While Egencia's gross bookings and revenues in the second quarter decreased 23 percent and 11 percent year-over-year, respectively, Expedia's corporate travel management arm is expected to reach profitability in the next year, Expedia CEO and president Dara Khosrowshahi said in today's quarterly earnings call.
"It's essentially been break-even for the last couple of years," Khosrowshahi said of the nearly seven-year-old Egencia. "We've had limited losses. We could have been more aggressive, but we knew that it was going to take a long time, so we thought, we're not going to lose a bunch of money on this and take huge amounts of risk. Let's run it as essentially a break-even business and let's have it grow on an organic basis."
He added, "We do believe that we are getting to the point of scaling the business where you are going to see some profitability from this business coming in the next year. We are not running it for profit immediately, but we do think we are getting to the point of scale where next year, if it's not showing profitability, I will tell you I'd be disappointed."
Although Egencia gross bookings fell to $330 million and revenues dropped to $27 million in the second quarter, which ended June 30, those numbers are an improvement from the $321 million in gross bookings and $25 million reported in the first quarter of 2009.
Even with the improvement, Khosrowshahi said the company's managed corporate travel operation has had some growing pains.
"It's definitely taken longer than we anticipated," he said. "This is a very hard business to get into, and honestly we had to learn it. We were a consumer Internet company, and B2B businesses are very different from B2C businesses. We've really had to almost set up a separate company out there. It's a long-lead-time business. On the B2C side, you bid on a keyword and you get instant action tomorrow. On the B2B side, with these large accounts, you've got to go in, woo them, build up a sales force, train the sales force, track the results and then you go in with RFPs, with pitches that you may win six months from now, and then you've got to implement them three months to six months later. It's harder than we thought. We've been working really, really hard at it and we're very confident it's something we're going to succeed at."
During the quarter, Egencia's former president Jean-Pierre Remy left the company and was replaced by Egencia senior vice president of North America Rob Greyber
(BTNonline, May 11).
Meanwhile, Expedia's overall gross bookings, which include those on Expedia.com, Hotels.com and Hotwire.com, decreased 5 percent year-over-year to $5.6 billion, driven primarily by lower air and hotel prices but offset by an increase in transactions. Worldwide hotel average daily rates decreased 19 percent. The company's revenue per air ticket decreased 29 percent, but it reported a 13 percent increase in ticket volume, partially driven by the company's removal of consumer booking fees in March.