InterActiveCorp (IAC), Internet entrepreneur Barry Diller’s e-commerce company, announced on Monday that it has agreed to buy online discount site, Hotwire.com
for $665 million in cash to expand its travel services business.IAC estimates 2003 full year gross bookings for Hotwire of approximately $110 million and Net Revenue of approximately $700 million and Net Revenue of approximately $110 million.
Hotwire, which will remain a separate subsidiary and brand within IAC, identifies itself as an ‘opaque’ travel site.
An Opaque travel site is one that enables customers to chose a fare or rate without knowing the brand of the supplier until after the item is purchased. The model enables discounts of as much as 45% for airline tickets and 75% for hotel rooms, according to IAC officials.
Founded by Texas Pacific Group and airlines America West, Continental, Northwest, United and US Airways, Hotwire recorded an estimated $110 million in net revenue in fiscal 2003.
Formerly known as USA Interactive, IAC’s goal is to create the world’s largest and most profitable interactive e-commerce company by pursuing a multi-brand strategy.
IAC has rapidly expanded its network of web-based travel assets through a string of acquisitions in the past few months. IAC already owns Expedia and Hotels.com, and according to comScore, now controls three of the ten most visited Internet travel sites with the Hotwire acquisition.
“This acquisition adds a segment of the business that IAC is not currently in - and Hotwire is one of the fastest growing online travel companies with excellent management”. Bob Diener, President of Hotels.com told Internet Travel News. “This should add great value to IAC and help fuel IAC’s growth”.
Simon Breakwell, Managing Director, Expedia Europe, told ITN: “Hotwire is a fantastic brand to compliment IAC, appealing to a particular niche”.
With no budget and $5 billion in cash to spend, IAC has a bullish acquisition strategy. Breakwell explained that IAC are prepared to look anywhere for future acquisitions - “We don’t turn anything down. If something interesting comes along, we’ll buy it”
IAC have also announced that they will be forming a single travel division called IAC Travel, which will consist of businesses including Expedia.com, Hotels.com and its affiliated brands and Hotwire among others. Erik Blachford, President and CEO of Expedia, will lead IAC Travel as President. IAC’s philosophy is ‘collaboration’, which entails that the brands will remain separate.
Commenting on the online travel market, Breakwell said: “If you look at the online market, to date, 4% is global travel. With the main market segments being travel, finance and auctions, it is inevitable that this percentage will mark up rapidly. I would predict that 20 or 30 years from now there will be a colossal market. Many of the next generation will not even consider buying travel other than online”.
The transaction is expected to close during the fourth quarter of 2003 subject to customary regulatory approvals.