Sometimes a relatively small deal uncovers a broader market opportunity. For example, the actions of executives at a small company in Uppsala, Sweden, may echo the thinking inside a giant company in Silicon Valley because both face similar issues, though at different scales.

On Thursday Sweden’s online travel agency group Etraveli said it had fully acquired TripStack, a Toronto-based airline distribution tech company.

In a roundabout way, the acquisition highlights similar issues to ones that must be on mind of executives at Airbnb, the short-term rental company that has been exploring a flights product of some kind.

When Airbnb begins selling flights, it will likely need to source its airfares from more than one type of travel distribution company because of industry quirks. It may also choose to mix-and-match flights across multiple carriers that don’t have formal agreements with each other to get more coverage and lower prices than giants like Expedia and Ctrip currently offer.

Coincidentally the Etraveli deal clarifies some of the questions Airbnb and other players, such as possibly Amazon, face.

A Midsummer Deal

Etraveli and TripStack didn’t disclose the terms of their transaction.

Etraveli Group is owned by private equity firm CVC, which bought it in 2017 for more than $550 million (€500 million) from Germany’s ProSiebenSat 1 Media.

The TripStack acquisition included the acquisition of parent company Flight Network, a Canadian online travel agency, which had invested at least $4.5 million ($6 million Canadian) in TripStack’s commercial launch a year ago.

The industry has known Etraveli best as an online travel agency group up until now.

As of 2014, it was dramatically smaller than Edreams Odiego, the largest flights-focused European travel seller. Edreams has flat-lined since then, while Etraveli has grown in booking volume at a compounded 30 percent annual rate and is a notable player in Scandinavia. It has taken better advantage of the rise of Google Flights as a source of customer referrals, among other moves.

Etraveli Group’s latest deal signals a strategic adjustment. It’s no longer dabbling on the side in business-to-business services but is making it a significant focus with the acquisition of TripStack. It will aim to become a provider of flights and airline ancillaries content to third parties on a white-label basis.

Someday one of those third parties might one day include a company like Airbnb.

An Airbnb State of Mind

Part of the thought process behind Etraveli’s acquisition of TripStack highlights questions that a company like Airbnb may be asking too. Earlier this year Airbnb hired Fred Reid, the former president of Delta Air Lines and the founding CEO of Virgin America, to become its first global head of transportation. Reid is probably thinking about similar matters as the Etraveli executives.

Experts have speculated for years on how Airbnb may enter flights. The industry conversation has emphasized the user experience. Some believe Airbnb would look to acquire or partner with a flight search brand whose way of presenting fares has a proven appeal to mobile-first millennials. Recurring Apple App Store favorites for flight search like Hitlist, Hopper, and Ctrip-owned Skyscanner have been among the name-checked targets for either acquisitions or partnerships.

Behind-the-scenes questions about how to source airfare content, while not as buzzy, are equally important.

Airbnb, Etraveli, and other companies face a problem. A decade ago, if any company wanted most of the world’s airfares, they could get most by plugging into one of four global distribution systems: Amadeus, Sabre, Travelport, or TravelSky.

In recent years, however, low-cost carriers have grown dramatically in numbers. They now represent nearly a third of all airline tickets sold. These smaller carriers often choose not to distribute their fares via the traditional online distribution channels.

TripStack will help Etraveli and its enterprise customers to get access to those budget airlines through its connections to them. It has a product that aggregates low-cost carriers that are mostly not available via traditional distribution channels in a single application programming interface, or API for short, as a method of delivering its content that is easy for companies like Etraveli and Airbnb to ingest.

Adding to the confusion, a handful of giant airline groups like Lufthansa now distribute perhaps as much as half of their bookings outside of the traditional distribution tech players, depending on how you define terms.

TripStack joins more established vendors in helping airlines make the necessary connections, such as TravelFusion, Farelogix (which Sabre is attempting to acquire for $360 million), and PROS.

Virtual Interlining as a Catchphrase

Airbnb might also be interested in so-called “virtual interlining.”

Some context, first: Virtual interlining is a concept where a travel seller combines flight segments among low-cost carriers and full-service airlines even when these airlines don’t have formal agreements with each other. Imagine piecing together a round trip by booking a one-way on Ryanair, then a one-way on EasyJet on your way home.

This concept matters to a company like Airbnb or Etraveli that is competing, in different ways, with established travel sellers like Booking Holdings. By creating many itineraries that aren’t in traditional systems, virtual interlining expands the map of destinations travelers can reach.

For a company like Airbnb that is global and fancies itself as serving the little guy in little places, this may have appeal. The prices of combined fares are often lower, which can also be a plus, though they also often require additional customer service support in case of flight disruption.

TripStack has a product called TripBuilder that specializes in virtual interlining. It competes with other tech providers, such as enterprise pioneer Air Black Box that an investment firm took over last year, Iceland-based Dohop that works with airlines like EasyJet on virtual interlining, and AeroCRS, which online travel agency Kiwi invested in last year before selling a majority share of itself to private equity firm General Atlantic this year.

Virtual interlining comes in two main flavors. One flouts the rules of many airlines by breaking up round-trip tickets and only using part of the tickets. Some airlines dislike that, as Skift reported earlier this year.

Etraveli says TripStack will do a more airline-friendly version of virtual interlining.

“We’ll work with the airlines to make sure they consider us good partners, though there will be some tensions and negotiations as we ramp things up quickly, and it’ll be a new concept to some of them,” said Mathias Hedlund, CEO of Etraveli Group.

Etraveli Group has hired Pia Vemmelund, former managing director of Kayak’s Europe operations and former managing director of Momondo, to run TripStack along with the co-founders Naman Budhdeo and John Boguslawski.

Etraveli also aims to expand its online travel agency footprint with additional acquisitions on the consumer-facing front.

This year it will focus on integrating FlightNetwork, which has a small market share of online travel agency sales in Canada. Etraveli will use the same playbook it recently used to absorb e-Travel, an online travel agency based in Athens, Greece.

Many Options for Airbnb

To be sure Etraveli only represents one example of a kind of company that Airbnb might consider working with. It’s mentioned here mainly to illustrate larger market dynamics. A number of other companies may be targeted by Airbnb for partnerships or acquisitions, depending on how ambitious its strategy will be.

Airbnb’s game plan when entering new markets has been to acquire small players with niche, long-tail slices of markets and novel user interfaces.

Think of its acquisitions of HotelTonight, which focused on boutique hotels and a mobile-first user interface, and Resy, a restaurant booking service that concentrated on buzzy eateries and had an Instagram-worthy design aesthetic.

Smaller, niche companies are more likely on the consideration list for Airbnb given its past behavior. An example of a small and niche player might be Colombia-based Viajala, which appears to have a lead among price-comparison search players in Latin America.

The traditional global distribution systems, such as Amadeus, Sabre, Travelport, and TravelSky, will also be jockeying for a share of Airbnb’s business. Under most scenarios, they would be critical partners for Airbnb’s success if the famous startup ever makes the leap into flight sales.

Photo Credit: Some developers at work in the Athens, Greece, office of Etraveli, an online travel group based in Sweden. Hopefully they take better care of the software code than the fish in that fish tank. Etraveli