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Online Travel: Expedia, Priceline, Orbitz

Posted on Thursday, Aug 7th 2008

The three key online travel companies are going through a rough patch following their recent quarterly earnings reports.

Expedia Inc (EXPE), the world’s largest online travel agency, announced their Q2 earnings at the end of July. Revenues of $795 million beat the market’s expectations of $791 million. For the quarter, revenues grew 15% over the year and 16% over the quarter. EPS of $0.40 was $0.01 higher than the Street’s expectations. EPS grew a substantial 67% sequentially and 14% over the year.

Bookings increased 10% in North America and 30% in Europe. Overall bookings rose 16% to $5.93 billion.

Earlier 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 as “fairly challenging”.

Challenges are not limited to the US; the company is now experiencing softness even in Continental European markets, where until recently, they experienced excellent growth. Airlines proposed domestic capacity reduction to improve yield and mitigate losses from high fuel prices is not going to be favorable for the online travel segment.

Expedia’s diversified service offerings have helped them face market challenges. Advertising and international revenues contributed over 40% of revenues. And despite the market conditions, Expedia is going full throttle on acquisitions. During the quarter they acquired Venere, an Italian online travel agency. Venere works on an agency model for hotels and has relationships with about 30,000 hotels worldwide. The transaction will add over 10,000 hotels in Europe, the Middle East and Africa to Expedia’s current offering.

Expedia also seems to have done away with the thought of spinning off TripAdvisor.com. They acquired TripAdvisor’s prime competitor VirtualTourist.com and OneTime, an online travel comparison site during the quarter. The acquisition will add to TripAdvisor’s user base. Expedia is continuing with a strategy of market expansion with entry into Japan and China and improvements to their user interface and search engine optimization. This week they also announced a partnership with the Dubai-based Jumeirah Group to market the group’s global luxury hotel chain through Expedia.com and Hotel.com.

After the results announcement, the stock rose $0.03 to $19.06. It is currently trading at $18.61 after recovering from the 52-week low of $16.85 it fell to earlier last month based on speculations about macro issues.

1yr EXPE

Priceline.com (PCLN) continued to beat the market’s expectations on revenues and earnings.

With quarterly revenues of $514 million, they exceeded the Street’s outlook of $495 million and recorded sequential growth of 28% and annual growth of 44%. Their international business recorded 80% growth in gross bookings, primarily due to the addition of markets through Agoda and the favorable exchange rate.

Their domestic market grew 59% annually compared to 51% in Q1. Priceline’s Bookings.com continued to grow and had more than 52,000 hotels listed in over 65 countries.

EPS of $1.55 was substantially higher than the market’s expectations of $1.40 and recorded impressive sequential growth of over 103% and annual growth of 40%.

Priceline.com gave Q3 revenue outlook of 30%-35% growth with EPS of $2.00-$2.15. For the year, they are estimating gross bookings of $7.55-$7.9 billion with EPS of $5.50-$5.85.

Being aware of and challenged by the market’s weakness, they are investing in new distribution channels and expanding the geographic reach of Booking.com. The site has a good market presence in Southern Europe and Italy, a region Expedia is targeting with the acquisition of Venere.

Priceline did express concern about the reduction of domestic airline capacity and its impact on the car rental business. As capacities decrease, Priceline expects car rental agencies to reduce their fleets of cars as well.

The stock had been trading well above the $104 levels which it had reached at the peak of the dot-com era. In May this year, it recorded a new high of $144.34. After the announcement of the results, the stock fell 19% to $95 before rising to $117.20. Currently, it is trading at $97.17. I stand by my view – Priceline is strong fundamentally.

1yr PCLN

Orbitz Worldwide (OWW) announced their Q2 results yesterday. Revenue of $231 million recorded a 5% sequential and annual increase. Revenues were substantially lower than analysts’ expectations of $267 million.

During the quarter, they reported a loss of $0.06 per share compared with analysts’ expectations of $0.03.

Bookings grew 4% to $3 billion. International operations grew 41% and contributed $476 million to bookings revenue. Domestic bookings, however, were down 1% to $2.6 billion. The domestic market conditions had an impact on their air business as well: revenue was down 13% to $90 million. The Non-Air segment reported a 12% increase over the year to $141 million.

Domestic air business contributed 21% of overall revenue. Orbitz management understands the need to diversify out of this business given the troubled economic conditions in the US. Further, the Non-Air business is also better for their margins.

Like their competitors Expedia and Priceline, Orbitz is targeting new markets. They teamed with Microsoft as the online travel provider for MSN.com’s travel portals in the United States and the UK. They are expanding into Russia through the Russian-language web site for HotelClub.com. They also partnered with the Indian hotel group the Taj Hotel Resorts and Palaces for their 80 luxury hotels worldwide.

Orbitz is on track with their migration to a new global platform and continued to come up with innovative pricing techniques for last-minute hotel deals through RatesToGo.com, and Price Assurance. Price Assurance is a functionality that assures customers that “if the price drops for a plane ticket booked on Orbitz.com and another customer subsequently books the same airline ticket on Orbitz.com for less, Orbitz will automatically send travelers a cash refund for the difference.”

Despite these measures, the stock fell 2.6 percent to $5.60 in the afternoon trading session. It had reached a new 52-week low of $4.14 in July.

orbitz

This segment is a part in the series : Online Travel

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[…] Online Travel: Expedia, Priceline, Orbitz Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages. […]

Honeymoon Travel | HoneymoonTravelHolidays.co.uk Thursday, August 7, 2008 at 12:45 PM PT

EXPEDIA is a scam and will eventually gown down when people realize they cannot trust EXPEDIA. Click on my name to read my case (How EXPEDIA tried to scam me ….and failed, miserabley)

John Sunday, August 10, 2008 at 2:16 PM PT

I booked a hotel room through priceline. I was charged for it, and I called the hotel (Sun Suites Of Jacksonville) for confirmation and to advise I would arrive close to 11:30pm. Everything seemed to be in order.

The nightmare. I arrived at the hotel at 11pm on check in date at Sun Suites Of Jacksonville Hotel. I spoke to Marlon, the front desk clerk. He offered to accommodate me to the hotel’s sister property, but that property was sold out as well. He then gave up and asked me to speak to Priceline. I spoke to Thomas (agent #15323) at Priceline who didn’t resolve anything for me. He said “you’re on your own. You will receive a refund in 7 to 10 business days!!” Once I asked to speak to a supervisor, he said that supervisors Jared and Brandy did not want to speak to me and disconnected me. I WAS SHOCKED!! I called back and was told they were closing the call center at midnight, and left me to my own devises in a strange city. After 10 phone calls to other hotels, I learned all city hotel rooms were sold out because American Idol was conducting auditions the following day. I was a horor movie come true!!

Its been days now since I have been trying to secure my refund but so far, all I have gotten is the run-arounds. The whole PRICELINE experience has been a nightmare!! I do not recomend!!

Oscar Saturday, August 16, 2008 at 3:39 PM PT

[…] Online Travel: Expedia, Priceline, Orbitz […]

Honeymoon Travel | HoneymoonTravelHolidays.co.uk Friday, August 22, 2008 at 4:45 AM PT

[…] November 17, 2008 | No comments Check other articles in the series…The online travel industry’s woes just don’t seem to be coming to an end, not a surprise as Japan follows the European Union and […]

Online Travel: Priceline, Expedia, Orbitz - Sramana Mitra on Strategy Monday, November 17, 2008 at 10:41 AM PT

[…] $3.5 billion online travel major, Priceline (PCLN) surpassed the market’s expectations in its Q4 results. After having […]

Online Travel: Priceline, Expedia, Orbitz | Genuine Forex Trading Wednesday, March 18, 2009 at 1:51 PM PT