While Expedia has been on a growth spurt given all of its acquisitions over the past year, Priceline has been saying that its "competitive moat" is wide but under-appreciated. A Priceline acquisition of TripAdvisor would make a bold statement and widen that competitive moat for all to see.
The Priceline Group, locked in its global battle with Expedia and others, is known to have been interested in acquiring TripAdvisor for some time.
But is now the time to pull the trigger?
TripAdvisor chairman Greg Maffei, whose Liberty TripAdvisor Holdings controls 54 percent of the voting power at TripAdvisor, may have opened the door to speculation about either TripAdvisor buying down Liberty’s stake or a suitor coming in to make an offer during his comments at a Morgan Stanley investor conference early this month.
Asked at that March 1 event about the future of Liberty TripAdvisor Holdings’ ownership of TripAdvisor, Maffei said “the most obvious catalyst” for change is if another company “walked in one day and put a number on the table for TRIP, which is not for sale. But if somebody put a number for TRIP on then you are dividing the spoils and it is a lot easier discussion than if you sitting around on the average day running the company.”
TripAdvisor’s stock got a boost two weeks later as rumors swirled about a possible merger or acquisition, with Priceline cited as a possible buyer. It’s unclear if Maffei’s comments had anything to do with the rumors.
But at a Bank of America Merrill Lynch investor conference March 15, a day after the market-moving rumors, Priceline CFO Daniel Finnegan addressed the merger and acquisitions issue, noting that M&A has “been a critical part of our past. I would expect us to continue to be acquisitive.”
Finnegan said Priceline’s acquisition goals usually revolve around expanding services, adding geographic reach or generating increased demand like Priceline did in 2013 when it acquired Kayak.
Priceline has not executed a major acquisition since mid-2014, when it acquired restaurant reservations platform OpenTable for $2.6 billion. In the interim, Expedia went on an acquisition tear, buying up Wotif in Australia, Travelocity, Orbitz Worldwide and HomeAway, among others.
Is Priceline Due for a Big Deal?
Priceline, with its $63 billion market cap, clearly has the means to acquire TripAdvisor, currently valued at $9 billion.
“Priceline has raised a lot of low interest debt over the past year, which when paired with its high cash and free cash flow levels, certainly makes an acquisition feasible,” says one financial analyst, who declined to be identified.
A merger, if it were to take place, would come at a critical juncture for TripAdvisor, which faces an arduous transition from metasearch as its primary monetization platform into one that combines a booking site along with a metasearch option. The Priceline Group, including its Booking.com unit, is a key booking partner for TripAdvisor as it struggles to monetize TripAdvisor Instant Booking at a comparable rate to metasearch and manages the financial challenges of users’ switch to mobile, which comes with lower conversion rates than desktop users.
A TripAdvisor Parallel With HomeAway?
“It may take a year or two to perfect our Instant Booking offering, to get all the room content in line, to make an even better more seamless booking experience and to educate more users about our unbeatable offer,” said TripAdvisor CEO Stephen Kaufer during the company’s earnings call in February.
Just as HomeAway sought a sale last year and ended up in Expedia’s arms because HomeAway saw risks in having owners migrate to online bookings and in imposing a traveler booking fee for the first time, Priceline could be poised to assist TripAdvisor in the event of an acquisition as TripAdvisor expands Instant Booking to more international destinations.
TripAdvisor chairman Maffei in early March referred to the company’s path in 2016 as “crossing a chasm,” hinting at the dimensions and import of the transition under way.
For its part, Priceline’s Booking.com, which is a household name in Europe and is available in 42 languages, could be in a position to ease TripAdvisor’s transition as it rolls out Instant Booking in Europe, especially in non-English-speaking countries.
What’s in It for Priceline?
A Priceline acquisition of TripAdvisor would bring into the fold a powerful marketing vehicle that Expedia and others find essential, a rising booking company, and one that is expanding around the world.
In addition to grabbing TripAdvisor’s 320 million reviews and opinions to supplement Booking.com’s substantial roster of verified reviews, the Priceline Group would be able to take advantage of increased demand generated by TripAdvisor’s 350 million monthly unique visitors.
There would be plenty of synergies in the two companies’ hotel-booking, metasearch, vacation rentals, tours and activities, and restaurant reservations’ businesses.
On the restaurant reservations front, for example, Priceline’s OpenTable is basically a U.S. business and its international expansion has been slower than the parent company initially expected. TripAdvisor’s The Fork restaurant reservations platform, meanwhile, is strong in France, Spain and Australia, and TripAdvisor is investing in expanding it in southern Europe.
Both TripAdvisor and Priceline are trying to be essential for not only trip-planning and booking, but also when travelers arrive at a destination and use their mobile devices. TripAdvisor’s tours and activities business, grabbed when TripAdvisor acquired Viator in 2014, and its restaurant reservations platform would benefit Priceline’s customers in-destination, as well.
Antitrust Worries Less of a Concern
Antitrust concerns about a Priceline acquisition of TripAdvisor may be less of a concern today than they would have been a year or two ago because of the emergence of Google as a potential competitor in hotel and flight bookings.
It’s hard to see the U.S. Department of Justice standing in the way of a Priceline acquisition of TripAdvisor given the fact that Expedia is the dominant force in U.S. online travel. There are also so many other places for consumers to book travel, including hotel websites such as Marriott and Hilton, which are putting big advertising dollars into direct-booking campaigns, as well as offline options.
Probably the biggest potential roadblock that could get in the way of a Priceline acquisition of TripAdvisor are the close ties between Maffei’s Liberty TripAdvisor Holdings and Barry Diller, the chairman and controlling stakeholder of Expedia. Maffei’s and Diller’s extensive ties date all the way back to 2001 and the days when Diller’s USA Networks acquired Expedia from Microsoft, and extended through their joint holdings in Expedia until recently.
Still, with TripAdvisor having so much to prove in making its transition from cost-per click metasearch to a booking site plus metasearch, and given Maffei’s statements about a potential suitor offering the right price for TripAdvisor, it’s possible that substantial change is afoot.
While Expedia has been on a growth spurt given all of its acquisitions, Priceline has been saying that its “competitive moat” has been under-appreciated.
An acquisition of TripAdvisor would make a statement and widen that competitive moat for all to see.
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Photo credit: Since its split from Expedia, TripAdvisor's fate as an independent company has been debated widely throughout the industry. As it's grown stronger, the potential price has increased. TripAdvisor