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Online Travel Looks To Asia, Mobile Apps, Social Media

Posted on Monday, Mar 21st 2011

Asia is expected to be a high-growth market for the travel industry. According to the World Trade Organization, the global tourism industry will add 66 million jobs by 2020, of which 50 million jobs will be in Asia. Rising income levels and an expanding middle class will help to fuel this growth. In China, for instance, each of its 1.3 billion people takes one trip per year, and the country expects to see that figure quadruple by 2015. For online travel players, there is even better news. According to PhoCusWright, only 2% of travel is booked online in China. iResearch predicts that 30% of Chinese air tickets will be sold online by 2013. India too has seen a tremendous growth in online bookings, which grew at a compounded rate of 80% annually to $6 billion in 2010 from $295 million in 2005.
The U.S. domestic market is also expected to fare well within the travel sector this year. Analysts expect the overall U.S. gross bookings to increase 5% over the year in 2011 to $269 billion. Online leisure/unmanaged business bookings are estimated to increase 11% over the year to $108 billion. Amid such positive trends, online travel players have delivered strong results in the recent quarter.

Priceline’s Financials
Priceline’s (NASDAQ:PCLN) Q4 revenues grew 35% over the year to $731 million, missing the market’s projected revenues of $735 million. EPS of $3.26 was better than the Street’s projected EPS of $3.09.

Gross bookings for the quarter grew 44% to $3.26 billion. Priceline has benefited significantly from its acquisition of Booking.com and Agoda.com, which have helped it to attract more customers in the international market. International revenues grew 68% over the year to $374.9 million. On a local currency basis, international revenues grew 75% over the year.

For the year 2010, Priceline’s revenues grew 32% to $3.08 billion with international operations growing 70% over the year to $1.4 billion. EPS for the year of $13.49 was significantly higher than the previous year’s EPS of $8.52.

For the current quarter, Priceline has predicted revenues of $753 million–$782 million with EPS of $2.34–$2.44. The market was expecting revenues of $742 million with EPS of $2.30.

Priceline’s New Offerings
To continue offering new services to its consumers, Priceline recently launched a Freebie service. Initially launched for hotels, the service has been expanded to rental cars. Hotel Freebies is a free service that searches, by city or category, for hotels offering freebies such as free breakfast, kids stay free, spa credits, free golf, and limited-time room discounts. Since the program’s launch earlier this year, more than 200,000 freebie properties have been made available to consumers to choose from. The rental car freebies program looks for rental car company coupons and discounts that are available to Priceline and then applies them to the buyer’s rental rate.

The stock is trading at $449.54 with a market capitalization of $22.1 billion. It touched a 10-year high of $474.74 earlier this month.

Expedia’s Financials
Expedia’s (NASDAQ:EXPE) Q4 revenues grew 16% to $808.4 million, exceeding the market’s expected $802.3 million. Advertising and media revenues increased the most at 30% over the year. Merchant business revenues grew 12%, and Agency revenues grew 15% over the year. EPS of $0.32 managed to top the previous year’s $0.29 but was significantly lower than the market’s projected earnings of $0.36.

For the full year, Expedia recorded revenues of $3.35 billion compared with $2.96 billion earned a year ago. EPS of $1.46 increased 41% over the previous year’s $1.03.

Expedia’s Mobile Focus
Expedia recently acquired Mobiata, a leading creator of mobile travel applications. Mobiata is best known for its travel app FlightTrack, which is a best-selling iPhone travel app in the App Store. The app lets users track flight statuses, locate flight gates, and see real-time flight maps. Mobiata’s other apps include TripDeck, HotelPal, FlightBoard, and FareCompare. The company is estimated to have earned revenues of $2 million for the year 2010. The acquisition will help Expedia to address the growing use of mobile devices in travel planning. For 2010, Expedia got 4% of its traffic from mobile devices. The number has increased fivefold over the previous year. Expedia is hoping to increase the share further through this acquisition.

Earlier last month, Expedia also announced the acquisition of EveryTrail, a GPS-enabled publishing platform that lets tourists create tour and city guides for mobile devices. The acquisition will help Expedia to expand TripAdvisor’s mobile offering by enabling travelers to access walking tours, city guides, and hiking trails directly from their smartphones.

Expedia’s Social Media Focus
Expedia is also investing in addressing the growing social media trend. TripAdvisor recently launched its instant personalization efforts on Facebook, with success. The feature lets users view an interactive social map with reviews and preferred destinations among friends.

Expedia’s International Plans
Expedia continued to expand its international operations. It is planning to launch in Singapore soon and is looking at another five to eight new countries in the year. Expedia also sees China as a big opportunity. According to China Tourism Industry Forecast, China will see major growth in its domestic travel from 2011 to 2013. For 2011, online travel bookings in China are estimated to be worth $15.4 billion.

Expedia is sharpening its focus in China through its sites DaoDao and Kuxun. DaoDao, the Chinese version of TripAdvisor, is seeing good growth and has the greatest number of reviews in the Chinese market, and Kuxun remained second-largest online travel–related website in China.

The stock is trading at $21.32 with a market capitalization of $5.84 billion. It touched a 52-week high of $29.85 in September of last year.

Orbitz’s Financials
Orbitz’s (NASDAQ:OWW) Q4 revenue grew 4% over the year to $182.4 million driven by 13% growth in hotel bookings and 12% growth in flight bookings. The market was expecting revenues of $177.3 million. Orbitz reported a loss of $0.76 per share compared with a loss of $0.21 per share a year ago.

For the current quarter, Orbitz projects revenues of $177 million–$184 million with an adjusted EBITDA of $16 million–$21 million.

Orbitz’s International Focus
As part of its international focus, Orbitz entered into an agreement with destination marketing organizations, including Tourism Australia, Puerto Rico Tourism Company, Hawaii Tourism Authority, and Canadian Tourism Commission. The company has tied up with nearly 200 destination marketing organizations.

Orbitz’s Mobile Expansion
It also continued to expand its mobile offerings by launching a mobile website for ebookers.com. The site allows users to shop for air travel, hotel, and car rental options from any Web-enabled mobile device. It has already launched the Orbitz mobile app for iPhone and Android mobile devices.

The stock is trading at $3.69 with a market capitalization of $377.7 million. It touched a 52-week low of $3.25 earlier this month.

MakeMyTrip’s Financials
MakeMyTrip’s (NASDAQ:MMYT) Q3 revenues increased 59% over the year to $17.3 million driven by 59% growth in air ticketing and hotels and packages transactions during the period. Analysts were expecting revenues of $15.1 million. EPS of $0.04 doubled from previous year’s $0.02 and was in line with market expectations.

For the current year, the company projects revenues of $59 million–$61 million, exceeding analysts’ expectations of $56.6 million.

MakeMyTrip’s Acquisition Plans
As part of its acquisition plans announced last quarter, the company made its first purchase. It acquired a 79% stake in Singapore-based Luxury Tours & Travel Pte Limited for $3 million. Luxury Tours provides hotel reservations, excursion tours, and other related services to inbound and outbound travelers in Singapore and the region and has tie-ups with more than 100 hotels in Singapore and another 25 hotels in Southeast Asia. MakeMyTrip is counting on expanding its presence in the South East Asian markets through this acquisition. MakeMyTrip will acquire the remaining stake in the company over the next three years.

The stock is trading at $25.84 with a market capitalization of $902 million. In September of last year, the stock touched $42.88, the highest since its IPO earlier last year.

Kayak’s Financials
Kayak, the leading travel search engine, is also soon going to become a publicly traded company. Since its launch in October 2004, the company has raised $223 million in funding. Through the IPO, it plans to raise another $50 million.

According to reports, the company grew 48% over the previous year and earned $128 million in the three quarters ended September 2010. For the quarter ended September 2010, the company’s revenues grew 80% over the year to $48 million. Net income for the nine months ended September fell from $10.4 million in 2009 to $6.2 million. Analysts at Trefis peg Kayak’s value at over $800 million.

During the nine months, the website processed 469 million user queries for travel information, recording 37% growth over the previous year. For the quarter ended September, the query volume grew 50% over the year. Kayak’s presence within the mobile space is also dominating. Its mobile app has been downloaded nearly 4 million times since its launch in March 2009. In the September quarter, the app was downloaded 1 million times.

Kayak’s International Expansion
Kayak is primarily present in the U.S. and gets a relatively modest 7% of its revenue from international operations. However, since last year, the company has been expanding into other markets. In May of last year, it acquired swoodoo.com, a German metasearch player, for an undisclosed amount. Germany is estimated to be Europe’s second-largest travel market, and through the acquisition, Kayak has become a leader in the region. This was its second acquisition since inception. In 2007, it acquired SideStep, the operator of Travelpost.com and TripUp.com.

Kayak Enters Direct Hotel Booking Space
While Kayak has till now been a search engine helping users find the best available deal online, it recently entered the direct hotel booking market as well. The “Book Now” feature added to a limited beta version enables users to book hotels through Travelocity. Kayak will also continue referring to partner websites and thus keep earning a referral fee.

Kayak and Google’s Acquisition of ITA
Earlier last year, Google had acquired ITA Software, a developer of flight information software, for $700 million. ITA has already licensed its software to Kayak through an agreement that will expire in December 2013. The faring software accounts for Kayak’s 42% overall airfare query results. At the expiry of the agreement, many believe that Google will either refuse to renew the contract or put in unfavorable terms, making it rather difficult for Kayak. Not only other online travel players, but even Microsoft have come together to form the FairSearch organization to oppose the merger. They believe that the merger will curb competition and restrict search options. The Department of Justice is expected to announce its decision soon.

The recovering economy will help to boost travel sales in the coming years. PhoCusWright estimates online travel bookings to account for 22% of the Asian market in 2010, compared with the 32% contribution in Europe and the 38% contribution in the United States. Surely, the travel players realize that expanding their presence in Asia is critical to their growth. In the coming years, the player that is best able to leverage mobile technology and social media applications and tap these growing markets will be the leader.

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