The story I’m going to call “a banker rumor” today, regarding the potential acquisition by Uber of Expedia Group, is a natural extension both of speculations around Expedia Group’s future and the shared history between Dara Khosrowshahi.
It is intuitive and intriguing to think of such a merger, but I believe it would be a strategic mistake for Uber and probably Expedia as well.
Uber continues its global dominance in ride-hailing, mobility platforms, and Dara’s significant success with COVID. Its expansion into other mobility-related categories, such as freight transportation and food delivery, offers plenty of runway. Recent agreements with Waymo and other companies offer promise for a new stage of point to point logistics within a particular city or region.
Expedia is one of two major online travel agencies in the world. Its facilitation of bookings of flights, hotels and rental cars, among other travel-related services, seems to be an extension of Uber’s mobility dominance.
The two companies have some synergies, for sure. So my immediate reaction was to admit the “sexiness”. The downsides are much more compelling. They include a major divergence in Uber’s core business of a mobility platform, as well as the complexity of merging two disparate technology platforms (and market demands) that serve very distinct use cases.
On a whiteboard, obvious integrations such as extending travel packaging for Uber users and moving closer towards a seamless experience for Expedia would work well, especially in corporate travel. I am dubious about the project due to the significant investment required in infrastructure and tech integration, as well as brand confusion surrounding a combined USP.
Uber’s potential regulatory challenges and its commitment to its core logistics and mobility investments may also be a problem for shareholders. This is especially true when you consider the possibility that margins could shrink in the travel intermediary industry. The concept of point to point travel integration sounds interesting, but the complexity of managing multiple systems, and the user outcomes, doesn’t align with me.
This may be one of those rumors that started at a financial conference and spread through the media. After all, Uber has untapped greenfield in geographic and core product areas that should command capital priorities (whether in M&A or not) across transportation tech, home delivery and commercial logistics, not to mention next gen autonomous transportation and delivery. Does travel expansion match this set business priorities?
What about Amazon?
I was wrong to suggest that Amazon would be a major player in the travel sector for over a decade. If Expedia really is for sale, Amazon stands to gain the most from a purchase.
Travel (the world’s second largest industry) is the obvious growth vehicle among all of Amazon’s major categories. Amazon would gain a significant and immediate foothold in this space, and leverage unique synergies between leisure and commercial travel. Amazon’s Prime customers, logistics network, technological infrastructure, and purchasing power will not only enhance Expedia’s brand, but also create a new distribution channel for travel suppliers.
Capital investment and intellectual properties offered by a new entity would be a major opportunity for suppliers, who are looking for lower costs, simplified pricing, closed groups, and a solution to the LLM/AI generative-learning disruption. Anti-trust concerns are a challenge for any deal in the current regulatory environment. However, Booking, Airbnb and other aggregators, such as Google, CTrip, are already firmly established.
In my utopian future, Amazon Prime Members would receive exclusive benefits and travel deals that simplify travel experiences, while Amazon/Expedia can also develop curated and predictive travel solutions, based on massive customer data sets. Prime Rewards is a major advantage for bank, OTA, and supplier reward programs, given that loyalty programs will undergo a sea-change in the next few years.
The alliance, which combines all of these factors with Expedia’s massive trove of travel information and built-in merchant/advertiser plumbing will allow a different control of the $14 billion travel market and a formidable opponent to the current intermediary landscape.
