Commission eyes Expedia's buyout of Wotif

Expedia says that accommodation is the individual travel product for which there is the greatest overlap between the parties' activities. Photo / Thinkstock

Online travel giant Expedia has told New Zealand regulators there will be plenty of competition in the market after its planned buyout of rival booking site Wotif.

Expedia has launched a A$703 million, ($770 million) bid for Australian-based Wotif, seeking to expand its presence in the Asia-Pacific region. Because they do business in this country, the deal needs Commerce Commission approval.

In a statement of preliminary issues, the commission has highlighted the key issues it says will be important in its decision on whether the acquisition would result in a "substantial lessening of competition".

The offer comes as Wotif struggles with falling profitability, with the company last month announcing it expected a slide in forecast annual profit to around A$43 million. Its founders have recommended shareholders accept the offer.

United States-based Expedia provides online and telephone booking services for accommodation, flights, holiday packages, car hire and other retail travel products. Its websites include Expedia.co.nz, Hotels.com and Trivago.co.nz.

Wotif provides similar services and its websites include Wotif.com and Lastminute.com.au.

The commission says that if the lessening of competition is likely to be substantial, it may not give clearance to the proposed acquisition.

While Wotif supplies services for a range of travel products, it is mainly active in accommodation booking services, which represents about 87 per cent of its revenue.

Expedia says that accommodation is the individual travel product for which there is the greatest overlap between the parties' activities.

The Washington-based company also says that after the purchase it would be constrained by a number of existing international and domestic online travel agents, along with low barriers to entry and expansion.

It submits that existing competitors include the Priceline Group (which owns Booking.com and Agoda), Webjet and Orbitz Worldwide, which have all significantly expanded their activities in New Zealand over the past few years.

The company also says it will continue to be constrained by a wide range of "bricks and mortar" travel agents (such as Flight Centre and House of Travel) which continue to account for a large share of travel bookings in New Zealand.

It says many of these "bricks and mortar" travel agents operate a mixed model and are expanding their online presence which increasingly blurs the line between online and "bricks and mortar" distribution channels.

Meta-search sites (such as TripAdvisor, HotelsCombined, Kayak and Trivago) are similar to online travel agents like Expedia and Wotif, Expedia has told the commission.

It further submits to the commission that, by offering side-by-side price comparisons, meta-search sites increase price transparency and lower searching costs for consumers by giving them the ability to browse many providers at once.

"We will consider whether the role of such search channels varies for individual travel products or based on the size and scale of suppliers of travel products," says the commission.

The commission hopes to make a decision by October 10.

Travel takeover
• Expedia wants to buy rival Wotif.
• It must prove that competition won't be significantly reduced.
• It says other booking sites and travel agents provide competition.

Read the Expedia and Wotif 'statement of preliminary issues':