Tags: Expedia | travel | growth | EXPE

Expedia Counts On Travel Growth

By    |   Thursday, 27 Oct 2011 01:03 PM

Travel services provider Expedia (EXPE) provides travel bookings through a modern, Internet-based delivery system. The company needs to draw pageviews to its online properties and needs those viewers to be in the need to book and take trips. The company counts on travel growth to increase its revenues.

The primary web properties owned by Expedia are Expedia.com, Hotels.com, Hotwire.com and TripAdvisor. Revenues are generated from the booking of cruises, hotel stays and airfare. Advertising sales, especially on the TripAdvisor properties, is another major source of revenue.

Hotel bookings are the largest revenue source, accounting for 65 percent of sales. Advertising is the second-largest revenue stream at 13 percent of the total. International sales account for about 40 percent of revenue. Expedia books as revenue its portion of the cost of the service sold, not the full value of the ticket or room charge.

For the second quarter of 2011, Expedia saw hotel and advertising revenues increase by more than 20 percent year-over-year. Reported revenues for the quarter were $1.02 billion, up 23 percent from 834 million. Adjusted earnings per share were 55 cents up from 44 cents.

Free cash flow increased by 60 percent to $432 million from $270 million. Looking at the year-over-year revenue increase, almost all of the revenue growth fell through to free cash.

Double-edged

Second quarter revenue growth was propelled by international sales, which were up by 45 percent compared to a 10 percent gain in U.S. revenues. However, about one-third of that 45 percent growth was due to positive currency exchange fluctuations.

Thus the shift to a stronger U.S. dollar in the second half of 2011 may result in slower international sales growth, once adjusted.

In early April 2011, Expedia management announced board approval for the spin-off of TripAdvisor as a separate company, with shareholders receiving shares in the new, separately trading company. At the time of the announcement, the spin-off was expected to take place in the third quarter of 2011. By mid October, no further announcement had been made concerning the transaction.

In recent analyst reports, Piper Jaffray analyst Michael Olson upgraded Expedia to overweight from neutral due to the pending spin-off. Mr. Olson put a $4.2 billion value on TripAdvisor. Analysts at Benchmark have maintained their hold rating while lowering their target price, citing an expected slowdown in travel spending.

The company next reports on Oct. 27.

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Travel services provider Expedia (EXPE) provides travel bookings through a modern, Internet-based delivery system. The company needs to draw pageviews to its online properties and needs those viewers to be in the need to book and take trips. The company counts on travel...
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2011-03-27
Thursday, 27 Oct 2011 01:03 PM
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