UPDATE: It looks like even after a float, the company still dreams 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 by buying Wotif, Travelocity, and Orbitz. Even after those acquisitions, their future revenue streams are being challenged by Priceline’s Booking.com, which is making its presence felt in the US market, along with Google making moves to make metasearch obsolete (see more here). Expedia has already announced plans to incorporate non-hotel accommodations—hostels, campsites, serviced apartments, etc.—into its site in key markets with key properties (see more here). Booking.com had listed hostels well before joining the Priceline team in 2005, so to catch up, Expedia will need more hostels. Since they have 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 significantly in size, from 10 beds to 800 beds. A commission on one bed doesn't mean much; even a few beds in a few hostels across several cities isn’t something to brag about. However, many beds sold by numerous hostels around 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’s expansion into the US. However, Europe presents more challenges than 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, yet their traction has been relatively slow in competing with Priceline's growth. An acquisition of WRI will open their doors to these small operators, as WRI also has many BnBs 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 now trendy.
Hostels are Everywhere
Hosteling is more than just a bed to sleep in; it is an experience, a way of traveling. While hostels may have been popularized in Europe, they are practically worldwide. Hostelworld boasts 35,000 properties in 180 countries. This can give Expedia a foot in many new markets, as it positions itself securely against the Priceline giant, whose Booking.com brand boasts slightly over 12,000 properties.
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 guests. Sure, some people would rather stay in a hotel, but when times get tough, hostels are always an option. This shows that demand is pretty consistent in the right geographic market. Owning WRI could generate revenue for Expedia in markets that aren't living up to their revenue expectations, especially on the luxury end. This product diversification, which Priceline secures through Booking.com, can similarly offer Expedia that same security.
Hostellers are Maturing
Hostelworld has been the number one hostel booking site since its inception in 1999. It now even owns the number two site, Hostelbookers. Their customer database must be enormous, and travelers from ’99 might now be looking for something more private and luxurious than in their earlier years. I’m not sure if Expedia can access all of WRI’s customer data through a purchase, but they could promote their brand across Hostelworld’s marketing platform, reaching many 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 acquiring 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.