The Phocus Wright conference in Fort Lauderdale last month again provided a deep insight into the strategic thinking of leading US travel players with a variety of presentations and one-on-one interviews.

The US online sector saw massive consolidation last year, with the formation of a virtual duopoly between Expedia and priceline groups, which now control 65% of the market, post the acquisition of Travelocity, Orbitz and HomeAway by Expedia.

The consolidation of Travelocity and Orbitz was driven by more traditional synergy motivations. The ability of Expedia to roll out its back office across both brands, whilst maintaining separate consumer-facing identities, provided the opportunity to cut costs, and make Expedia’s annual $750m investment in technology work harder across an increased market share.

However, the reasons for the acquisition of HomeAway touched upon motivations, which then reappeared during many of the other speakers’ interviews.

The strategic drive behind the acquisition of HomeAway may have been a desire to gain a foothold in the rapidly expanding private accommodation sector, spear-headed by Airbnb, in order to gain some of the ridiculous valuations currently given to sharing economy products. Currently Airbnb is valued on the private equity market at more than the entire Expedia group at $25bn, not to mention Uber’s current apparent worth. However, it was short term day to day financial motivation that was more interesting to me.

Expedia believes it can reduce HomeAway’s customer acquisition cost by co-mingling its product within its traditional hotel searches, thus giving HomeAway access to its large volume of low cost brand traffic. This lower acquisition cost will in turn allow HomeAway to enter markets such as Cities, where previously high Google bid costs combined with short durations stays made it uneconomic for them to operate. Similarly, Expedia is investing heavily into the “Air Sector”, because flights have a high attachment rate to its strong accomodation product, allowing it to make money in this lower margin air sector whilst other players are struggling. So it appears that high Google click costs are shaping its purchasing agenda, as it seeks to get more “Bang for its Google bucks”.

The acquisition of Viator by Tripadvisor follows a similar logic to the above, with Tripadvisor being able to promote Viator’s products to its customer base, whilst Priceline have openly stated that it is looking for further purchases similar to Rentalcars.com, which it has managed to roll out globally, following the footprint already in place with Booking.com.

Hence, all the major US players seem to be following the same consolidation program, aimed at maximising the benefit of their existing customer databases or Google spend, to deliver traffic to related products at a lower customer acquisition cost.

If this thought process is brought to its logical conclusion, then the merger of Airbnb or Uber with one of the major OTA giants has a lot of logic, with the high transaction frequency and app orientated customer base of Uber being the most prized asset. However, this is highly unlikely to occur in the short term, whilst these giants of the new “Sharing” economy, enjoy valuations on the private equity markets, which value them higher than the whole Expedia group, despite their massive variation in current real world profits.

The above model may also provide the rationale for further consolidation in the European OTA market, now that companies like On the Beach have access to more fluid funding via their stock market floatation. However, I think it’s more likely that the UK based OTAs will seek to scale further via the acquisition of branded OTAs in other European or Eastern block markets, as in the longer term a pan European footprint, is the only thing likely to attract the mega bucks offers from our friends across the pond.

The first of these the pan European footprint deals is likely to be the sale of the Hotelbeds group by TUI, for what I am sure will be a shockingly large price, for what in the past has been perceived as a relatively unsexy B2B hotels player. However, the strategic benefit of its massive B2B hotel buying power, particularly in the traditional beach hotel sector, that is likely to be a prize that few of the major B2C USA players will want to miss out on, so, “Watch this space” and expect consolidation to increase at a rapid pace.