Online Travel Update

According to comScore, online spending on travel in the U.S. grew 9% in July, compared with 8% growth in June and 7% growth in May. Air travel spending in July grew 12% over the year, while hotel spending rose 5%. Air travel spending has grown due to an increase in airfares and reduction in capacity. Bureau of Transportation Statistics reveal that average domestic airfares rose 4.7% over the year in the first quarter of 2010 from a year earlier.

Market reports predict travel growth to come from international segments in the coming years. In an Amadeus sponsored study titled The Travel Gold Rush 2020, analysts project that in the next ten years, Asia Pacific residents will account for 32.3% of global travel spending from the current 22.9% share. Travel to Asia Pacific will also increase significantly to account for 28% of global arrivals compared with 22% in 2010. Below is an image of the projected travel spending.

Priceline’s Financials
Priceline (NASDAQ:PCLN) continued to surpass market expectations. Q3 revenues increased 37% over the year to $1 billion driven by 68% growth in international operation sales. The market was projecting revenues of $0.97 billion. EPS grew 57% to $5.33 per share and surpassed Street estimates of $4.97.

For the current quarter, Priceline predicts revenues of $710 million–$747 million with EPS of $2.91–$3.06. The market was expecting revenues of $689.4 million with EPS of $2.68.

Priceline’s International Focus
Priceline has benefited from their presence in the international segment. During the quarter, airline ticket sales sold on their sites fell 5% due to reduced capacity and higher airfares, which was compensated by growth in international hotel bookings and rented car revenues. Hotel nights booked at Priceline grew 54% worldwide due to increase in the sale of Booking.com and Agoda’s price disclosed room night reservations. Booking.com now accounts for 69% of their gross bookings. The company’s earlier acquisition of Travel Jigsaw has also helped them grow the rental car revenues. During the quarter, rental car days grew by 97% over the year.

Priceline’s Mobile Focus
After launching their iPhone app, Priceline recently announced the Android version of the Hotel Negotiator application. The application enables users to bid on hotel rooms and book rooms on the same day right from their phones. The app comes with features such as recommendations, instant bid results and booking options of the Name Your Own Price hotel service.

The stock is trading at $410.65 with a market capitalization of $20.2 billion. It touched a ten-year high of $428.10 earlier this month.

Expedia’s Financials
Expedia’s (NASDAQ:EXPE) Q3 revenues increased 16% to $988 million, exceeding the market’s projected revenues of $944 million. During the quarter, gross bookings from the international businesses accounted for 36% of worldwide bookings and recorded $398 million revenues. EPS of $0.62 was also higher than previous year’s $0.40 and market’s projected earnings of $0.58.

Expedia’s International Focus
Expedia too is seeing growth in the international segments and is driving growth in the regions through Egencia Global Alliance, TripAdvisor, and offering their value-added services to consumers worldwide.

Egencia Global Alliance was launched last year with a focus on entering into partnerships with leading local travel management companies and to provide further support to clients around the world. The service now has a presence in 39 countries worldwide and in the recent quartered entered into partnerships with local travel management companies in Denmark, Finland, Greece, Norway, the Philippines, Poland, South Africa, Sweden, and Thailand.

Recently, Expedia’s TripAdvisor also launched their localized sites in Korea, Russia, Singapore, and Thailand. The site is now available to travelers in 24 countries and 17 languages. In July of this year, TripAdvisor.com became the first-ever travel brand to reach 40 million unique monthly visitors. The site has seen over 60% growth in the number of unique monthly visitors since the beginning of the year.

Expedia is also extending their value-added services such as loyalty programs on Hotels.com and WelcomRewards to their international users.

The stock is trading at $25.65 with a market capitalization of $7.5 billion. It stock touched a 52-week high of $29.85 in September of this year.

Orbitz’s Financials
Orbitz (NASDAQ:OWW) too managed to surpass market expectations and recorded revenues of $199.5 million with EPS of $0.15. The Street was expecting revenues of $196.1 million with EPS of $0.09 cents.

For the year, Orbitz has projected revenue growth of 1%–2% from a year ago, missing the Street’s estimates of $759.6 million.

Orbitz’s International Focus
Like others, Orbitz is growing their international business through strategic tie-ups. During the quarter, they entered into agreements with a number of European hotel partners, including Iberostar, Viva Hotels, SINA Hotels, Thon Hotels, and Dedeman Hotels & Resorts. They also tied up with marketing organizations, including Visit London, Dominican Republic Tourism Ministry, Costa Rica Tourism & Travel Bureau, and Grenada Bureau of Tourism, to promote travel to those destinations. Orbitz Worldwide now has partner marketing agreements with nearly 180 destination marketing organizations.

Orbitz’s Mobile Application
Recently, Orbitz too launched their first native application for the iPhone and Android mobile devices that lets consumers shop and book air, car rental, and hotel options. They also released their new mobile website that can be accessed by all Web-enabled mobile phones.

The stock is trading at $5.56 with a market capitalization of $568.81 million. It touched a 52-week high of $8.11 in December of last year.

MakeMyTrip’s Financials
MakeMyTrip (NASDAQGM:MMYT) had a very successful IPO in August of this year. However, their recently reported quarter results weren’t as uplifting. Q2 revenues of $12.9 million fell short of the market’s projected $13.7 million target. EPS of $0.02 was in line with market expectations.

The company is projecting the year’s revenues to be $58 million–$61 million compared with the market’s projections of $60.9 million.

MakeMyTrip’s Growth Plans
MakeMyTrip is looking for acquisitions in the hotel bookings, exhibitions and technology sectors. Earlier this year, the company acquired Ticketvala.com from Mumbai-based Travis Internet. The acquisition had helped them to increase their bus ticketing sales in India.

The company claims to have a 48% share in India’s $1 billion online travel agent market. MakeMyTrip is looking to expand beyond India as well. For the previous quarter, revenues from within India, which include both international and domestic ticket sales, contributed 75% to their revenues, compared with 40% last year. They are planning to invest in technology to help improve their online platform, especially for international travelers. At present, only 50% of MakeMyTrip’s international business is on the online platform.

MakeMyTrip’s Tax Issues
MakeMyTrip has run into trouble following an industry-wide tax audit initiated by the Government of India for the fiscal year ended March 2009. The audit contends that there is not compliance with service tax rules and regulations by travel companies in India. MakeMyTrip is confident of a ruling in their favor but remained cautious of the audit.

The stock is trading at $27.33 with a market capitalization of $481 million. In September of this year, the stock touched $42.88, the highest since its IPO earlier last quarter.