) recently lost the renewed contract for Eurostar to Orbitz
(NADSAQ:OWW) in 'a highly competitive bid process.' Expedia lost
the contract after having provided hotel bookings for over
five years on a private label basis to Eurostar - the high-speed
passenger train service that links UK (London) with mainland Europe
(Brussels and Paris). Expedia is the world leading online travel
agency and competes with Priceline (NASDAQ:PCLN) and
We value Expedia with a
$30.60 Trefis price estimate of its stock
, at roughly 20% premium to its current market price. Below we
explain why Eurostar was important for Expedia and now for
What Makes Partnering with Eurostar So Crucial?
Europe is well connected with high-speed railway networks.
Eurostar has alone carried about 120 million travelers since its
launch in 1994 and ferries over 10 million each year. Given the
sizable passenger traffic, Eurostar is touted to be one of the
top-five private label contracts available in the booming European
travel market. As such, losing Eurostar's private label contract to
Orbitz could dent Expedia's growth prospects in Europe.
Hotel bookings make up almost 55% of Expedia's stock. You can drag
the graph below to see the impact of Expedia's share of the total
hotel rooms booked, on its stock price estimate.
Why Partnering with Eurostar is Important for
Amid the sluggish and competitor U.S. travel market, overseas
hotel bookings have contributed to the steep rise of Expedia and
Priceline in the recent years. Orbitz' dispute with American
Airlines, its largest customer at one point in time, had eroded
almost 5% of its sales. Until now, Orbitz was mainly focused on
domestic air ticket bookings. Now the Eurostar partnership gives
Orbitz the much-needed exposure to international hotel bookings
that have benefitted other leading players.
In a previous article, we discussed the partnerships between
travel suppliers and online travel agencies as an evolving business
How About a New Business Model for Priceline
). All leading online travel agents are aggressively pursuing
private label partnerships with airlines. Orbitz also offers its
private-label solutions (hotel bookings at travel supplier
, KLM, LAN Airlines and Alaska Air, among others. Expedia, however,
continues to expand its private-label business, Expedia Affiliate
Network, with tie-ups with AirAsia and the recently announced
partnership with South African Airways.
You can see a detailed analysis of our
$30.60 Trefis price estimate of Expedia's stock