3. Industry Supply Chain
Hotels
Airlines
Car Rentals
Cruise Lines
Travel
Agencies
Leisure
Travelers
Business
Travelers
GDS
GDS
GDS
GDS
*Global DistribuCon System (GDS)
3
4. • MonopolisEc market structure
• Decline in brick and mortar travel agencies and an increase in online travel agents
(OTAs) due to internet penetraCon
• ShiQ in business model of travel agents from vendor commissions to service fees
• 60% of industry revenue is derived from sales of internaConal travel packages to
US residents
$35.3bn
Industry Revenue
2.3%
Annual Growth
17.4%
ConcentraEon RaEo (4)
Industry Overview
4
5. PESTEL Analysis
PoliEcal & Legal Factors
• Travel PromoCon Act of 2009 (TPA): promotes leisure, business, and scholarly travel to and
within the United States
• Airline industry is widely regulated in relaCon to passenger safety, internaConal trade, tax
policies and compeCCon
• Issues like war, terrorism and diseases also impact the industry
Economic Factors
• US consumer spending throughout past 5 years experiencing growth
• Significant decline in oil prices reflect on airline industry
• Increasing GDP creaCng more disposable income
Sociocultural Factors
• Increasing preference of consumers and businesses to make their travel purchases online
• Online reviews play a stronger role in influencing consumer-purchasing decisions
• Growing embracement of the sharing economy (Airbnb, Uber, etc.)
5
6. PESTEL Analysis
Technological Factors
• Internet has revoluConized the industry
• Decline in number of brick and mortar travel agencies
• Mobile devices are driving online booking
Environmental Factors
• Pressure for airlines to improve fuel efficiency and reduce noise
polluCon of their aircraQs
• Water and Sewage regulaCons on Hotels (West coast)
6
7. Porter’s Five Forces
Rivalry Among CompeEtors - HIGH
• Low degree of seller concentraCon (CR4 = 17.4%)
• Low industry growth (CAGR=2.3%)
• Low switching cost and product differenCaCon
• Low capital requirement
• Intense price war
Porter’s Five Forces
Threat of Entry - HIGH
• Low brand loyalty
• Easy access to distribuCon channel, favorable locaCons and
raw materials (Website and Internet)
• Minimal experience needed to enter industry
• Low capital requirement
7
8. Threat of SubsEtute - HIGH
• Hotels, airlines etc. are driving consumers to make bookings
directly on their website
• IntroducCon of home-rental market (Airbnb)
• AlternaCves are offering compeCCve or lower prices in a
market with high price elasCcity
Bargaining Power of Supplier - HIGH
• Higher concentrated industries (excluding hotels)
• Few subsCtutes for supplier inputs
• Forward integraCon already taking place
• Some price discriminaCon is possible
Porter’s Five Forces
8
9. Bargaining Power of Buyers - LOW
• Less concentrated industry
• Low volume and relaCvely low frequency of purchases
• Lack of financial capacity to backward integrate
• They can easily find subsCtutes (e.g direct booking, Airbnb)
• Usually price sensiCve consumers
Porter’s Five Forces
9
10. Recent News & Events
Marrioe InternaConal reached agreement
to acquire Starwood Hotels & Resorts.
Airbnb raised $1.5 billion in latest funding
round bringing its valuaCon to $25 billion.
Suppliers SubsEtutes
10
11. Hotels Airlines Car Rentals Cruise Lines AdverEsing
Travel & Hospitality Services
#1
Travel Agency in USA
9.5%
Market Share
$6.6bn
Global Earnings 2015
14K
Employees
$16bn
Market Cap
53%
Revenue from US market
11
13. Mission & Growth Strategy
13
“RevoluEonize Travel Through the Power of Technology.”
New Channel PenetraEonGlobal ExpansionProduct InnovaEon
Growth Strategy
Passionate InnovaEve Enterprising
Core Values
14. Analysis of Competitive Strategy
Generic Business Strategy - DifferenCaCon Strategy
Product Bundling DealsExpedia + CiE Rewards Card Expedia Mobile Apps
Bases of DifferenEaEon:
• Complements (Rewards card & Mobile app)
• Product Features (Bundling deals)
14
15. Analysis of Competitive Strategy
Corporate Strategy
• Horizontal IntegraEon (AcquisiEons) + Product-Market DiversificaEon
• Reduce excess capacity
• Reduce compeCCve intensity and increased profitability
• Increased differenCaCon strategy by widening product offering
• Operates in 60+ countries offering mulCple travel and hospitality services
15
17. Analysis of Competitive Strategy
COGS/
Sales
SGA/
Sales
Net Profit
Margin
Market
Share
ROA ROE ROIC
19.63% 57.70% 11.46 9.50% 6.23 23.00% 14.66%
6.85% 52.53% 27.66 5.40% 15.77% 29.39% 19.24%
private private private 1.60% private private private
Industry
Avg.
- - 15 - 6.84% 12.88% 8.43%
CompeEEve Profile
Expedia vs. Priceline
• Priceline COGS benefited from reversal of Hawaii travel transacCon taxes worth $16.4 million
• Decrease in Priceline’s Name Your Own Price® reservaCon services.
17
18. Analysis of Competitive Strategy
V R I O
Brand ✓ ✓ ✓ ✓ Sustainable
IT System ✓ ✘ ✘ ✓
Supplier
RelaEonships ✓ ✘ ✘ ✓
Ecosystem of
websites ✓ ✓ ✓ ✓ Sustainable
Economies of
scope ✓ ✘ ✘ ✓
HomeAway ✓ ✓ ✓ ✓ Sustainable
Expedia VRIO Analysis
18
19. SWOT Analysis
Strengths
• Brand Awareness/ReputaCon
• AcquisiCons - strong brand porpolio
• offers a broad range of travel and
hospitality services
Weaknesses
• Dependence on search engines
• Dependence on suppliers
• Pressure to grow shareholder value
OpportuniEes
• Growing internet penetraCon
• Demand from emerging markets
• Mobile technology
• Increasing availability of complements
Threats
• Sharing economy (Airbnb)
• Hotels and airlines increasing efforts of
direct booking
19
24. 12
Hotel & Motel Brands
6,300+
LocaEons
35+
Countries
$860M
Global Earnings 2015
500K+
Rooms
$3bn
Market Cap
Brand Porrolio
24
25. Porter’s Five Forces
Porter’s 3 Tests
1. AsracEveness - LOW
• Despite low switching costs, industry is saturated and some
firms are consolidaCng to increase profitability and reduce
compeCCon
2. Cost of Entry - HIGH
• Capital intensive industry with a high proporCon of fixed costs
to total cost and Incumbents with experCse are at advantage
as well as access to favorable locaCons low
3. Beser-Off Test - HIGH
• Industry players hold strong bargaining power and have forward
integrated in an effort to increase direct booking and eliminate
need for OTA. Expedia must react to threats
1
2
3
25
27. Porter’s Five Forces
Expedia + Choice Hotels Synergies
Sales Growth
Synergies that increase sales growth:
• MonopolisCc compeCCon over Choice Hotels (and
HomeAway)
• Control to differenCate product
• Lower prices and travel packages
• Cross-industry adverCsement
Cost of Goods Sold
Synergies that decrease COGS:
• Economies of Scale + Economies of Scope
• Decrease in licensing fees and booking fees
Synergies that increase COGS:
• CoordinaCon costs - Operate solo
27
29. • Sabre CorporaCon is a travel technology company based in South-lake, Texas
• Founded by American Airlines in 1960 (Spun Off)
• Largest Global DistribuCon Systems provider for air bookings in North America.
Hotels
100K
Airlines
70
Data TransacEons
85K/s
OperaEons
About
29
30. Porter’s Five Forces
Expedia + Sabre Synergies
Sales Growth
Synergies that increase sales growth:
• Complete backwards integraCon
• Strong bargaining power
• Complete control over supplier network
• Stronger control to create monopolisCc compeCCon
• Only OTA to completely verCcally integrate
Cost of Goods Sold
Synergies that decrease COGS:
• Greater decrease in licensing fees and booking fees
Synergies that increase COGS:
• CoordinaCon costs
• CoordinaCon costs - Cannot operate solo, will have to
integrate plaporm
30
31. 2021 2022 2023 2024 2025
Sales $21,442,259,829 $25,210,628,614 $29,644,147,237 $34,860,631,963 $40,998,826,138
COGS $20,846,641,500 $24,510,333,375 $28,820,698,702 $33,892,281,075 $39,859,969,857
SGA $4,552,977,852 $5,328,288,644 $6,236,894,900 $7,301,900,962 $8,550,443,291
DepreciaCon + Other OperaCng
Expenses
$13,179,999,778 $15,534,165,738 $18,309,274,327 $21,580,656,525 $25,437,133,273
OperaCng Income $110,459,129 $104,950,683 $100,770,501 $97,885,373 $96,279,094
Taxes + Interest and Other Income $3,003,204,741 $25,210,628,614 $29,644,147,237 $34,860,631,963 $40,998,826,138
OperaEng Income amer taxes $3,242,916,475 $2,988,552,188 $4,403,760,074 $4,319,215,347 $5,993,295,480
Sales post Choice AcquisiEon 0.05
Sales post Sabre AcquisiEon 0.08
COGS -0.01
Synergies
Expedia + Choice Hotels + Sabre
NPV Analysis
Expedia + Choice Synergies $11,518,275,180
NPV
Without Synergies $6,510,890,597
Total Synergies $13,105,589,748
31
32. Analysis of Competitive Strategy
V R I O
Brand ✓ ✓ ✓ ✓ Sustainable
IT System ✓ ✓ ✓ ✓ Sustainable
Supplier
RelaEonships ✓ ✓ ✓ ✓ Sustainable
Ecosystem of
websites ✓ ✓ ✓ ✓ Sustainable
Economies of
scope ✓ ✓ ✓ ✓ Sustainable
HomeAway ✓ ✓ ✓ ✓ Sustainable
Expedia VRIO Analysis
32
33. New Expedia Supply Chain
Leisure
Travelers
Business
Travelers
Full Backward Vertical
IntegrationHorizontal
Integration
33
