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Online Travel: More Destinations, More Services, More Apps

Posted on Thursday, Sep 9th 2010

The online travel sector has been abuzz with activity. In July of this year, Google announced its intention to enter the vertical and acquired flight search engine ITA Software for $700 million. The deal is still under antitrust investigation. More recently, MakeMyTrip, an India-based online travel services provider, debuted on the Nasdaq through its IPO; the stock appreciated 89% on the first day of trading.

MakeMyTrip (NASDAQ:MMYT) was founded in 2000 and began with a focus on attracting nonresident Indians (NRIs) living in the United States who wanted to travel back to India. In 2005, the company began its Indian operations and started to offer airline, hotel, train, and bus tickets as well.

The company boasts of being the biggest travel services provider in India and recorded 1.6 million domestic ticket transactions in 2009. Analysts estimate that MakeMyTrip owned a 48% market share in 2009. It reported revenue growth of 22% in 2009 to $83.6 million but was still making losses of $6.2 million in the year. A year ago, it reported a net loss of $7.3 million.

Reports estimate the India travel and tourism market to be worth over $110 billion in the next ten years. The current online penetration is a mere 10%. Given the statistics, MakeMyTrip surely has a big market potential ahead.

The company priced its five-million-share IPO at $14 each and is currently trading at $33.65

Meanwhile, the other bigger online players have managed to surprise the market by delivering better results despite the Iceland volcano eruption and euro exchange uncertainty. Priceline saw significant growth in the quarter driven by growth in the international segment.

Q2 revenues of $767 million grew 27% compared with the market’s estimates of $733 million. EPS of $3.09 was also significantly higher than the market’s projections of $2.64. Of note was growth in international bookings, which rose 63.6% to $321.8 million, and global hotel reservations, which grew 48% over the year.

To continue with its international expansion, Priceline (NASDAQ:PCLN) acquired the UK-based international car hire service, TravelJigsaw. TravelJigsaw, which provides online and phone-based car rental service and through its 4,000 locations in eighty countries and customer support in twenty languages, is expected to complement Priceline’s hotel websites and Agoda in the European and Asia-Pacific markets.

Priceline saw 82% of its customers with smartphones book hotel rooms within a day of arrival, compared with 45% of customers who do not have mobile devices. Also, 58% Priceline customers with mobile devices were within twenty miles of their hotels when they made a reservation, indicating the importance of a mobile application. Driven by the trend, the company also launched its iPad app earlier this quarter; the app lets users filter hotels by popularity, proximity, star rating, price, and neighborhood and then go on to make their reservations.

For the current quarter, Priceline projects revenues $942.6 million–$979.5 million compared with the market’s projections of $863.3 million. Projected EPS of $4.78–$4.98 also beat the Street’s target of $4.18.

The stock is trading at $328.77 with a market capitalization of $11.1 billion. This is the stock’s ten-year high.

Expedia’s (NASDAQ:EXPE) revenues grew 8% to $834 million but missed the market’s projected revenues of $845.5 million. EPS of $0.44 beat previous year’s $0.38 and the market’s projected target of $0.42.

Expedia too is focusing on international growth. During the second quarter, international revenues of $2.2 billion accounted for 36% of total revenues. The company is expanding operations in the UK, Brazil, and Asia Pacific. In Brazil, it witnessed 90% growth in hotel inventory and has seen intra-Latin America bookings grow by more than 250% over the year.

TripAdvisor extended its European presence by acquiring Holiday Lettings, the leading vacation rental site in the UK. Further, extended its WelcomeRewards loyalty program in the UK as well.

The company is expanding operations in China and Japan to cater to growing Asia Pacific demand. In Japan, the company signed a partnership agreement with Japan’s third-largest travel agency, Hankyu, that lets visitors to Hankyu’s Web site access Expedia Japan’s international hotel inventory.

Their stock is trading at $25.26 with a market capitalization of $7.2 billion. The stock touched a 52-week low of $18.30 in July of this year.

Orbitz’s (NYSE:OWW) revenues grew 3% over the year to $193.5 million, missing the market’s forecast of $198.2 million. EPS of $0.09 fell from $0.12 earned a year ago but managed to surpass the market’s projected $0.05.

During the quarter, global gross bookings grew 17% over the year driven by the increase in air fares and transaction volume. Domestic gross bookings increased 17% over the year and international gross bookings grew 19% in the period, translating to domestic net revenue growth of 2% and international net revenue growth of 8% over the year.

Orbitz recently launched its EasyConnect solution, an improved connectivity solution for channel managers and small to medium-sized hotel chains that enables the company to expand its hotel inventory more efficiently. It also signed global agreements with a number of new European and New Zealand hotel partners to expand inventory in these regions. As of the end of the quarter, Orbitz now offers over 100,000 hotels on its websites, including nearly 70,000 merchant hotels, 40,000 hotels in the EMEA region and 16,000 hotels in Asia Pacific.

To continue with innovative travel solutions, Orbitz launched AdventureFinder, a new travel website that provides instant access to the world’s adventure vacations and lets consumers research, customize, and plan active escapes.

For the current quarter, the company projects revenues to grow 3%–6% over the year with EBITDA to grow 0%–6%. For the full year, it expects a 5%–10% increase in adjusted EBITDA.

The stock is trading at $5.59 with a market capitalization of $571 million. It touched a 52-week high of $8.11 in December of last year.

This segment is a part in the series : Online Travel

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Verdasco Breakthroughs! | Trendy Twitter Thursday, September 9, 2010 at 6:28 AM PT

Even with the constant overlapping of the tech industry and the travel industry, local online travel agencies will still have a place.

One thing that technology can not replace from a travel agent is personal experience. And this is what agents should always offer to the customer.

e-Philippines Thursday, September 9, 2010 at 5:47 PM PT

Thanks for your information on online tourism it was interesting to know about the facts and the surveys taken by makemytrip, expedia etc..

Mithra Thursday, September 9, 2010 at 11:21 PM PT