Published on the 09/07/2014 | Written by Newsdesk
Online travel behemoth Expedia has launched an offer to buy Australian online travel business Wotif, valuing the business at $703 million and delivering a salutary lesson for A/NZ start-ups…
The online travel market is facing unprecedented levels of competition with online travel agents and metasearch engines scrabbling for share of the global travel market.
Global businesses such as Booking.com, Agoda, Expedia, TravelFactory, HotelsCombined, Trivago and TripAdvisor have access to international and domestic inventory that has already upset the cosy Australian duopoly enjoyed by Webjet and Wotif, which together once owned most of the Australian market for online flight and accommodation bookings.
When Wotif was founded 14 years ago, online travel was an emerging sector, and the company was considered a pioneer and innovator. But it failed to recognise quickly enough that online travel was a global market, and without access to global inventory it could be gazumped by rivals with a more international perspective and deeper pockets.
It’s a salutary lesson for any Australian start-up; local success does not guarantee longevity in a global market.
Just a month ago Wotif managing director and group CEO, Scott Blume, was still arguing that Wotif could compete effectively with international rivals. He said that that after 14 years in business Wotif boasted 3.5 million subscribers, and that it would continue to invest in technology and marketing in order to better compete. He said at that time that he also intended to build Wotif’s international inventory to around 20 percent of overall sales – currently the vast majority of Wotif sales are domestic.
Now Expedia – which already has a significant global footprint – has launched a bid to buy Wotif’s 3.5 million subscribers and is prepared to pay the company’s shareholders around $200 apiece for them.
Wotif chairman, Dick McIlwain, this week said that the Expedia bid would maximise shareholder value given the increasingly global nature of the travel business.
While the deal relies on shareholders approving the offer, the founders of the company, Graeme Wood and Andrew Brice, have already agreed that whatever is decided they will offload their shares to Expedia, guaranteeing the company a 19.9 percent stake in Wotif.
If shareholders approve the deal is expected to be completed this October.
