Online Travel Players Hurt By Trouble In Europe And Thailand

According to recent research, online leisure and unmanaged business travel sales for the U.S. market fell 6.7% in 2009. eMarketer projects the trend to reverse in the current year with growth peaking at 7% in 2012 to reach $105.4 billion. Travel companies will also benefit from increasing travel fares. International fares are already up 23% and domestic fares up 15% over the year. But, despite the positive outlook, most travel industry players are worried about the current quarter outlook, which has been hurt by the Icelandic volcano eruption and economic and political unrest in several countries.

Priceline (NASDAQ:PCLN), the star performer, seems to be struggling. While gross travel bookings for Q1 grew 52.5% over the year to $3 billion, quarterly revenues grew only 26.5% to $584.4 million with EPS of $1.70. The market was expecting revenues of $597.2 million with EPS of $1.66.

Booking.com continued to build its inventory with a hotel count of nearly 86,000 hotels in 80 countries. Domestic gross bookings grew 16% in the quarter, driven by strong hotel results and a significant increase in airline ticket prices. The company’s international business has been performing well with 73% gross bookings growth on a local currency basis, but management expects trouble ahead. European travel has been impacted because of the major disruptions in air travel caused by the Icelandic volcano and concerns over the debt-burdened Greek, Portuguese, and Spanish economies. Further, the depreciating euro will affect the numbers reported in dollars in the coming quarter. Asian travel is also expected to be slow due to the continuing civil unrest in Thailand, impacting Priceline’s Agoda revenues.

Priceline is expanding into the auto rental business and recently bought TravelJigsaw, an England-based auto rental company which services over 80 countries. While the deal terms were not disclosed, analysts estimate TravelJigsaw to be valued at $245 million.

Priceline is now projecting Q2 revenues to grow the 18%–23% over the year with EPS of $2.50–$2.70. The market was looking for EPS of $2.83.

The stock is trading at $193.44 with a market capitalization of $9.18 billion. The stock reached a 52-week high of $273.93 late last month. It’s a sharp fall in a month, although some of it is also due to macro turmoil.

Expedia’s (NASDAQ:EXPE) revenues grew to $717.9 million, compared with $635.7 million earned a year ago, but missed the market’s projected revenues of $722 million. EPS of $0.26, however, managed to exceed the market’s projected $0.22.

Advertising and media businesses delivered a strong quarter with revenues growing 34% and contributing 14% of total revenues. TripAdvisor reported 33% of revenue growth driven by strong traffic and click growth across the company’s global media network. TripAdvisor registered over 12,000 subscribers for its new service listings products. Transaction-based sites generated 18% growth in room nights and 22% growth in air tickets despite the less favorable pricing environment.

Expedia saw significant growth in international business, particularly in hotel bookings. International revenues grew 31%, benefiting from the exchange fluctuation. On a constant currency basis, international revenues recorded growth of 24%. Domestic revenues are also growing, albeit at a slower pace. Domestic revenues grew 5% due to lower gross bookings.

The Hotels.com segment reported slower growth rates driven by tougher comparisons. Expedia continued innovating during the quarter and recently launched VirtualVacation, which is an augmented reality microsite that lets consumers “travel” to New York City, Los Angeles, Chicago, Washington D.C., Las Vegas, San Francisco, New Orleans, Denver, San Diego, and Seattle from their computers. Expedia believes that this is a “natural progression toward how future travel plans will be researched and booked, and represents an evolution” of their brand as it migrates to a social channel. Through visual storytelling and live interaction, VirtualVacation provides a real-world environment fused with computer imagery and lets users interact via webcam motion detection and microphone.

Their stock is trading at $21.61 with a market capitalization of $6.14 billion after having reached a 52-week high of $27.51 a few weeks ago.

Orbitz’s (NYSE:OWW) revenues continued to report year-on-year declines. For the quarter, revenues fell 1% to $187.2 million. Loss for the quarter was $0.05 a share compared with a loss of $4.02 a share a year ago. The market was looking for revenues of $184.1 million with a loss of $0.07 a share.

Airline revenues of $71.6 million fell 12% over the year with domestic air revenues falling 20% owing to the removal of most domestic booking fees. International air net revenues increased 23%, or 14% on a constant currency basis, due to higher air transactions. Hotel net revenues of $43.5 million grew 10% over the year due to strong performance at ebookers. Orbitz recorded 80% growth in room nights in the quarter and 26% growth in room nights booked in its Orbitz for Business segment.

Vacation package net revenues fell 4% over the year to $27.9 million as a result of lower domestic transactions. Advertising and media revenues also decreased 13% over the year to $12.2 million due to a decline in revenue from third-party referral programs, specifically membership discount programs. At the end of the quarter, Orbitz ended the third-party membership discount program that being offered earlier on its domestic websites and terminated its relationship with its supplier for these programs.

Recently, Orbitz entered into an exclusive, multiyear partnership with iSeatz to develop customized private-label and in-path travel solutions. As part of the agreement, Orbitz Worldwide will give customers of existing iSeatz partners, the ability to book travel products through the Orbitz Worldwide global network of suppliers, thus bringing increased power and flexibility to travel suppliers around the world.

During the quarter, Orbitz removed hotel change and cancellation fees on its ebookers websites. The company is seeing a significant increase in corporate travel segment, and Orbitz for Business delivered 25% growth over the year in transactions. It added major new clients including FMC Corporation and the European business of Cooper Industries with contract renewals with IBM and Yale University.

For the current quarter, Orbitz expects revenues of $193 million–$199 million, with adjusted EBITDA down 10%–20% on a year-over-year basis, due largely to higher marketing expenses.

The stock is trading at $5.03 with a market capitalization of $509 million. It touched a 52-week high of $8.11 in December of last year.