International Expansion At Travel Sites

A survey conducted by AAA predicted that despite increasing gas prices, almost 35 million people traveled 50 miles or more over the Memorial Day long weekend. Even the Air Transport Association of America (ATA) estimates that an average of 2.24 million people will fly every day from June through August, which is an increase of 34,000 people over the year. The ATA also expects the current year to be a record-breaking summer for Americans going on international trips.

But, it is not just the domestic market that is thriving. PhoCusWright expects the Indian travel market to grow to $22 billion by 2012, of which $7 billion will be online. Last year, the overall travel market in the country was estimated to be worth $6 billion. China is another big market in the region. According to EnTravel, online tourism sales in China sales grew 42% over the year to $6 billion last year. The research expects the sales to cross $10.5 billion in 2012. It is no surprise that online travel players are increasing their presence in these regions.

Expedia’s Financials
Expedia’s Q1 revenues grew 15% to $822.2 million, exceeding the market’s expected $795.4 million. Despite beating revenue expectations, the company fell short on the EPS expectations. For the quarter, earnings of $0.25 missed the Street’s expectations by a cent. Expedia attributes the weak margin performance to increasing investments in technology and international operations.

Expedia’s International Expansion
Expedia upped the ante on international expansion. During the quarter, they spent 60% of their direct marketing expenses towards these efforts. Expedia is looking aggressively at Asia-Pacific. Last quarter, they announced a joint venture with AirAsia, a Malaysia-based budget airline. The equal stakes joint venture will grant exclusive distribution rights for AirAsia tickets to Expedia, apart from the airline’s own site.

They also entered into tie-ups with multiple players in India to cater to the growing travel market. They entered into agreements with Cleartrip.com for back end support, redBus, and Nokia for maps. Expedia has a budget of $6 million it plans to spend on marketing in India. They launched their “Big Daddy” ad campaign aggressively in the market.

To cater to the Chinese market, Expedia increased their stake in eLong, an online travel services provider in China. With an additional investment of $41.2 million made earlier this year, Expedia now owns a 56% stake in eLong. Additionally, they launched local sites in Vietnam and Indonesia and will soon be launching in Malaysia and Thailand. Expedia plans to enter four to five additional markets by the end of the year.

Expedia to Spin Off TripAdvisor
Meanwhile, Expedia announced plans to spin off their highly popular TripAdvisor site into a separate company. TripAdvisor is more a media business that relies on user-generated content for hotel and travel destination reviews and earns revenues through advertising. Analysts estimate TripAdvisor to be worth more than $4 billion. Through the spin-off, Expedia will be able to focus on its core online travel booking operations. I believe that this move may be a vital mistake for them as it strays from the Web 3.0 strategy. By having TripAdvisor as part of their offering, Expedia provided their consumers a collection of sites that offered all the elements of Web 3.0 under the same umbrella.

The stock is trading at $27.69 with a market capitalization of $7.6 billion. It touched a 52-week high of $29.85 in September of last year.

Priceline’s Financials
Priceline’s (NASDAQ:PCLN) Q1 revenues grew 39% over the year to $809.3 million with international operations growing 80% over the year to $389.1 million. The Street was looking for revenues of $779.5 million. EPS grew to $2.66 over $1.70 earned a year ago and exceeded the market’s expectations of $2.44.

For the current quarter, Priceline expects revenues to grow 36% to 41% over the year and to earn EPS of $4.70 to $4.90. The market was projecting earnings of $4.45.

Priceline’s International Growth
Priceline has benefited from strong international sales. Booking.com now claims to have an inventory of more than 135,000 hotels across 101 countries as it expanded in Asia, South America, and North America. The car rental service acquired through Travel Jigsaw in Europe also saw improved performance, with rental cars days booked growing 65% over the year. They expect international businesses to continue to drive growth in the coming quarters.

Priceline’s stock is trading at $501.44 with a market capitalization of $24.9 billion. It touched a ten-year high of $561.88 earlier this month.

Orbitz’s Financials
Orbitz’s (NASDAQ:OWW) Q1 revenues fell 1% over the year to $184.9 million but managed to exceed market expectations of $180.5 million. Revenue from domestic operations fell 7% to $134.3 million, while international revenues grew 17% to $50.6 million. Loss of $0.11 per share was in line with the Street’s expectations but has widened from the previous year’s loss of $0.05 per share.

For the current quarter, Orbitz is projecting revenues of $194 million to $200 million. The Street was looking for revenues of $197.7 million.

Orbitz’s Legal Issues
Meanwhile, Orbitz’s troubles with American Airlines became a legal matter when American Airlines sued Orbitz for removing their flights from Orbitz’s search results. A year ago, American Airlines had introduced a new booking system that Orbitz claims interfered with the online travel search engine’s capabilities to offer comparative search results to their consumers. American Airlines is seeking “treble damages” for alleged inflated fees paid to Orbitz, a punitive award, and a permanent injunction preventing Orbitz from retaliating by favoring other airlines’ flights.

The stock is trading at $2.24 with a market capitalization of $230 million. It touched a 52-week low of $2.06 last week.

Kayak’s Financials
The soon-to-be-listed vertical search engine Kayak reported last quarter’s revenues of $53 million, registering 43% growth over the year. However, losses widened to $8.2 million for the quarter. For the quarter, Kayak’s revenues from Expedia and affiliates accounted for 26% with Orbitz following at 14% contribution. The number of queries processed by Kayak grew 48% over the year to over 214 million.

Kayak’s Competition
Kayak has been worried about Google’s ITA acquisition. Recently, the acquisition got the nod from the Department of Justice amid caveats. ITA currently accounts for 56% of Kayak’s airfare query results. Kayak’s agreement with ITA lasts until end of 2013. Kayak has been worried that after Google’s acquisition, they may not have access to ITA’s enhanced services and that Google may create other search tools and services that compete with Kayak. However, Kayak was pleased with the slew of restrictions imposed by the DoJ on Google to maintain healthy competition within the industry.

Kayak’s International Growth
International business contributed 14% of the quarter’s revenues for Kayak, compared with 8% a year ago. As part of their international strategy, Kayak recently opened their European headquarters in Zurich. They also acquired Austria-based JaBo Software for $9.5 million. JaBo operates travel metasearch website checkfelix.com, which is a leading travel search site in the region. Kayak will be looking at investing some of the proceeds from its anticipated $50 million IPO toward international expansion.