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Travelocity is a Huge Success for Expedia and Orbitz

@denschaal

Aug 07, 2014 11:30 am

Skift Take

Orbitz Worldwide paid $10 million to acquire the Travelocity Partner Network in late February 2014 and would pay an additional $10 million if the affiliate network hits certain performance targets this year and in 2015. This is a nice acquisition for Orbitz Worldwide because the private label sector was already an important part of its business.

— Dennis Schaal

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Travelocity

Travelocity parent Sabre says it will ramp up its marketing of the Travelocity brand in the second half of 2014. Pictured is an image from a Travelocity marketing email. Travelocity


Travelocity’s parent, Sabre, didn’t have much success with its online travel agency in recent years, but Orbitz Worldwide and Expedia Inc. are benefiting greatly from the pieces of Travelocity that they have picked up.

In releasing its second quarter results August 7, Orbitz Worldwide disclosed that its total revenue climbed 10% to $248.1 million year over year, and the Travelocity Partner Network, which Orbitz Worldwide acquired in late February, contributed 7 percentage points of that revenue growth.

Orbitz Worldwide also disclosed today in a Securities and Exchange Commission filing that it paid $10 million to acquire the Travelocity Partner Network, which powers parts of sites such as Yahoo Travel and the AmexTravel.com, and would pay an additional $10 million if the Travelocity affiliate network hits certain targets in 2014 and 2015.

During the second quarter, the Travelocity Partner Network contributed 10 percentage points of Orbitz Worldwide’s 9% year over year increase in gross bookings.

Orbitz Worldwide also saw a 20% increase in hotel room nights sold in the second quarter, the same as in the second quarter of 2013.

Despite the Travelocity Partner Network’s contribution to Orbitz Worldwide’s top line growth, Orbitz CFO Mark Randolfi estimates that TPN will actually lose about $4 million in 2014.

But, Randolfi believes that TPN will be “nicely additive to adjusted EBITDA” once TPN is integrated onto Orbitz Worldwide’s global technology platform.

Expedia is Happy, Too

If Orbitz Worldwide is pleased at the pickup it is getting from its acquisition of the Travelocity affiliate network, then Expedia Inc., too, is very satisfied with the arrangement that had Sabre farming out much of its Travelocity North America operations – just about everything but marketing — to Expedia.

As part of its second quarter earnings report, Expedia Inc. officials stated that Travelocity amplified Expedia’s top and bottom line growth.

Expedia’s Inc.’s hotel room nights sold grew 28% in the second quarter and Travelocity contributed a tad more than 4 percentage points to this growth.

And while Expedia Inc.’s air ticket volumes climbed 28% in the second quarter, Travelocity boosted that growth by 18 percentage points, officials stated.

Good Things to Come for Rest of 2014

There should be more good things in store for Expedia from Travelocity for the second half of 2014, as well.

Expedia has an option to acquire Travelocity, but for now Expedia has no control over the vigor in which Sabre markets the Travelocity brand.

But, Sabre CEO Tom Klein said today that “we decided to throttle marketing spend [for Travelocity] somewhat” during the second quarter, and Sabre intends to ramp up that marketing spend for Travelocity in the second half of 2014.

Some of that benefit would flow to Sabre, and a whole bunch would bump up Expedia’s financial results.

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