Coverage: Expedia acquires Airbnb competitor HomeAway

Expedia announced Wednesday its $3.9 billion acquisition of Airbnb competitor HomeAway. The deal will allow Expedia to have more control in the home sharing market as Airbnb continues to cut into the traditional booking site’s territory.

Leslie Picker of The New York Times had details of the merger:

Expedia said it had agreed to acquire HomeAway, adding vacation rentals to its wide swath of online travel booking options.

Expedia plans to pay $3.9 billion, or $38.31 a share, in cash and stock for all of HomeAway’s brands — a premium of nearly 20 percent to Wednesday’s closing stock price.

Expedia, born almost 20 years ago within Microsoft, has amassed a nearly $18 billion market valuation from buying other travel-booking brands. In September, Expedia closed its acquisition of a fellow travel site, Orbitz Worldwide, for $1.6 billion including debt. Also this year, Expedia purchased Travelocity from Sabre Corporation for $280 million in cash. Other brands under the Expedia umbrella include Hotels.com, Hotwire.com and Trivago.

But Expedia said in a call on Tuesday that this acquisition would be different from others it has done because HomeAway would be run almost autonomously out of Austin, Tex.

Chelsey Dulaney and Drew Fitzgerald of The Wall Street Journal explained what the deal could mean for Expedia:

Buying HomeAway gives Expedia more control of the lucrative market for apartments and vacation homes as Airbnb moves on traditional booking sites’ territory. It also gives Expedia more inventory in vacation-rental destinations dominated by companies like Priceline Group Inc. and TripAdvisor Inc.

The cash-and-stock offer is valued at about $37.86 a share based on Expedia’s closing price on Wednesday. That represents an 18% premium over HomeAway’s last closing price. The deal, subject to regulatory approvals, is expected to close in the first quarter of next year.

HomeAway Chief Executive Brian Sharples said his company had made some headway listing urban homes and apartments on its platform, though he acknowledged questions about how quickly the company could expand in cities might have held back its stock in recent years. “You’ll see some more activity from us there over the next few years,” Mr. Sharples said.

Jeffrey Dastin and Ankit Ajmera of Reuters detailed the competition between HomeAway and Airbnb:

While Expedia now markets hotel rooms, overlapping little with Airbnb, analysts have warned that competition with the startup could become fierce by 2018.

Airbnb is expected to double bookings to about 80 million nights this year alone. By contrast, Expedia booked some 150 million nights in 2014.

In an interview, Expedia Chief Executive Dara Khosrowshahi said HomeAway will become “more aggressive” in marketing urban apartment shares that face off with Airbnb.

By contrast, beach and ski rentals account for a large portion of HomeAway’s bookings.

HomeAway’s business model has also differed from that of Airbnb, which lets homeowners add listings for free but charges travelers a service fee. Transactions occur on site.

HomeAway instead lets homeowners and property managers pay to advertise listings, with many transactions occurring off-site. However, it has announced that all listings would be available for direct booking by the end of next year, and it is adding a traveler fee.

“We are going to help HomeAway accelerate in its transition from a listings model to a booking model,” Khosrowshahi said, adding this will help it compete with Airbnb.

Coral Garnick of The Seattle Times described other deals Expedia has made recently:

The deal adds the HomeAway brand and sites to Expedia’s growing lineup, which already includes Hotels.com, Hotwire, Egencia, Travelocity and Orbitz.

Expedia bought rival Orbitz Worldwidein February for $1.6 billion. The deal closed in September, the day after federal regulators dropped an objection to the merger. Expedia had acquired Travelocity early this year for $280 million.

Expedia traditionally has focused on primary urban vacation destinations, while HomeAway has been focused on beach, ski and other resort locations. On Wednesday’s call, Khosrowshahi said the two will now “have leading complementary and growing coverage across both and we believe we’ll help each other across all destinations worldwide.”

Expedia shares closed at $134.17, down 1.6 percent and near its 52-week high of $139.58 a share. In after-hours trading — and after the deal was announced — shares rose 2.5 percent to $137.50.