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Expedia and the Web 3.0 Trends

Posted on Friday, Mar 14th 2008

Expedia.com (NASDAQ: EXPE), reported their Q4 2007 revenues on Feb 7. With annual global bookings just short of $20 billion, they are the world’s largest online travel agency. I have covered Expedia’s business offerings in the Web 3.0 series in detail. Let’s take a look at their latest financials.

Their Q4 gross bookings increased by 25% to $4.6 billion compared to the previous year. Their revenues on these bookings totaled $665.3 million for the quarter, i.e. a revenue margin of 14.47%. For the corresponding period in the previous year, their revenue margin was 14.41% and gross revenues were $531.3 million.

Region wise, their North American revenues rose by 19%, European revenues by 39% and Other regions by 42%. Recently, Expedia has even launched an Indian website as part of their added focus to the APAC region.

Segment wise, the merchant hotel revenue increased by 23%, worldwide air revenue rose by 13%, package revenue rose by 20% and other services and product revenues increased by 42%, for the quarter.

For the year 2007, gross bookings reached $19.98 billion, registering a 16% increase over the previous year bookings of $17.16 billion. For the year, these bookings converted to revenues of $2.66 billion i.e. 13.34% revenue margin compared to previous year margins of 13.04% or revenues of $2.23 billion.

For the year, while their merchant hotel revenue increased by 19%, package revenue increased by 7% and other services and product revenues increased by 38%, their worldwide air revenue reduced by 2%.

Their quarter EPS of $0.31 met analyst expectations. It was higher than the previous year EPS of $0.28 by 10.7%. For the year, the EPS stood at $1.22, again equating to market expectations. Compared to 2006, the EPS has risen by 11.9% over $1.09.

During the year, the company repurchased 55 million shares from the market.

Expedia Chart

The company does not publish its outlook, but has suggested that the Easter holidays will pull in additional revenue for the quarter.

Currently, the global travel industry is going through a crunch. Expedia’s shares themselves have been trading at $21.17. Their 52 week low price of $20.72 was a year ago.

Expedia’s management, however, does not share the glum view. They maintain that the climate is a “mixed bag”. They illustrate that despite airline fares having increased, air traffic still continues to be high. Similarly, American hotel occupancies might be low, but they expect that to translate to better deals and thus higher sales.

There have been talks recently of Expedia wanting to spin off TripAdvisor. But, as of now, they seem to have put these thoughts on hold. In fact, they have increased TripAdvisor’s reach by launching travel applications such as Cities I have visited, Traveler IQ Challenge, and Local Picks on Facebook. Their Cities I have visited application is the lead ad and media revenue generator.

Expedia continues to innovate on its business model. Hotels.com has created customized versions for the iPhone and iPod and also used Facebook to expand its network through Hotels Near Friends application. They recently tied up with Hawaiian air to come up with the NFL pro bowl promotion, featuring first co-branded campaign offerings giving exclusive rates to travelers for the Honolulu big game. They added a co-branded credit card to their portfolio which was named the best card for travel rewards by SmartMoney within three months of its launch. They have tied up with Cruise Ship Centers International Inc. to offer travel products through home-based agents in the US and through a co-branded store.

For my other analysis on Online Travel, read the Web 3.0 segment analysis, as well as discussions on the vertical search engines, and vertical ad networks, both trends that Expedia needs to pay attention to.

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Besides its legitimate business, EXPEDIA scams travelers. I was a victim (they tried to scam me 1254,95 U&D, and failed miserably. Click in my website for details.

John Monday, March 17, 2008 at 12:48 PM PT

[…] in the year, Expedia had said the macro environment was a “mixed bag”. During the current quarter’s results, they revised the statement to describe the environment […]

Online Travel: Expedia, Priceline, Orbitz - Sramana Mitra on Strategy Thursday, August 7, 2008 at 8:13 PM PT