It is too soon to tell how the Sabre-Expedia agreement on Travelocity is working out for Sabre. We have to get past the initial implementation to see if Sabre's profitability promises will be valid.
The revenue drop isn’t a big shocker because of the Sabre-Expedia agreement, which has Expedia paying Sabre a performance-based marketing fee in exchange for Expedia providing its technology platform, content, and customer service for Travelocity sites in the U.S. and Canada.
Sabre expects its cut in expenses for Travelocity to lead to “stronger financial performance and profitability” in the future, but the timing of the implementation with Expedia contributed an adjusted EBITDA loss at Travelocity of $25 million during the quarter, a widening of losses compared with a $9 million loss in the first quarter of 2013.
Under the agreement, Sabre is still responsible for Travelocity’s marketing, which leaves Expedia in a bit of a quandary.
In its own first quarter, Expedia reported that the Travelocity partnership contributed 18 percentage points to Expedia’s air ticket growth, and Travelocity also chipped in 3 percentage points to Expedia’s 24% hotel room-night growth.
Regarding its companywide results in the first quarter, Sabre’s net loss narrowed to $2.84 million, compared with a loss of $15.7 million a year earlier.
This was Sabre’s first financial results’ reporting since it executed raised $627 million in an IPO last month.
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Photo credit: Travelocity's Roaming Gnome brought parent company Sabre less revenue in the first quarter of 2014 because Travelocity's now sharing sales with Expedia. Travelocity