Expedia kills Hopper deal, but analysts worry 'cat is out of the bag'

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Expedia kills Hopper deal, but analysts worry 'cat is out of the bag'
Credit: © Reuters.

Expedia (NASDAQ: EXPE ) has decided to end its partnership with rival online travel agency (OTA) Hopper, stemming from concerns about several practices they perceive as anti-consumer. The news was first reported by the website Skift on Wednesday.

"Expedia Group terminated its supply relationship with Hopper today," an Expedia Group spokesperson told Skift. "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. As leaders in powering the B2B travel market, we have a commitment to travelers and to our supply partners that we take very seriously, and, as such, we are ceasing placing our trusted supplier content on the Hopper platform."

Commenting on that news, Bernstein analysts said the lack of a press release from Expedia shows this is "likely immaterial to its own results" however, "it is illustrative of competitive pressures in the OTA industry today."

While Expedia said the reason was that Hopper was exploiting customer anxiety, Hopper has suggested that the decision is more "anti-competitive". Clark thinks both are likely true.

The analysts have noted in the past that Hopper has been a key market share gainer in the OTA market through the pandemic

They remarked that the number of smaller OTAs continues to increase, as indicated in their recent Google (NASDAQ: GOOGL ) report. This fragmentation has been partially driven by larger OTAs such as Expedia and Booking (NASDAQ: BKNG ), who have embraced a B2B model. This model involves supplying rival OTAs like Hopper, eDreams (BME: EDRE ), and Trip.com (HK: 9961 ), thereby reducing the barrier to entry almost completely. Expedia's decision to terminate its partnership with Hopper might imply that they are reconsidering supplying rival OTAs and instead shifting their focus to truly incremental partnerships with airlines, banks, and other non-rival B2B entities. However, Hopper's confidence in replacing Expedia with other partners suggests that the B2B supply concept has gained traction and the "cat is out of the bag," and alternative players can step in. This indicates that the trend towards fragmentation is unlikely to be fully reversed.

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