Uber (UBER -2.03%) doesn't just want you to book your ride to the airport with its app anymore. It's hoping that soon you'll book your plane ticket and rental car through it, too. With a pilot program it's rolling out in the U.K. this year, the company is adding options for people to buy train, bus, and plane tickets and reserve rental cars via its app. If the test goes well, it'll expand the program to more countries.
It's yet another move in Uber's efforts to transform into a "super app." It follows the introduction of a new Explore section in select U.S. cities, and the ability to book taxis in New York and San Francisco.
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Uber's going places
Uber is now focused on tacking on ancillary services that complement its core ridesharing business. People are already booking Uber rides to the airport, bus station, or train station. It makes sense then to offer them a way to purchase tickets for longer-distance travel and then schedule their rides to and from the station or airport at the same time -- all within the Uber app.
The argument is similar for Uber allowing its users to make restaurant reservations or buy event tickets -- both options that it now offers through its Explore section. These services give users more reasons to open the Uber app. And users are more likely to use it for their rides if they're already using the app for something else.
Uber saw this play out when it merged its mobility and Eats apps. A quarter of first-time Uber Eats users come from the rides business, and 20% of first-time riders come from the Eats business. By adding more services -- whether it offers them directly or merely acts as a booking agent -- Uber should increase engagement across its ecosystem.
What it means for investors
In the future, it could be possible to book your entire vacation through Uber: plane tickets, hotels, restaurant reservations, and activities, along with local transportation to everything. That would make Uber more of a competitor with Airbnb (ABNB 1.17%) and Booking Holdings (BKNG -0.47%) than other gig-economy companies like Lyft (LYFT -3.43%) and DoorDash (DASH -2.01%).
That's particularly notable because Airbnb and Booking Holdings each have market capitalizations of nearly $100 billion. By comparison, Lyft and DoorDash have market caps of $12 billion and $38 billion, respectively. Uber's market cap is about $63 billion.
The online travel agent market is much bigger than either the rideshare or the food-delivery markets, so a successful expansion into that niche could provide a huge boost to Uber. Of course, it could be difficult for Uber to steal market share from the leading online travel agency and vacation rental platforms, but it has the advantage of already occupying a prominent position on the screens of tens of millions of people's smartphones.
If the test for offering airline and rail tickets works in the U.K., investors should pay attention to management's commentary on the segment. It would be particularly useful if the company breaks out data on those bookings, which could provide some information for those seeking to value the stock in the future by a "sum of the parts" approach.
DoorDash, for example, is valued at 0.9 times its gross bookings. Lyft no longer reports gross bookings, but it's estimated to trade at a ratio of around 1. Based on those multiples, Uber is undervalued now, but not egregiously so.
Importantly, Booking Holdings trades for about 1.2 times its gross bookings, and Airbnb trades for more than 2 times gross bookings. That means adding those types of businesses could provide significant leverage to Uber. And that makes sense, considering that it will act as a platform for booking tickets -- a high-profit-margin business -- instead of having to provide services directly.
A successful foray into these new markets could be expected to have a meaningful impact on Uber stock and expand its valuation multiple.
