It’s been a pretty busy and expensive 2015 so far for Expedia — which forked out $280 million to buy Travelcity in February, before shelling out $1.6 billion for Orbitz a week later — but the travel giant is divesting one major asset after it sold its majority stake in eLong, its loss-making partner in China, for $671 million.
Expedia’s 62.4 percent ownership of the company was snapped up by a bevy of Chinese travel firms, including eLong’s fierce rival and travel heavyweight Ctrip, hospitality firms Keystone Lodging and Platen Group, and investment company Luxuriant Holdings. Ctrip separately clarified that it paid around $400 million for a 37.6 percent share.
While Expedia didn’t say why it is exiting the eLong business, the overwhelming evidence points to this being a financial decision. eLong has struggled to turn in profit — it recorded a $33 million (EBITDA) loss in its recent Q1 2015. Prospects of a turnaround any time soon were remote, and the street seems happy with the divestment: Expedia shares jumped 7 percent on news of the deal on Friday.
The deal does, however, leave Expedia without a partner in China. To address that, it has teamed up with Ctrip — although the statement explaining how the two will work together is fairly vague:
Expedia and Ctrip have agreed to cooperate with each other to allow their respective customers to benefit from certain travel product offerings for specified geographic markets
That alliance makes sense as eLong was Expedia’s strategic partner in China. The U.S. firm first invested in the travel marketplace in early 2011, and it followed that up with a joint $126 million deal with Tencent in May 2011. Priorities change, however, and it seems that eLong’s business and future potential couldn’t justify the weight that it added to the overall Expedia balance sheet.