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Now that the Expedia-Travelocity agreement’s implementation has begun, we can expect to hear about some of the financial benefits to Expedia during its upcoming Q4 earnings call. The agreement is being phased in, and the rollout is taking place somewhat faster than expected.
Expedia and Travelocity have quietly put their alliance into place, and Expedia is now selling Travelocity-sourced hotels and flights, Sabre’s IPO papers revealed.
New details emerged about the August 2013, exclusive, strategic marketing agreement (SMA) in which Travelocity North America basically gives in and outsources all but its marketing to Expedia.com, which sells hotels and flights for Travelocity, handling all of the back-end technology and relationships.
Sabre, which owns Travelocity, disclosed in its S-1 registration statement that by December 31, 2013, “the majority of the the online hotel and air offering had been migrated to the Expedia platform, and a launch of the majority of the remainder is expected in early 2014.”
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The pact has an eight-year term.
The agreement automatically renews unless certain conditions take place, such as Travelocity’s failure to hit certain revenue targets.
There are also put/call terms “whereby Expedia may acquire, or we may sell to Expedia, certain assets relating to the Travelocity business,” Sabre says.
The agreement Travelocity-Expedia agreement was geared to enable Sabre/Travelocity to trim costs and improve earnings in anticipation of the Sabre IPO and beyond as an envisioned public company.
Although Expedia is now a marketing partner with Sabre’s consumer-facing Travelocity business, Expedia hurt Sabre’s global distribution business in late 2012 by taking some of that business and moving it to a Sabre GDS competitor, Sabre says.
That decision by Expedia to diversify its GDS suppliers led to a year-over-year decline in Sabre’s transaction volumes, Sabre said.