BELLEVUE, Wash.—July 29, 2010—Expedia, Inc. (NASDAQ: EXPE) today announced financial results for its second quarter ended June 30, 2010.
Discussion of Results
Gross Bookings, Revenue & Revenue Margins
Gross bookings increased 19% (19% excluding the estimated benefit from year on year changes in foreign exchange rates) for the second quarter of 2010 compared with the second quarter of 2009, driven primarily by 10% growth in transactions and a 17% increase in average airfares. Domestic bookings increased 15% and international bookings increased 28% (29% excluding foreign exchange).
Revenue increased 8% (11% excluding foreign exchange) for the second quarter, primarily driven by an increase in advertising & media revenues and hotel revenues. Domestic revenue increased 9% while international revenue increased 8% (16% excluding foreign exchange).
Revenue as a percentage of gross bookings (―revenue margin‖) was 12.5% for the second quarter, a decrease of 121 basis points compared to the second quarter of 2009, due primarily to a higher mix of air bookings, which have a lower revenue margin than our other products and services. The higher mix of air bookings is due in part to an increase in air ticket prices.
Products & Services Detail
Worldwide hotel revenue increased 4% for the second quarter primarily due to a 12% increase in room nights stayed, including rooms delivered as a component of packages, partially offset by a 7% decline in revenue per room night. Revenue per room night declined due in part to the impact from foreign exchange, customer refunds issued as a result of the Icelandic volcano in second quarter 2010 and lower hotel service fees compared with the prior year period.
Worldwide air revenue increased 13% for the second quarter, primarily due to a 6% increase in air tickets sold and a 7% increase in revenue per ticket. Revenue per ticket increased primarily as a result of higher average airfares.
Advertising and media revenue (including net revenue from TripAdvisor.) increased 39% for the second quarter, driven by a 55% increase in third-party revenue for TripAdvisor. All other revenue (primarily car rentals and destination services) was relatively consistent with the second quarter of the prior year.
As a percentage of worldwide revenues in the second quarter of 2010, hotel accounted for 63%, advertising & media accounted for 13%, while air and all other revenues each accounted for 12%.
OIBA for the second quarter increased 3% to $219 million primarily due to increased revenues, substantially offset by increased costs and expenses. OIBA decreased 128 basis points as a percentage of revenue to 26.3% due to growth in costs and expenses in excess of revenue growth. Operating income increased 69% due to the same factors impacting OIBA. In addition, operating income for the second quarter of 2009 included $74 million of occupancy tax assessments and legal reserves and $6 million of restructuring charges.
Adjusted net income for the second quarter increased $16 million compared to the prior year period primarily due to a foreign exchange gain compared with a prior year loss, higher OIBA and a lower effective tax rate. Net income increased $73 million compared to the prior year period primarily due to higher operating income and the same factors impacting adjusted net income. Adjusted EPS increased 16% to $0.44 and diluted EPS increased 186% to $0.40.
. Gross bookings from Expedia, Inc.’s international businesses were $2.2 billion in the second quarter,accounting for 33% of worldwide bookings, up from 31% in the prior year period. International revenues were $301 million, representing 36% of worldwide revenue, consistent with the prior year period. EMEA represents roughly one fourth and APAC approximately 5% of Expedia, Inc.’s worldwide business.
. TripAdvisor. extended its European presence with the acquisition of Holiday Lettings., the U.K.’s number one independent vacation rental site.
. Hotels.com. launched its WelcomeRewards. loyalty program in the U.K., enabling Hotels.co.uk customers to earn one free night for every 10 nights stayed at more than 65,000 properties around the world.
. Expedia.co.jp signed a partnership agreement with Japan’s third-largest travel agency Hankyu, giving visitors to Hankyu’s web site access to Expedia Japan’s international hotel inventory.
Traveler Value Proposition and Innovation
. Expedia.com kicked off its annual summer sale in May, marking the largest ever promotion in company history with more than 7,400 participating hotels, an increase of 48% over 2009. hotels.com also launched its first ever full summer sale, with more than 5,000 participating properties, including 600 exclusive deals. Venere.com also launched its first summer sale.
. Expedia.com. introduced Unpublished Rates opaque hotel inventory as part of the ongoing focus to improve the customer value proposition and capture incremental bookings to standard published rate bookings.
. Hotwire. introduced its One-Way Car product, giving travelers the flexibility to pick-up or drop-off at any combination of local rental agencies or airports.
Media, Advertising and Distribution
. TripAdvisor launched TripAdvisor for Business, a dedicated B2B division managing Business Listings, Vacation Rentals and Partnerships.
. TripAdvisor launched Trip Friends feature, enabling travelers to see a list of their friends who have been to various destinations, as identified via the TripAdvisor Cities, I’ve Visited. application on the Facebook Platform.
. Expedia. Media, the advertising sales division of Expedia, Inc., rolled out a new algorithm for its TravelAds. product in June, improving performance for participating hotels and setting a record for monthly revenue for that product. In addition, a newly released case study shows that the average hotels using the TravelAds product for the first time realized a significant return and a meaningful lift in market share within the first week of participating.
. Expedia Media signed a long-term pan-European partnership with the Netherlands Board of Tourism for online advertising campaigns targeting travelers in Belgium, Denmark, France, Germany, Italy, Norway, Spain and Sweden.
. Expedia. Affiliate Network (EAN) signed agreements to power online travel bookings for a number of new global partners, including Russia-based OTA OKtoGO.ru; G-Plan, a leading membership points program in Japan with 1.7 million registered users; and SoftVoyage, a B2B travel software solutions company based in Canada.
. At quarter-end, Expedia’s global websites featured approximately 127,000 bookable properties, including nearly 68,000 merchant and 30,000 agency properties with which we have direct relationships. Expedia sites offer approximately 62,000 EMEA region hotels and more than 13,000 properties in APAC countries. Separately, eLong features over 12,000 properties in China.
. Expedia and Delta Airlines have signed a new agreement under which all Delta schedules and fares will be available on Expedia.com, Expedia.ca, Hotwire, Expedia Affiliate Network and Egencia.
. Expedia signed global partnership agreements with a number of international hotel brands, including Spain-based Iberostar Hotels & Resorts, and Chinese economy chains Jinjiang Inn and GreenTree Inn Hotels.
. Hotwire partnered with Air Canada, Canada’s largest air carrier, giving Hotwire customers access to all of Air Canada’s routes which include more than 170 destinations worldwide.