Expedia Partners with South African Airways

Expedia recently announced a private-label partnership with South African Airways,  the leading airline carrier in Africa. This follows a trend of online travel agencies offering hotel bookings on airlines' websites, and now Expedia will provide hotel bookings at each of the 35 destinations served by SAA. The announcement comes soon after Expedia's joint venture with AirAsia, the leading budget carrier in Asia.  We believe these moves will help it compete against other leading online travel agencies such as Priceline, Orbitz and Travelocity.

 How do these partnerships work?
The partnerships between airlines and online travel agencies is part of an evolving business model. Airlines' websites offer the most competitive airfares and attract a majority of air ticket bookings over the Internet. Offering hotel bookings on airlines' websites provides an added convenience and a seamless one-stop travel bookings experience. It also helps online travel agencies sell their inventory of hotel inventory to a relevant audience at the most crucial stage in the travel bookings process.

How much could it impact Expedia's stock?
Partnering with South African Airways could potentially increase Expedia's market share of hotel stays .
Here's an estimate of the potential impact by NASDAQ:
  • More hotel stays for Expedia through the AirAsia partnership
    • South African Airways flew 7 million passengers in 2010.
    • Assuming that even if a conservative 1 in every 10 passengers booked a hotel stay at Expedia, this translates into a 700k more hotel stays
  • More hotel nights booked through Expedia
    • It is estimated that on average there will be 2 persons per hotel room and 3 nights per stay leading to additional 1.05 million hotel room night bookings at Expedia in 2011 (0.7 million visitors / 2 visitors per room X 3 nights per stay)
    • http://www.cityslicker.co.za/?_sid=38
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