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Expedia is arguing that acquisitions such as its proposed $1.3 billion purchase of Orbitz Worldwide will mean lower prices for consumers.
In an interview on CNBC May 1, Expedia Inc. CEO Dara Khosrowshahi defended the merits of seeing the U.S. Department of Justice give the go-ahead for Expedia’s acquisition of Orbitz. The review is expected to take much of the rest of 2015, if not longer.
As Expedia brings new companies on board, it should mean lower prices for consumers, he said. Since 2014, Expedia has acquired Travelocity, Wotif, Auto Escape Group, AAE Travel (a joint venture with AirAsia) and has the pending acquisition of Orbitz Worldwide.
Some critics of the Expedia-Orbitz deal argue that it would make Expedia even more powerful, harming consumers. It’s a new wrinkle for Khosrowshahi to argue that consumer prices could fall because of the merger.
In some emerging markets, Expedia says it is taking smaller hotel margins to get further traction in bringing new properties on board, and this helps consumers in terms of rates and a wider selection of hotels.
Lower prices haven’t occurred in the U.S. airline industry after a wave of consolidation and it remains to be seen if merger fever in online travel would really lead to lower rates.
Regulators Getting Tougher?
Asked whether the U.S. regulatory environment is getting tougher now that the Comcast-Time Warner Cable and the Applied Materials-Tokyo Electron deals fell through, Khosrowshahi said Expedia’s market share is “significantly lower” than Comcast’s in the U.S.
Expedia states it has 16 percent market share of the U.S. online travel market and 9 percent of the total U.S. travel market.
Khosrowshahi said Expedia Inc. has lower U.S. market share than Comcast’s, although he conceded that regulators have the right to review the Expedia-Orbitz deal.
The global travel market is “highly fragmented” and Expedia has less than 5 percent market share, Khosrowshahi said.
Asked about Amazon’s launch of Amazon Destinations, Khosrowshahi said travel is a $1.3 trillion market and “you are going to have competition.”
With brands in the fold such as Expedia.com and Hotels.com, as long as Expedia Inc. keeps executing “we are going to be fine,” Khosrowshahi said.
This year, for the first time, Expedia has been mentioning Amazon as a potential competitive factor in travel.
In a financial filing May 1, Expedia stated: “Finally, traditional consumer eCommerce and group buying websites, such as Amazon and Groupon, have been expanding their local offerings into the travel market by adding hotel offers to their sites.”