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Online Travel: A Third of the World’s Travel Sales

Posted on Thursday, Mar 8th 2012

According to PhoCusWright’s Global Online Travel Overview report, second edition, online travel sales will account for a third of the world’s travel sales by the end of 2012. Online leisure, or the unmanaged business travel market, is projected to be worth more than $313 billion this year. The report also projects an increase in online penetration rates in Asia Pacific and Latin America to help drive growth in travel bookings. Online travel players are growing internationally to respond to this change.

Expedia’s Financials
Expedia’s Q4 revenues grew 7% over the year to $787.1 million, significantly short of the market’s expected revenues of $838 million. EPS of $0.58 was ahead of the market’s target of $0.54.

They ended the year with revenues of $3.45 billion compared with $3.03 billion reported in the previous year. EPS of $2.75 was also higher than the previous year’s $2.53.

Expedia’s International Expansion
As part of their international expansion strategy, Expedia tied up with Asia’s largest carrier, China Southern Airlines, for their inventory to be available on Expedia’s site. This is the first tie-up that the Guangzhou province–based airline has established with any international travel player. The agreement will make their inventory available on all Expedia’s North American, European, and Asian websites, thus making the website more relevant to the Chinese population around the world.

Their stock is trading at $32.89 with a market capitalization of $4.39 billion. It touched a 52-week high of $65.78 in July 2011.

Orbitz’s Financials
Orbitz’s (NASDAQ:OWW) Q4 revenues fell 3% over the year to $177.1 million to exceed market expectations of $175.7 million. Earnings for the quarter grew 14% over the year to $30.1 million but fell short of the market’s projected earnings of $30.5 million.

Revenues for the year grew 1% to $766.8 million, and losses for the year narrowed from $0.58 per share in 2011 to $0.36 per share.

For the current quarter, the company projects revenues of $187 million-$193 million, compared with the market forecast of $195.8 million.

Orbitz’s Expanding Inventory
Orbitz too is expanding their inventory and recently tied up with United Continental Holdings to enter into a multiyear agreement to book flights through their website. As part of the deal, Orbitz will be able to offer flights, fares, and schedules from United, Continental, and their regional affiliates.

Their stock is trading at $3.31 with a market capitalization of $343.54 million. It touched a 52-week high of $4.49 in December 2011.

Priceline’s Financials
Priceline’s (NASDAQ:PCLN) Q4 revenues grew 36% over the year to $991 million, with earnings growing 54% over the year to $344 million. The market was looking for revenues of $967.9 million. EPS of $5.37 was significantly ahead of the Street’s target of $5.06.

During the year, international bookings grew 66% over the year to $3.91 billion and U.S. bookings rose 16% to $1.04 billion.

Priceline ended the year with revenues growing 41% over the year to $4.36 billion with EPS growing to $20.63 compared with $10.35 reported a year ago.

For the current quarter, they project revenues to grow 22%-27% over the year, with EPS of $3.80-$3.90. The Street was looking for revenue growth of 25.2% with EPS of $3.72 for the quarter.

Priceline’s Acquisitions Paying Off
In recent quarters, Priceline has seen significant results from earlier acquisitions. Within hotels, Booking.com continues to grow. The site now has inventory in more than 160 countries compared with 60 countries a year ago. Their Southeast Asian–focused acquisition of Agoda.com has also seen tremendous growth in gross bookings despite the floods in Thailand. Priceline’s management was also impressed with the performance of rentalcars.com and TravelJigsaw, which have helped them increase their presence in the car rental market.

Priceline’s stock is trading at $641.60 with a market capitalization of $31.95 billion. It touched a ten-year high of $649.70 earlier this month.

Kayak’s Financials
Although the travel market may be growing rapidly, there has been no progress in IPO plans for the other big online player, Kayak. Kayak had delayed their IPO launch last November and has not yet confirmed new IPO dates. The company maintains that the delay in IPO plans is because of market conditions.

According to their SEC filing, for the quarter ended September 2011, the company’s revenues grew 28% over the year to $61.16 million. During the quarter, net income grew 44% over the year to $12.7 million. For the nine-month period, they reported revenues rising 33% over the year to $170.6 million.

Kayak has seen significant increase in viewership. According to their reports, query volumes for the site grew 45% over the year through September 2011. Mobile app downloads have also helped them grow. During the nine-month period, mobile app downloads grew 97% to over 5 million. But the traffic growth rates may suffer as Google prepares to bring the acquisition of ITA Software into its fold. ITA accounts for more than 56% of Kayak’s search query results. Kayak’s ITA agreement is set to expire next December, and some believe it may not be up for renewal at very favorable terms.

Earlier last week, Google also launched their own airline reservation system. A few months ago, Google had stepped up efforts in this area by placing their new flight-search service on top of general search results so that their own results were featured over the links to results from other travel sites.

This segment is a part in the series : Online Travel

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