Many of us in the travel business were a bit surprised to see that Priceline was acquiring Kayak. So far, most of the press coverage has focused on the financial aspects of the deal—specifically, whether Priceline paid too much for the stock—with very little speculation about consumer impacts. Perhaps that’s because consumer impacts are likely to be minimal.
The probable outcome, at least for several years, is that Priceline will continue to operate Kayak as a separate entity, reflecting the basic differences between the two operations: Priceline is an online travel agency. It actually sells tickets, hotel rooms, and rental cars. And Kayak is a metasearch engine that locates and compares prices, but doesn’t actually sell anything.
Kayak may plug some holes in Priceline’s operation. Although Priceline’s public image is heavily weighted to its unique bid system, it actually competes with other online travel agencies such as Expedia and Travelocity in searching and selling open-priced services. As far as I can tell, Priceline’s signature opaque system does most of its business in hotels these days, whereas Kayak is big on airfares. According to reports, Kayak may be ahead of Priceline technologically. Also, Priceline’s move may have been partially motivated by a desire to preempt Kayak from acquisition by potential future competitors such as Google.
All that’s speculation. For now, the most likely outcome of the deal is business as usual. Priceline will certainly continue to build its position in the opaque hotel and rental-car markets, where it can locate some really good deals for consumers, and Kayak will continue to provide third-party fare and rate comparisons.
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