Bring?
Expedia has decades of customer data, invaluable in the age of AI and the future of personalization.
“I think companies would be keen to buy another company purely for its data, given the world we live in. Knowing information about how consumers are traveling, why they’re traveling, where they’re traveling, what kind of preferences they have — I think that’s really, really valuable, for sure. And Expedia is probably up there as the most significant tech player in travel, alongside Hopper,” Agarwal said.
At the very least, a merged company would lay building blocks for the future of data sharing that industry leaders have been working toward for years. Some call it the “connected trip,” some call it the “perfect trip” — it’s the idea that companies can easily share data between each other to create a seamless trip for the consumers.
Hypothetically: A user could schedule an Uber ride at the airport, and the driver could see in-app updates about the customer’s flight. Or, an Uber driver at the airport could automatically see a customer’s hotel address.
7: What Are The Risks to a Complicated Booking System?
Travel booking is already a complex system with multiple layers. If adding Uber to that mix creates so much complexity that consumers run into technical issues, it could hurt the company in the long-run, said Seth Borko, head of research for Skift.
“The supply chain is getting longer and longer and longer. Customers only care about the supply chain when it breaks down. The more links in it, the more likely it is to break down,” Borko said. “But the key is seamlessness. If Uber can do it and get their suppliers in order and make it seamless, then no one will care how many links are in the chain, and will be a big success. If, by adding additional change, they introduce more points of failure, they send themselves up for a challenge. And when things start to break down, trust goes away pretty quickly.”
8. Could Expedia Save on Marketing Spend?
Expedia and Booking Holdings have found that mobile users tend to be more loyal and are easier to attract.
Expedia spends a lot of money on ads with Google and other forms of marketing, but the returns aren’t what they used to be. Getting in front of Uber’s customers could be a big help.
And if Uber operates Expedia’s online travel business primarily via its mobile app, perhaps Uber could see stronger margins than Expedia is currently experiencing.
“The core challenge that Expedia is having right now is acquiring customers. That’s the core challenge that any online travel agency faces, and especially Expedia,” Borko said. “Expedia always acquired customers with performance advertising. That has gotten more expensive. That’s become a bit of a race to the bottom, and we’ve seen increased competition from Booking.com in the United States, which is Expedia’s home turf.”
For Uber, it could also mean higher average transaction values and higher commissions that come along with that.
9: What Would Happen to Expedia’s Growing B2B Business?
Expedia has been growing its B2B business, which now completes $25 billion in bookings annually.
Expedia provides its travel inventory as a white-label product, which allows client companies to sell travel to their customers. Expedia’s inventory powers travel programs for Delta, American Express Global Business Travel, JPMorgan Chase, Marriott Vacations, Walmart, Trip.com, and 60,000 others. It’s a way to gain customers without having to pay for Google ads.
And it could all come crashing down if Uber takes over, which would eliminate a quarter of Expedia’s revenue.
“That is really key. If Uber bought Expedia, would they allow Expedia to power other platforms? I’m not sure,” Agarwal said.
10: Would Regulators and Big Investors Approve a Deal?
If Uber and Expedia are sure about the deal, there would be many roadblocks along the way.
First, the deal would need to be approved by multiple shareholders. Institutions own 83% of Uber. Among them: Vanguard Group, BlackRock, FMR, and Morgan Stanley.
If Diller of Expedia were to choose to sell, analysts from JMP believe that “it is likely the transaction would be approved by enough shareholders.”
Next, it would undoubtedly draw scrutiny from regulators, who could very well block the deal.
The European Commission in 2023 blocked the proposed acquisition of eTraveli by Booking Holdings due to antitrust concerns.
Agarwal isn’t convinced it would work out.
“You hear rumors and speculations of mega-mergers in the online travel world, particularly given the amount of M&A activity that took place in the hey-days of online travel in the decade post the financial crisis of 2008,” Agarwal said. “Today, the landscape is very different: Companies like Booking and Expedia are now more mature companies than they were a decade ago, and such large-scale acquisitions are rare. Also, given the regulation hurdles, and likely backlash from Uber’s shareholders, I doubt this deal will materialize.”
