Will Uber or Amazon acquire Expedia? How does AI influence the decision?

This week the travel industry trade press has been reporting on speculation that Uber might buy Expedia:

• Skift – https://skift.com/2024/10/17/uber-expedia-super-deal-our-answers-to-10-big-questions/
• PhocusWire – https://www.phocuswire.com/why-uber-not-buying-expedia-but-think-amazon-should

None of this analysis talked about AI agents or autonomous vehicles so I thought I should add my perspective including these two key strategic elements.

The frequency perspective

Traditionally, success in the travel sector is correlated with high frequency transactions. High frequency creates big VC backable businesses as markets become winner takes most.

There are two opportunities to attain high frequency in the hospitality & travel sectors:

• Business travel – attracting customers who constantly go to conferences, meetings, warehouses, oil rigs, building sites etc – booking their flights & hotels
• Leisure – where you are going for your night out with your local friends – including restaurants, mobility & booking activities/attractions

Booking Holdings has done well with leisure (OpenTable restaurant bookings), Uber has done well with leisure (mobility), Expedia has done well with business travellers (previously Egencia, now sold) and booking leisure activities & attractions.

So if you look through a high frequency lens, Uber, Expedia & Booking Holdings come out well. No surprise that one high frequency business wants to acquire another high frequency business as that is what they know.

But industry strategy should be seen through an AI lens, not only a frequency lens. Throw out your prior assumptions and the last 10 years of analysis. High frequency is still important, but no longer the only game in town.

The AI perspective

AI delivers us two key changes relevant here:

• AI agents
• Autonomous vehicles

Within autonomous vehicles, Uber has been forced to change model. No longer are they the service (book a car & driver via Uber, operated in the Uber brand), Uber is now the retailer (recently partnered with 8 autonomous vehicle platforms who themselves are the services operating in their own independent brands) [Waymo, Motional, BYD, Cruise, Wayve, WeRide, Avride, Aurora]. This is significant, Uber has had to move up a layer on food delivery, but now they have to move up a layer on long-term mobility. Now Uber has found themselves up a layer, they can be up a layer for flights & hotels too, i.e. be an OTA….. the precedent is set

AI agents – when you can ask your iOS Apple Intelligence AI agent for a hotel suggestion & subsequently to make that booking, what is the role of an OTA? Expedia and others are in trouble as they can be routed around with consumer operated AI agents booking directly with hotels. OTAs are no longer the market degragmentation solution that they have been for 10-20 years, top level (e.g. on your phone) generic AI agents will take that role.

Summary

To summarise, both Uber and Expedia are winners today, as they are both high frequency, the significant factor in todays market. But this is not the playing field for the next game. Neither are yet setup for the upcoming battles ahead. Uber buying Expedia doesn’t solve this for Uber.

• Expedia should focus on innovation as their hand is becoming weaker over time as AI grows in influence. Build something core to the AI agent future, so they have growing future value. Ideally they should innovate within a high frequency use case.
• Uber could buy Expedia, but do they really want to be a product retailer rather than a service? Or should they spend their warchest money working out how to become the service again on their core business, mobility? I think they need to buy back into autonomous vehicles at the service level rather than buy into retail on complementary products. Perhaps this is not mutually exclusive.
• Amazon could wait. Expedia IS a good business to buy, but only if they think they need it in an AI agent centric world view. If they dont need Expedia, but might like Expedia, the longer they wait, the lower the price.

If I had to pick a suitor, I would suggest Amazon buys Expedia.

The Zoox / Expedia / Alexa collab in Las Vegas in 2025 would be quite something, probably going a long way to helping them win that significant tourism & leisure market.

Imagine booking your hotel with Expedia, having your Las Vegas airport transfer operated by a Zoox robotaxi (owned by Amazon), your sightseeing experience lead by Alexa the AI tour guide, booking shows, activities & attractions via Expedia, and including restaurant bookings via Alexa for Hospitality.

A powerful AI operated combination that Booking Holdings, Airbnb etc would struggle to immediately react to.

(Amazon would need some branding unification as consumers won’t want this as just described)

Image: OpenAI. Yes I know this isn’t what the Zoox robotaxi looks like