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Why Expedia Shares Were Cleared for Takeoff

Friday - 8/23/2013, 9:36am  ET

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Expedia , an online travel booking company, soared as much as 10% after announcing a partnership with privately held Travelocity last night.

So what: Although financial terms of the deal were not disclosed, the length of the partnership is long-term and will give Travelocity access to Expedia's booking supply and customer services while allowing Expedia to integrate its technology platform on Travelocity's U.S. and Canadian websites. The two companies should have their sites integrated by next year and the expectation is that Travelocity's costs will fall, with Expedia having recently invested in newer technology, while more eyeballs for Expedia will help draw in more hotel bookings.

Now what: In this highly competitive booking landscape, this is certainly a win for both companies. The customer that Expedia and Travelocity have been targeting separately is very similar, so the combination of technology and support services makes a lot of sense. However, I wouldn't get too overwhelmed with excitement, because priceline.com is still the dominant force in this space, and it's doing most of its damage in less competitive overseas markets. Until Expedia can really ramp up its overseas exposure, it's likely to remain in Priceline's shadow.

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This article was originally published as Why Expedia Shares Were Cleared for Takeoffon Fool.com

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