Expedia Reports Lower First Quarter Revenues, Profits

Closely watched Expedia, Inc., the online travel giant, announced drops in bookings, revenue and profit for the first quarter ended March 31, 2009. Revenue was down 8 percent to $635.7 million, gross profit was down 8 percent to $492.2 million, adjusted net income was down 11 percent to $62.8 million, and net income attributable to Expedia Inc. was down 23 percent to $39.5 million.

Gross bookings decreased 11 percent (down 7 percent excluding the estimated impact from foreign exchange) for the first quarter of 2009 compared with the first quarter of 2008, driven by a decrease in the leisure segment. Domestic bookings decreased 11 percent and international bookings decreased 13 percent (down 1 percent excluding the estimated impact from foreign exchange).

Revenue decreased 8 percent (down 3 percent excluding the estimated impact from foreign exchange) for the first quarter, primarily driven by lower package, hotel and air revenues in the leisure segment, partially offset by increases in advertising and media and car revenues. Domestic revenue decreased 5 percent while international revenue decreased 14 percent (flat year over year excluding the estimated impact from foreign exchange).

Worldwide hotel revenue decreased 10 percent for the first quarter due to a 20 percent decrease in revenue per room night, partially offset by a 13 percent increase in room nights stayed, including rooms delivered as a component of packages and nights booked through Venere, the European online website purchased by Expedia last year. Revenue per room night decreased primarily due to an 18 percent decrease in worldwide average daily rates.

Worldwide air revenue decreased 17 percent for the first quarter, primarily due to a 14 percent decrease in revenue per ticket, driven by lower commissions and overrides (in part due to timing of receipts), a lower mix of merchant air tickets, the negative impact of foreign exchange and lower consumer booking fees. Ticket volumes declined 4 percent reflecting lower passenger volumes due to carrier capacity cuts and softening traveler demand, partially offset by ticket volume share gains driven in part by Expedia’s booking fee promotion beginning in March.

Worldwide revenue from products and services other than hotel and air (primarily revenue from advertising and media, car rentals and destination services) increased 5 percent for the first quarter due primarily to increased advertising and media revenue and increased car revenue. Advertising and media revenue, including revenue from Expedia’s TripAdvisor segment, increased 15 percent for the first quarter, accounting for over 11 percent of worldwide revenue. Package revenue decreased 18 percent compared with the prior year period primarily due to lower ADRs.

Revenue as a percentage of gross bookings (revenue margin) was 12.17 percent for the first quarter, an increase of 51 basis points. Domestic revenue margin increased 81 basis points to 12.51 percent while international revenue margin decreased 13 basis points to 11.42 percent. The increase in worldwide and domestic revenue margins was primarily due to an increased mix of advertising and media revenues as compared to first quarter 2008. The decline in international revenue margin was primarily due to lower hotel margins, in part as a result of the negative impact of foreign exchange.

Gross profit for the first quarter of 2009 was $492 million, a decrease of 8 percent compared with the first quarter of 2008 primarily due to decreased revenue. OIBA for the first quarter increased 3 percent to $130 million and increased 212 basis points as a percentage of revenue to 20.4 percent, driven primarily by a decrease in sales and marketing expenses at a faster rate than the decrease in revenue. Operating income increased 3 percent for the same reasons OIBA increased, in addition to lower amortization of intangible assets, partially offset by a $9 million restructuring charge taken in the first quarter of 2009.