UPDATE: Looks like even after a float, the company still has a dream of becoming part of the Expedia team. Hostelworld has appointed an ex Expedia executive as their new CEO.
Expedia has been on an acquisition rampage lately, shocking the world buying Wotif, Travelocity, and Orbitz. Even after those acquisitions, their future revenue streams are being challenged by Priceline’s Booking.com making its presence in the US market and even Google making moves to leave metasearch obsolete (see more here).
Expedia already announced incorporating non-hotel accommodation, hostel, campsites, serviced apartments, etc, inventory on its site, in key markets with key properties (see more here). Booking.com had listed hostels well before joining the Priceline team 2005, so to catch up, Expedia will need more hostels. Since they been on a shopping spree, perhaps adding Web Reservations International (WRI), which includes the brands of Hostelworld, Hostelbookers, Hostels.com, and BedandBreakfastworld.com, to their portfolio could be easier than waiting for hostels along with other non-hotel accommodation providers to list with this brand. Here are the reasons why WRI would be a good buy:
Hostels have Inventory
Hostels can range in size, greatly, from 10 beds to 800 beds. A commission on one bed doesn’t mean much, even a few beds in a few hostels and cities isn’t something to brag about. Now, many beds sold by the many hostels across the globe is something to brag about, which is critical to Hostelworld’s success. Expedia can tap that market by adding WRI under their umbrella.
Hostels are Huge in Europe
Expedia is looking to expand into Europe to counter Booking expanding into the US, however, Europe offers more challenges that the US because there are far more small and independent operators to deal with. They launched an agent model that will appeal to this market, and yet their traction is still rather slow to compete with Priceline’s growth. An acquisition of WRI will open their door to the small operators, as they also have many BnB’s using bedandbreakfastworld.com. This will be a huge bonus to the hostel inventories that will be added, not to mention the ever increasing number of private rooms that are trendy now.
Hostels are Everywhere
Hosteling is more than a bed to sleep. It is an experience, a way of travelling. They might have been popularized in Europe, but they are practically worldwide. Hostelworld boasts 35,000 properties in 180 countries. This can give Expedia the foot in the door to many new markets, as it positions itself securely against the Priceline giant, whose Booking.com brand boasts slightly over 12,000.
Hostels are Robust
Hostel guests sacrifice some of their privacy, and sometimes security, for the experience and a cheaper price. When the market turns bad, hostels always find a guest. Sure some people would rather stay in a hotel, but when times get tough, hostels are always an option. This shows the demand is pretty consistent in the right geographic market. Owning WRI could bring in revenue for Expedia in markets that aren’t holding up to their revenue expectations, especially on the luxury end of it. This product diversification, that Priceline secures through Booking.com, can only offer Expedia that same security.
Hostellers are Maturing
Hostelworld has been the number one hostel booking site since its existence in 1999. It now even owns the number 2 site, Hostelbookers. Their customer database must be huge and their travelers in ’99 might be able to afford and look for something more private and luxurious than their earlier years. I’m not too sure if Expedia can access all WRI’s customer data by buying them, however Expedia could promote its brand across Hostelworld’s marketing platform, reaching many new potential customers across the globe.
Hostelworld’s low commissions are not appealing, the changes in Ireland’s tax laws are questionable, and the operational redundancies with the major hostel brands are all variables that could deter Expedia from buying up WRI, however, the growth and success of Priceline could scare Expedia right into it. I cannot wait to see what happens.
For more about the Expedia and Priceline battle heating up, see here.
