Expedia and Web 3.0 Trends

Expedia.com (NASDAQ: EXPE), reported its Q4 2007 revenues on Feb 7. With annual global bookings just short of $20 billion, it is the world’s largest online travel agency. I have covered Expedia’s business offerings in the Web 3.0 series in detail. Let’s take a look at the company's latest financials.

Its Q4 gross bookings increased by 25% to $4.6 billion compared to the previous year. Its revenues on these bookings totaled $665.3 million for the quarter, i.e. a revenue margin of 14.47%. For the corresponding period in the previous year, its revenue margin was 14.41% and gross revenues were $531.3 million.

Region-wise, its North American revenues rose by 19%, European revenues by 39% and Other regions by 42%. Recently, Expedia has even launched an Indian website as part of the company's added focus to the APAC region.

Segment-wise, the merchant hotel revenue increased by 23%, worldwide air revenue rose by 13%, package revenue rose by 20% and other services and product revenues increased by 42%, for the quarter.

For the year 2007, gross bookings reached $19.98 billion, registering a 16% increase over the previous year's bookings of $17.16 billion. For the year, these bookings converted to revenues of $2.66 billion i.e. 13.34% revenue margin compared to previous year's margins of 13.04% or revenues of $2.23 billion.

For the year, while its merchant hotel revenue increased by 19%, package revenue increased by 7% and other services and product revenues increased by 38%, its worldwide air revenue reduced by 2%.

The company's quarter EPS of $0.31 met analyst expectations. It was higher than the previous year's EPS of $0.28 by 10.7%. For the year, the EPS stood at $1.22, again equating to market expectations. Compared to 2006, the EPS has risen by 11.9% over $1.09.

During the year, the company repurchased 55 million shares from the market.

click to enlarge

The company does not publish its outlook, but has suggested that the Easter holidays will pull in additional revenue for the quarter.

Currently, the global travel industry is going through a crunch. Expedia’s shares have been trading at $21.17. Its 52-week low price of $20.72 was a year ago.

Expedia’s management, however, does not share the glum view. They maintain that the climate is a “mixed bag.” They point out the fact that despite airline fares having increased, air traffic still continues to be high. Similarly, American hotel occupancies might be low, but they expect that to translate to better deals and thus higher sales.

There have been talks recently of Expedia wanting to spin off TripAdvisor. But, as of now, the company seems to have put these thoughts on hold. In fact, it has increased TripAdvisor’s reach by launching travel applications such as Cities I have visited, Traveler IQ Challenge, and Local Picks on Facebook. Expedia's Cities I have visited application is the lead ad and media revenue generator.

Expedia continues to innovate on its business model. Hotels.com has created customized versions for the iPhone and iPod and also used Facebook to expand its network through Hotels Near Friends application. It recently teamed up with Hawaiian Air to come up with the NFL pro bowl promotion, featuring first co-branded campaign offerings giving exclusive rates to travelers for the Honolulu big game. It added a co-branded credit card to its portfolio which was named the best card for travel rewards by SmartMoney within three months of its launch. It has also teamed up with Cruise Ship Centers International Inc. to offer travel products through home-based agents in the U.S. and through a co-branded store.

For my other analysis on Online Travel, read the Web 3.0 segment analysis, as well as discussions on the vertical search engines, and vertical ad networks, both trends that Expedia needs to pay attention to.