The SEC published Expedia's Form 8-K which discloses its proposed merger with Orbitz Worldwide, Inc., and there's a whopper of a clause: Expedia will dish out $115 million to Orbitz in the event that the deal falls through due to regulatory issues.
And if the deal is scuttled by Orbitz itself, for example if the company found a more agreeable suitor, it would be on the hook for a termination fee of $57.5 million to Expedia.
This doesn't seem likely, as the company had been seeking suitors for some time before locking in Expedia.
Even for a deal worth far over a billion dollars, that's still a pretty penny. The concern that regulators will not approve the deal is valid, as the newly-formed entity would own about 75% of the American online travel booking market.
That's a significant amount, one that is giving pause to pundits and consumers alike.
The concern that regulators will not approve the deal is valid, as the newly-formed entity would own about 75% of the American online travel booking market.
However, consumers are far more savvy than simply being "stuck" with the biggest player. There are a myriad of other means to book travel, including (gasp) travel agents, which means that the newly formed entity would still face fierce competition in a way that a monopolistic enterprise would not.
There are also emerging players such as Skyscanner which are posting strong growth as they move into new markets such as the United States.
The landscape is far from static; in fact, the ongoing consolidation in the space is making it more fluid than ever.
A new crop of OTA startups will now be further encouraged to go after the entrenched players — after all, this merger would leave only two which makes it a much smaller dance card to work through.
And the fact that this consolidation could have happened five years ago emphasizes that there is clearly enough room for more than two major players.
Not to mention the fact that customer experience is what matters most. We've moved beyond the part where we connect the hotels and past the part where it's all about inventory.
We've got nearly all the hotels connected, and nearly all the inventory online. As that differentiator fades, its going to be all about the customer experience. Whoever consistently delivers the magic moments will win, again and again.