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Online Travel Retrospective For Q1

Posted on Thursday, May 14th 2009

The online travel majors recently announced impressive quarterly results for these troubled times. Priceline regained lost ground in terms of valuation and revenue growth and Expedia gained market share, but Orbitz continued to flounder.

Priceline’s (NASDAQ:PCLN) revenues of $462.1 million represented growth of 14.6% over the year and beat the market’s expectations of $440.8 million. EPS of $1.09 was also significantly higher than the $0.91 expected by analysts and recorded significant 43% growth over the year.

Gross bookings rose 10.5% over the year to $1.9 billion. Worldwide hotel room night sales also grew a significant 36% over the year to $12.8 million for the quarter. Airline sales saw 28% growth in the number of tickets sold.

There was growth not only in the domestic market, but also in the international one. Priceline’s international business saw growth of 24% in gross bookings on a local currency basis and benefited from growth in hotel inventory, and growth in new markets. continued to expand its worldwide supply base to over 66,000 hotels in nearly 70 countries.

The company forecasts Q2 gross bookings at $2.1-$2.15 billion with domestic gross bookings growing nearly 5% and international gross bookings growing nearly 15% on a local currency basis. They expect that to translate to revenue growth of nearly 8%-13% over the year. They project EPS growth of nearly 10% to $1.65-$1.75 per share.

Priceline attributes its growth to “substantial investments in marketing and brand-building.” Most competitors are trying to cut costs and reduce marketing spending in particular, which should help Priceline expand its market share.

The company’s stellar performance even in such troubled times speaks volumes of Priceline’s business model. The name-your-own-price initiative has helped it gain market share in the present cost-conscious times. Its strong presence in international markets has also stood it in good stead. Priceline’s web sites offer extensive content in nearly 22 languages.

The stock has crossed the $100 mark and is currently trading at $108.23 with a market capitalization of $4.44 billion.

Expedia’s (NASDAQ:EXPE) recently announced Q1 earnings were better than the Street’s expectations. Transaction volumes grew 7% over the year, led by a 13% increase in hotel room night sales. Expedia now seems to be eating into the market share of other players.

Q1 revenues of $635.7 million fell 8% from the $687.8 million last year but managed to exceed the Street’s expectations of $588 million. EPS of $0.21 was also higher than the Street’s expected $0.17.

During the quarter, Expedia initiated a price war by following Priceline’s strategy of waiving airline ticket booking fees through May. The policy had favorable results, with overall US ticket sales falling by 5% compared to US carriers’ 13% traffic decline. However, overall, revenue from air travel fell 17% and ticket volumes fell 4% over the year.

Expedia has been running similar promotional schemes for its site Over the past few quarters, in addition to improving search engine optimization, it eliminated change and cancellation fees and lowered hotel booking fees. As a result, saw Q1 room nights soar 14% over the year. Expedia’s portfolio now boasts of nearly 100,000 properties including Venere’s 15,000 properties and has grown 30% over the year.

Additionally, advertising revenues grew 15% contributing to 11% of overall revenue. When the rest of the media world is worried by declining ad sales, Expedia seems to be thriving.

The stock reacted positively to the results and was up significantly. It is currently trading at $14.89 with a market capitalization of $4.29 billion.

Orbitz (NYSE:OWW) meanwhile continues to struggle on all fronts. Q1 revenues of $188 million fell 14% over the year and were short of the Street’s expectations of $192.5 million. EPS of $0.01 per share was marginally higher than analysts’ expected loss of $0.02 per share.

The company saw a drop in all segments. During the quarter, domestic bookings fell 13% over the year and international gross bookings were down 36%. Hotel room nights fell 2% over the year, and hotel net revenue reported a 29% fall over the year, translating to a 21% fall on a constant currency basis. International revenues also fell 39% over the year or 23% on a constant currency basis. Only advertising and media revenues grew, by 12% over the year to contribute 7% of total quarterly revenue.

During the quarter, Orbitz boasted of having stepped up its efforts to implement search engine optimization and CRM initiatives. Their results, however, still do not reflect any impact of these initiatives.

Orbitz has launched several promotional programs, but unfortunately none of them are bearing results. It also expanded its price assurance initiative to hotels and packages. It launched a feature called the Total Price hotel search, which makes it the first major online travel company to show the total price up front on the initial search results page.

To attract cost-conscious customers, the company also launched a Hotel Fee Cut promotion which cuts booking fees on all its hotels around the world for rooms booked during a defined period. The Orbitz Hotel Price Assurance also aims to get customers the lowest rates by automatically refunding them when lower hotel rates are booked on

Unlike its competitors, Orbitz’s stock has not regained any value at all. It is still struggling at record low levels of $2.15 with a market capitalization of just under $180 million. Someone should take them out of their misery, and put them through a cleanup exercise!

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