Analysts say Expedia-Hopper split was bound to happen

The breakup of Expedia and Hopper, with Expedia Group ending its supply relationship with the smaller OTA, was the likely outcome of Hopper suddenly becoming a legitimate and growing competitor, analysts say.

Indeed, several said that Expedia’s decision to end its relationship with Hopper was almost inevitable. 

“Hopper has got a great following,” said Christopher Anderson, a professor at the Cornell School of Hotel Administration. “They have really done a great job of striking out their own niche and growing that customer base, and at some level as they move beyond fintech products, they become more of a direct competitor to Expedia versus synergistically creating traffic for them. 

“It was bound to happen,” he added, “as Hopper looks to capitalize on the opportunity of its user base.”

Earlier this month, Expedia (No. 2 on Travel Weekly’s 2023 Power List) said it would no longer supply Hopper (No. 9 on the Power List) with hotel and vacation rental inventory. In a statement, Expedia said “the reasons for termination are simple: As Hopper’s product has evolved, we have determined that its features exploit consumer anxiety and confuse customers, leading them to purchase services they neither need nor fully understand.”

Hopper responded by calling the move “anticompetitive” and stating that “Expedia clearly views Hopper as a significant and competitive threat.” Hopper also said it has a “multisourced strategy” for its inventory, calling Expedia “one participant among many.”

The tone of both companies’ statements surprised Henry Harteveldt, founder of Atmosphere Research Group. He called the situation “a very unpleasant, very uncomfortable divorce” and said he was “taken aback” by each company’s statement. 

Hopper’s sales last year were three times greater than the year before. It made its debut on Travel Weekly’s Power List in 2022, with $2 billion in 2021 sales. Sales skyrocketed in 2022, to $6 billion.

Analysts said that growth was a likely factor in Expedia’s decision.

“It’s very clear there were some very substantive differences in how the two companies viewed their relationship,” Harteveldt said. “And I don’t know if Expedia felt that some of Hopper’s business practices, or perhaps even Hopper’s own strength, would have been almost competitive with some of Expedia’s work where the two were no longer partners but rivals.” 

Lorraine Sileo, a Phocuswright senior analyst and founder of Phocuswright Research, said Hopper poses a threat not only to Expedia but to Booking Holdings and all other OTAs. But the threat is still a distant one. 

“There is a duopoly out there, of course, with Expedia and Booking,” Sileo said. “Hopper is No. 3, but there is a big gap between No. 2 and No. 3.”

Expedia’s 2022 sales totaled $95.1 billion while Booking Holdings’ were $121.3 billion.

Harteveldt said Hopper started with a focus on air but has since diversified and grown. 

“Hopper is a rapidly growing company,” he said. “The fact that they are the third largest online travel company speaks literally volumes to its own success.”

While Hopper will have to fill some gaps in its inventory, analysts said further impacts will be minimal. Anderson said multiple third parties distribute accommodations.

“Hopper will, with minimal effort, be able to navigate this hiccup,” he said.

The Hopper breakup is one of a series of recent developments from Expedia Group. The company reportedly laid off staff in multiple departments last week, but said the number of employees affected was “immaterial to the business.” 

Expedia also launched its One Key loyalty program in the U.S. last week. The program encompasses Expedia, and Vrbo.

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