Analysts Are Puzzled Why Booking Holdings Acquired HotelsCombined
Skift Take
The deal surprised analysts, some of whom didn't see an obvious logic for it. Yet one thing is sure: Online hotel sales are a bit like an old-fashioned butter market. A big chunk of butter changes hands multiple times and everyone gets their hands greasy.
Booking Holdings said on Monday it would acquire Sydney, Australia-based HotelsCombined to expand the company's travel price-comparison, or metasearch, offering.
Booking Holdings' intention with the deal will be revealed in the steps it takes with HotelsCombined by either investing in it or gutting it but keeping the name.
Those moves will reveal whether Kayak plans to be a global brand, whether it is shopping for better technology, and how dependent it sees itself on acquiring customers through paid advertising on Google.
Booking Holdings didn't reveal the price tag.
A handful of analysts and industry players estimated it paid between about $250 million and $300 million.
If true, that range would probably represent a very small amount above the company's likely annualized revenue. HotelsCombined did not disclose revenue. But it did claim to have facilitated $2 billion in hotel accommodation sales globally in 2017.
Statements from other travel metasearch players suggest that the industry standard for typical commissions in metasearch are relatively low.
For example, an auditor's report by Deloitte had found that the Danish brand of Momondo, part of the Momondo Group, had suffered several years of losses prior to its acquisition by Booking Holdings last year for $550 million.
The losses included a $5 million loss on revenue of $17 million in 2016, the year before the acquisition. The group as a whole did not reveal its financials. But the example suggests margins aren't fat in this segment.
Analyst Views
Views of analysts Skift spoke with were mixed, and Booking Holdings' stock price didn't change on the news.
"HotelsCombined has relatively low traffic and mobile share, according to data from analytics firms SimilarWeb and App Annie," Dan Wasiolek, senior equity analyst at research firm Morningstar, said in an interview.
Wasiolek said: "According to App Annie its strongest mobile app exposure is in Asia — it is pretty strong in South Korea [with about 50 percent of the company's recent mobile app installs] — and in the Middle East — Lebanon is fairly strong, which are growing regions."
"Still, we [at Morningstar] are a bit surprised that Booking acquired the company given its Booking.com platform already has high awareness in many Asian and Middle Eastern nations, based on mobile app rankings from App Annie," Wasiolek said.
Another analyst for a research firm following Booking Holdings was unimpressed with t
