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When Expedia gets around to talking about acquiring Travelocity outright, the relationship between Travelocity parent Sabre and Expedia is already so close they will have no problem getting their phone calls answered. Sabre is counting on such a sale, telling investors that it is guaranteed to increase shareholder value.
Whether you want to consider it a bromance or soul sistership, the already tight Expedia-Sabre relationship just got wound a little tighter.
The duo signed a strategic technology agreement in which the Expedia Affiliate Network agreed to provide hotel content to travel agents connected to the Sabre global distribution system.
The ironies are many.
Expedia and Sabre already have a long-standing technology partnership in which Sabre provides global distribution services to Expedia.com and other Expedia Inc. brands.
This means that Expedia essentially grabs much of its airline content from Sabre, although Expedia also taps into airline content from Amadeus and Travelport for diversity’s sake.
Sabre doesn’t break out the details of its global distribution system arrangement with Expedia, but did say that Sabre had a 62% share of air bookings handled by Expedia, Priceline and Sabre’s own Travelocity in 2013.
Suffice it to say that Expedia is a huge Sabre customer.
Apart from the new relationship announced July 1 between Sabre and the Expedia Affiliate Network, last year Sabre outsourced Travelocity’s customer service and technology operations in North America to Expedia. Under the deal, Travelocity greatly trims its expenses and essentially becomes a marketing organization, and Expedia grabs expanded reach in North America from Travelocity.
So now Expedia and Travelocity hotel content appears on Travelocity.com and Travelocity.ca, and with the new affiliate relationship, Expedia turns around and provides hotel content back to Sabre.
You almost need a flow chart or route map to understand how the two companies’ hotel content flows back and forth.
While Travelocity and Expedia are separate entities, Expedia has an open-ended option to acquire Travelocity at fair market value during the course of their agreement, and Skift has speculated that Expedia will indeed acquire Travelocity at some point.
Expedia earns incentive fees from Sabre for the Travelocity deal. Sabre says it paid Expedia $8 million in January 2014, and another $3 million in March.
The agreement between Sabre and the Expedia Affiliate Network helps Sabre compete against Travelport for travel agent customers as Travelport, which hopes to execute an IPO like Sabre did a few months ago, has been aggressively adding searchable hotel content for travel agents.
Just to add a little more complexity to the state of online travel relationships and trends these days, Orbitz Worldwide recently acquired Travelocity’s affiliate network, called the Travelocity Partner Network, which includes customers such as Yahoo Travel, AAA and Visit Orlando, so Orbitz can better compete against the Expedia’s affiliate network.
Meanwhile, Expedia and best-bud Sabre are virtually joined at the hip.