Shares of Expedia jumped 5 percent Friday after the online-travel agency said it formed a partnership with competitor Travelocity.
The companies announced a “strategic marketing agreement” after the market closed Thursday. In Friday trading, Expedia shares closed up $2.37, or 5.1 percent, at $48.84. The stock is still down 25 percent since July 25, when Expedia reported disappointing quarterly results.
The two companies did not disclose financial terms but said the exclusive partnership will be for the long term. Bellevue-based Expedia will support technology platforms for Travelocity’s websites in the U.S. and Canada, and Travelocity will get access to Expedia’s supply and customer services.
Travelocity will focus on promoting its brand and marketing the travel services made available through the deal, the companies said. Travelocity is owned by Sabre Holdings and will remain a separate company from Expedia.
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The companies said they plan to launch their combined services next year.
Susquehanna Financial Group analyst Brian Nowak said a lot of customers use one site and not the other, so Expedia will be able to reach more consumers. He said Expedia will get more room nights and revenue, and Travelocity will benefit from Expedia’s recent investments in technology and will save on technology and customer services.
“In effect, (Travelocity) is becoming a new distribution channel for Expedia’s inventory,” he wrote. Nowak rates Expedia shares at “neutral” with a price target of $50 a share.
Cantor Fitzgerald analyst Naved Khan said competition in the travel-search sector is increasing, and smaller companies are forced to either focus on specific strengths or partner with bigger companies. He said Expedia is gaining a new source of revenue, and it should become more efficient as booking volumes increase. Khan rates the shares “buy” with a price target of $65 a share.
Expedia runs Hotels.com and Hotwire.com in addition to its namesake website. In 2012 it bought Via Travel, the biggest travel-management company in the Nordic countries, and in March it bought a majority stake in German hotel-search site Trivago for about $632 million.