Uber Exploring an Acquisition of Expedia
Could the rideshare company be planning a super-app for travel?
On Thursday, the Financial Times reported that Uber is considering acquiring the travel-booking company Expedia. The deal is in its early stages and may not materialize, but if it does, it could potentially reshape the travel industry. Let's explore how this acquisition might unfold for Uber.
At the center of the discussion is Uber’s CEO, Dara Khosrowshahi, who previously served as Expedia’s CEO before moving to Uber. He still sits on Expedia's board, and during his tenure, the company's market cap surged by 550%, reaching $150 per share. Five years after his departure, the stock hovers around $160. Khosrowshahi is a protégé of Barry Diller, Expedia's executive chair, who holds 29% of the company’s voting power.
Some experts envision the deal taking a private equity approach, with Khosrowshahi playing a key role. Currently, Expedia’s biggest challenge is competing with Booking.com and Airbnb to attract and retain customers, leading to a substantial marketing expenditure of $16.8 billion in 2023. With Uber's advertising business gaining momentum, some suggest the company could reduce Expedia's marketing costs by promoting its services within the Uber app to improve profitability. However, I don’t see this being the best strategy for Uber.
When I use the Uber app, I spend minimal time on it - just enough to enter my destination, confirm the ride, and maybe check the car's arrival time. I don’t pay attention to ads, let alone plan and book a vacation in the minutes spent waiting for a ride based on an Expedia banner.
The real opportunity for Uber lies in creating a super app for travel. Following the success of Uber Eats, an "Uber Travel" platform could be the third major app in Uber's family - a go-to destination for all travel-related bookings. The key advantage would be integration.
“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?”
Expedia’s portfolio includes brands like Orbitz, CarRentals.com, Hotels.com, and Vrbo (a competitor to Airbnb). By acquiring Expedia, Uber could unify these services under a single app, offering a comprehensive travel experience that integrates flights, hotels, short-term rentals, car rentals, cruises, rideshare, and food delivery. Imagine a single platform managing your entire itinerary, from airport transfers to hotel bookings, with dinner waiting at your hotel upon arrival.
Uber has already started experimenting with travel booking, allowing UK users to book flights and trains through a partnership with Hopper. Khosrowshahi has said the results so far have been very encouraging.
With a market cap of $170 billion, Uber has the financial means to acquire Expedia, valued at $20 billion. However, a merger of this scale could face regulatory scrutiny on anti-competition grounds. It will be interesting to see whether the deal advances and if Uber makes a serious push to become the king of travel.