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What the Priceline/Kayak Merger Means for You

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Priceline announced this week its plans to buy KAYAK, the online travel research company, for cash and stock worth $1.8 billion or $40 per share with $500 million in cash and 1.3 billion in stock and assumed stock options for the company. A lot of money is changing hands, but the impact of the merger will also be felt by the consumer and could change how the average traveler books online.

Priceline and KAYAk board members have already voted unanimously for this acquisition, but must gain approval from shareholders and regulators. By the first quarter of 2013, the process should be finalize with Kayak is set to work under the umbrella of Priceline.com. However, Kayak will operate independently and retain its current board, former co-founders of Priceline’s rivals: Orbitz, Travelocity, and Expedia.

Priceline Group President and Chief Executive Officer Jeffery H. Boyd says,

“KAYAK…has world class technology and a tradition of innovation in building great user interfaces across multiple platforms and devices.  We believe we can be helpful with KAYAK’s plans to build a global online travel brand.”

In 2004, Priceline acquired Booking.com, Europe’s largest hotel reservation site, which boosted Priceline into the top 11 growing businesses according to CNN. Over the past few year’s Kayak’s domestic ratings and usage have skyrocketed, where Priceline has seen little to no growth domestically.

The merger will help Priceline expand in a tumultuous economy and allow Kayak to expand its travel connections especially with hotels and travel lodging overseas. This press release does not come as a shock to Peter Greenberg. Greenberg states,

This was bound to happen sooner or later. There is an excess in capacity on the number of travel booking websites, and the Internet world is beginning to follow the airlines’ lead when it comes to cuts in capacity and consolidation.

KAYAk will continue to operate under its reputable brand name, but one of the main issues of the merger stems from a travel research and price comparison company being owned by one of the main travel booking companies.  Since Kayak directs its visitors to travel booking websites that sell airline tickets, car rentals, and hotel reservations, travelers cannot make purchases directly from Kayak.

Greenberg notes,

A large opaque website buying one of the giant search aggregators calls into question how an airline/hotel/fare/room rate will be positioned on the KAYAK site and whether consumers are really going to be given the opportunity to be comparison shoppers on an unbiased site.

Although the acquisition is a smart business move for both KAYAK and Priceline, travelers may choose other meta-search sites such as fly.com and momondo.com to ensure at least the hope of more non-bias results.

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By Darra Stone for PeterGreenberg.com

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