Expedia will need to improve its foreign sales numbers if it hopes to maintain any edge over Priceline.
Source: Seattle Times
By Drew Desilver
Go online to plan your trip and you might start at expedia.com. Then you might look for a room at Hotels.com, drool over the luxury packages on classicvacations.com, reserve an SUV at CarRentals.com, or see if you can find a last-minute deal at Hotwire.com or travel-ticker.com.
Finally, just to make sure you’re not overlooking anything, you might check out some smaller regional travel companies.
But with all that Web-hopping, you wouldn’t have strayed from the archipelago of 140-odd travel sites owned and operated worldwide by Bellevue-based Expedia, whose financial performance in 2011 was good enough to rank fourth in The Seattle Times‘ annual ranking of publicly traded companies based in the Northwest.
Even those regional travel agencies may well be part of Expedia’s “Affiliate Network” of private-label websites.
And that is just the way Expedia wants it, Chief Financial Officer Mark Okerstrom said.
“What we’ve found is that different brands resonate with different people, and we like to let that play out,” Okerstrom said. “We try to get multiple bites of the apple.”
Since its 1994 origin as a project within Microsoft, Expedia has grown into the largest online travel agency in the world.
One of every 20 occupied hotel-room nights in the United States is booked through Expedia, Okerstrom said. In some markets, such as New York and Las Vegas, the share is more like one in 10.
As those stats suggest, Expedia today depends much more on booking hotel stays than airplane trips, its original focus. Pacific Crest Securities analyst Chad Bartley estimates 72 percent of Expedia’s revenue derives from hotels, versus 11 percent from air travel.
That mix boosts Expedia’s results, because margins are higher in hotels than in air travel, where profits have been squeezed by intense competition and consolidation in the airline industry.
However, Bartley wrote in a client note, the mix is shifting in the hotel segment toward large chains, which are less profitable for Expedia.
The company also faces a host of competitors globally. Perhaps its most notable rival is Priceline, which recently extended its booking.com business, already a strong presence in Europe, into the United States.
But Expedia’s established position in the U.S. should help it withstand booking.com, Piper Jaffray analyst Michael Olson said: “You never want to assume Priceline can’t get market share, but in the U.S. it’s not necessarily going to come at the expense of Expedia.”
Nonetheless, Olson said, non-U.S. markets are likely to have more growth potential in coming years. “They need to hold their ground in the U.S. while expanding their footprint overseas.”
Okerstrom said Expedia is working on that. It owns venere.com, an Italian travel site, and a majority stake in eLong, China’s second-biggest travel site after Ctrip. But Expedia still derives about 60 percent of its gross bookings and revenue domestically, though that’s down from nearly 80 percent in 2005.
Over the past few years, Expedia also has invested heavily in retooling and upgrading its sites’ technology platforms, with the goal of being able to test deals and launch new versions of the sites more frequently. Currently, 50 different tests are running on the expedia.com site alone, Okerstrom said.
In general, he said, the global travel business has a lot of running room. Expedia estimates the total market at around $1 trillion, and its share about $30 billion.
“We’re the biggest travel company in the world, and we have 3 percent of the market,” he said. “We think there’s a lot of room in this industry for both us and our competitors.”
Drew DeSilver: 206-464-3145 or email@example.com
Subscribe to Skift Pro
Subscribe to Skift Pro to get unlimited access to stories like these ($30/month)Subscribe Now
How Far Will Google Take New Hotel and Environment Claims?
It's a nice step for Google to provide more information about hotels' sustainability practices in search results. But will the company have the guts to get "political," in the eyes of some, and push hotel listings higher or lower based on environmental practices?
Dennis Schaal | 5 hours ago
Expedia Consolidates 3 Loyalty Programs With New Rewards for Vacation Rentals
With Marriott Bonvoy making loyalty inroads, and subscription programs having a moment, Expedia Group is consolidating its far-flung loyalty programs in a move that coincides with its strategy to simplify its operations.
Dennis Schaal | 1 day ago
Expedia Gives GetYourGuide Big Lift and 9 Other Travel Stories This Week
In big travel news this week, Skift looked Expedia partnering with GetYourGuide to help give it a big U.S. presence, four airlines that made more on ancillaries than ticket sales in 2020, and what the retirement of longtime CEO David Kong means for the future of Best Western.
Tom Lowry | 4 days ago