Expedia's Earnings Show Erosion Of Demand
Expedia Inc.'s fourth-quarter earnings report released today showed the acceleration of sinking travel demand from leisure and business travelers.
Gross bookings decreased 11 percent in the fourth quarter, which ended Dec. 31. Other bookings, which are primarily derived from travel management company Egencia and Expedia's Asia/Pacific operations, increased 4 percent. The international-expansion-minded Egencia launched new points of sale in India and Switzerland during the quarter. In its sixth year of operation, Egencia recorded $1.5 billion in gross bookings, with more than 20 percent revenue growth, according to the company's quarterly report.
Expedia president and CEO Dara Khosrowshahi said business travel demand has gotten "significantly worse" on a same-account basis in 2009. "Egencia performed better than the leisure businesses based on business travel demand. In '09, same-store sales are going to be down, but new sales—our ability to go out and get new clients—are stronger than they ever have been," Khosrowshahi said in today's earnings call.
Meanwhile, Expedia's broad business units reflected the downward spiral of hotel occupancy rates and revenues. Its worldwide hotel revenue per room night decreased 19 percent primarily due to a 10 percent decrease in worldwide average daily rates during the quarter. Room nights stayed increased 10 percent year-over-year, which Khosrowshahi attributed to heavy discounting and promotions by properties to boost occupancy.
Overall air tickets sold decreased 12 percent and revenue per air ticket decreased 4 percent, which the company said reflects a lower mix of higher-revenue merchant air tickets at Hotwire. According to CFO Michael Adler, "air forward bookings show ticket prices continuing to trend down."
Even with revenue losses that were offset from advertising and media revenue increases, the company recorded a gross profit in the quarter of $484 million, a decrease of 7 percent over the prior year. Full-year profit was $2.3 billion, a 9 percent increase compared with 2007.