Expedia Buys Newtrade

...And Hotel Distribution Takes A Leap Forward

Expedia today announced its intention to acquire Newtrade Technologies Inc., a provider of software development and integration services to the travel industry, specifically hospitality. The transaction is expected to close this month. While Montreal, Quebec-based Newtrade may not be a household name like Expedia, the acquisition is big for the travel industry. Here's why:

1. A notable exception to Expedia's "Build, Not Buy" strategy. Expedia is so serious about becoming the largest travel seller in the world, with hotel and hospitality as a cornerstone, it's made its first pure technology acquisition to accelerate those goals. While travel executives complain about the lack of connectivity in the hotel industry, Expedia has decided to fix the problem by identifying and implementing a solution.
3. The next generation in hotel distribution. Manual processes, fragmentation and lack of connectivity along the hotel value chain bog down online distribution. Although U.S. hotels will book $6.3 billion online in 2002, that will represent just 9% of all hotel sales - way behind online penetration rates for airlines and car rental companies. Newtrade's XML interfaces provide seamless connectivity among multiple points of distribution, including hotel central reservation systems (CRSs), property management systems (PMSs), Global Distribution Systems (GDSs), online travel agencies and hotel Web sites. Eventually, Expedia will replace the mostly manual system that currently operates between it and its hotel partners with the real-time connectivity offered by Newtrade. The deal is further enhanced by Newtrade's critical PMS relationships.
5. Raising capital, post Sept. 11. Launched in 1997, Newtrade raised capital in October 2000 and closed an even bigger round of financing a year later, thus proving a travel technology company CAN raise capital, build a business AND execute an exit strategy in the post-9/11 environment. There is renewed hope for the VC markets relative to travel technology after all.
7. A successful start-up. Having big vision in a big industry still works - if you have good management and swift, precise execution. Newtrade was a small start-up company just a few years ago. By recognizing hotel distribution was "broken" and developing technical solutions to fix it, it brought its case to the travel industry. Expedia noticed. Expect Expedia to accelerate its dominance in online hotel distribution via this deal.

Note: Phocuswright will publish an in-depth analysis of the pending Expedia/Newtrade acquisition for Phocuswright Channel subscribers after the deal is closed.

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