Despite market trends, Expedia reports 80% growth

Even as the Street this week reports financial troubles and widespread layoffs at such high-profile companies as Lucent Technologies and Xerox, major online travel are on the rise.
Earlier this month Travelocity reported that gross bookings and revenue growth exceeded 100% last year with gross profits at $125.5 million (an increase of 150%), new booker conversion rate rose to 8.1%, and membership was 24.9 million at year-end.
Yesterday Expedia announced its second quarter results and while its growth is not as dramatic as its competitor, it is impressive nonetheless given market conditions.
Expedia reported that its second quarter revenues increased by 81% year-over-year (on a pro forma basis adjusted for acquisitions) to $80 million from $44 million. Its net loss was $2.6 million or $0.06 per share, down year-over-year from $10.3 million or $0.26 per share. Gross profit increased to $28 million, from $16 million.
“We are very pleased with our financial performance this quarter,” said Greg Stanger, senior vice president and CFO of Expedia, Inc. “Gross profit grew 76% year-over-year while operating expenses excluding non-cash charges increased only 21%, providing a clear illustration of the strength of our business model.”
Expedia attributes it wholesale and merchant business model, managed through its subsidiary, to helping the company increase its gross profit per transaction. Expedia also reported that its conversion rate for new bookers was up from 4.8% to 6.0%, citing new additions and improvement to the site’s shopping tools.
“Ongoing product enhancements to flights, lodging and cruises have driven a significant improvement in conversion this quarter,” said Expedia President and CEO Richard Barton.
The promising conversion rates should continue to improve as the online travel retailer adds new features to the site. Last week Expedia introduced Expert Searching and Pricing, a new platform developed with its CRS partner Worldspan that provides Expedia users with more fare options. With an average return of 400 itinerary combinations for each roundtrip domestic air ticket search, Expedia said its new technology rivals the ITA Software technology being utilized by Hotwire.
Building on the ESP platform, Expedia recently launched Expedia Packages, a new service that allows customers to build their own air and lodging packages at discounted rates.
“Going forward, we expect the (ESP) platform to make a significant contribution to the growth of our business through improvements in conversion and cross-sell,” Stanger said.

Expedia’s share price also is on an upswing. Still significantly lower than its 52-week high of $38.00 in February 2000, Expedia yesterday closed at $16.75 per share up from $7.75 per share in November.
Gross travel bookings increased to $475 million, up 90% year-over-year from $250 million.
á Agency revenues, which represent transaction commissions and fees from the agency component of the business, increased to $24 million, up 95% year-over-year from $12 million.
á Merchant revenues, which represent the full retail value of merchant-of-record transactions, increased to $47 million, up 81% year-over-year from $26 million.
á Operating expenses excluding non-cash amortization of goodwill and intangibles and recognition of stock option-based charges increased to $32 million, up 21% year-over-year from $27 million.
á Cash and marketable securities totaled $118 million at December 31, 2000.
Things are looking good for GDSs also. Galileo International reported that fourth quarter earnings grew 6.7% per share to $.53 per diluted share, compared to $.49 per diluted share for the same quarter last year.
Earnings in the fourth quarter were $21.6 million, or $.24 per diluted share, before special items, compared to $34.1 million, or $0.38 per diluted share last year. Total revenue grew 9.7% $371.3 million for the quarter. Operating income, however, decreased, 18.7% to $51.5 million, largely due to the incremental amortization of intangible assets resulting from the acquisition in early 2000.
“Our leadership in high-growth travel markets around the world has enabled us to deliver strong revenue growth in the fourth quarter,” said James E. Barlett, chairman, president and CEO. “While we delivered strong gains in many markets around the world, we are particularly pleased with our exceptional performance in the UK, and throughout the Asia Pacific region. Given our global diversity, successful sales efforts, and entry into new high-growth businesses, we are well positioned to deliver strong revenue and solid economic earnings per share growth in 2001.”