Expedia (EXPE) is investing $350 million in Traveloka, an Indonesian online travel site, according to a report in The Information.
Traveloka is one of the largest online travel booking sites in Southeast Asia and operates mostly domestically, but also serves five other countries.
Expedia’s investment in Traveloka is a continuation of a bold strategy that makes fewer but larger investments and acquisitions as management focuses its efforts on larger opportunities.
Jakarta, Indonesia-based Traveloka was founded in 2012 to aggregate flight and hotel availability for users to book their vacations.
Management is headed by co-founder and CEO Ferry Unardi, who founded the site while finishing his Harvard MBA.
Below is a brief promo video showing Traveloka’s focus on younger users:
(Source: Traveloka Malaysia)
Traveloka claims to service ‘more than 50 domestic and international airlines, serving more than 100,000 different routes throughout Asia Pacific and Europe…more than 70,000 hotels all over Southeast Asia, Hong Kong, South Korea, Japan and Australia.’
Investment Terms and Rationale
The current financing round is reported to reach a total of $400 million at a valuation of more than $2 billion.
Traveloka previously raised a Series A round in 2012-2013 from Tokyo-based East Ventures and European investor Global Founders Capital.
Notably, Expedia has made very few investments in recent years, as the Excel sheet below indicates,
Expedia Investments: Expedia_Investments.xlsx
However, a feature of Expedia’s approach appears to be that it makes very large investments in companies that have already achieved scale in their particular region or industry.
So, the lack of investment quantity does not seem to represent a low interest in investing; rather it shows an approach that is focused more on later stage companies that can benefit from Expedia’s scale or contribute scale of their own as part of a partnership.
The online travel booking industry continues to grow, with Asia Pacific as the largest and fastest growing region, according to a 2015 Euromonitor International estimate shown below,
(Source: Euromonitor International)
According to the report, ‘Asia Pacific is expected to be the main driver of this performance [12% worldwide CAGR reaching $434 billion sales in 2020].’
Furthermore, Expedia has been an active acquirer in the past three years, having acquired seven companies including HomeAway and Orbitz Worldwide as the table below indicates,
So, Expedia’s strategy of remaining focused on fewer later stage investments and larger acquisitions appears to be paying off for investors, as the five-year chart below shows a stock that has risen from $58.00 to nearly $160.00 in that time period,
(Source: Seeking Alpha)
With Expedia management delivering such generally steady and substantial returns to investors, it’s hard to find fault with their investment, M&A, and operating strategy.
I expect and hope for more of the same, as Expedia continues to dominate the online booking and travel industry via smart and bold moves.
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