Expedia Takes Over Travelocity's Online Travel Business

In a deal that's not quite a takeover, Expedia is becoming the back end to Travelocity.com, the website of its longtime rival in the online-travel business.

The agreement highlights the importance of becoming a marketplace, not just a middleman.

Travelocity, part of the privately owned Sabre Group, will have Expedia run its online-travel website, where it books plane trips, hotel rooms, and car reservations. Crucially, Expedia will also supply its own hotel inventory—for the most part, guaranteed or reserved blocks of hotel rooms—to Travelocity, relieving it of making its own deals with hotel operators. It will also handle customer service.

The rivalry between Expedia and Travelocity began in the '90s, when the online-travel business was mostly about plane tickets. But Expedia grabbed the upper ground early in the post 9/11-travel crash, buying Hotels.com and snapping up hotel inventory, then packaging hotel rooms with other travel products and making money through the markup rather than on commissions. That proved wise, as airlines cut online commissions and sought to take control of their own airline seats.

Meanwhile, Priceline staged a remarkable recovery and bought Booking.com, a European property broadly similar to Hotels.com, as well as Asian travel sites.

Now Expedia faces off against Priceline, with Orbitz as a secondary player—and Travelocity essentially another storefront for Expedia.

Photo by Ewan M