Expedia posts record room-night growth, but could owe Hawaii $170 million
Expedia’s revenge? After years of sluggish growth in its all-important hotel business, Expedia’s room-night growth is kicking into gear. The adverse Hawaii excise tax ruling is a concern, but the online travel agencies have been able to navigate the torrent of litigation so far without getting blown away.
Expedia Inc. released its fourth-quarter results today and recorded record room-night-growth at 33% year over year. But there were some negative rumblings in the background as the company revealed it could owe the state of Hawaii up to $170 million if a tax ruling doesn’t ultimately go its way.
The company reported that its room nights grew 33% in the fourth quarter of 2012, now that its global tech platform is pumping, compared with 19% growth in the fourth quarter of 2011.
The fourth quarter of 2012 was the “second consecutive quarter of acceleration [in room-night growth] across Europe, Asia-Pacific, and the Americas,” Expedia stated.
Domestic room-night growth wasn’t shabby, either, growing at a 19% pace year-over year.
Despite the high marks in room-night growth, CEO Dara Khosrowshahi told analysts in a conference call that although the company is gaining hotel share against smaller competitors, its largest competitor (Priceline) has continued historically to outpace Expedia’s room-night growth rate. Priceline hasn’t yet reported its fourth quarter results.
Net income, driven by the top-line growth, increased 10% to $88.9 million during the quarter on revenue of $974.9 million, a 24% increase, Expedia said.
Expedia’s fourth quarter gross bookings and revenue each were boosted 4% by its acquisition of VIA Travel in the second quarter of 2012.
The State of Hawaii last month granted a judgment against Expedia and other online travel agencies for unpaid general excise taxes dating back to 2000.
In its earnings release today, Expedia indicated that it has put $110 million in reserve related to the Hawaii judgment, and the Hawaii Tax Court is also seeking an additional $60 million in penalties and additional assessments.
Initial reports about the judgment, which came against Expedia and other OTAs, including Priceline, Orbitz, and Travelocity and some of their subsidiaries, cited potential tax liabilities of some $150 million. But, the figure appears to be substantially greater when penalties and other assessments are taken into account.
Expedia intends to challenge the ruling, but Hawaii is one of the states that requires payment of the allegedly unpaid tax in order to file an appeal.
Hawaii would have to reimburse Expedia the $110 million plus interest if Expedia wins the appeal, but that, of course, is to be determined.
In other news, Expedia stated that it expects its $647 million investment in German travel-metasearch firm Trivago to close during the first half of 2013.