Orbitz Worldwide is pinning its hopes on a now-completed technology platform migration and an American Express private label deal, which is supposed to generate some momentum starting in the fourth quarter of 2012.
The Chicago-based online travel agency was putting its best spin on a lackluster performance during the fourth quarter of 2011 as it released its earnings report today.
Oribitz Worldwide’s net loss narrowed to $46.5 million during the fourth quarter, which was less than the net loss of $78 million a year earlier. And net revenue fell 3% in the fourth quarter of 2011 to $177.1 million.
In other important metrics, gross bookings for the quarter declined 2.9% to a little more than $2 billion. The decline, Orbitz says, was driven primarily by lower volumes, which was partially offset by higher airfares and higher average daily rates for hotels.
In the all-important hotel arena, hotel gross bookings, including standalone hotel and hotel bookings as part of vacation packages, increased just 4% in the fourth quarter, primarily because of higher ADRs.
This is not the growth story that Orbitz Worldwide would have liked to portray, although CEO Barney Hartford conceded 2011 was an investment year.
Speaking with financial analysts, Harford held out great hope that 2012 will be about growth rather than re-platforming.
“The current platform makes it simple to build once and then deploy across all our brands,” Harford said, adding that the pace of innovation would be quicker.
Ebookers, which has been on the new technology platform since the end of 2010, was a bright spot for Orbitz Worldwide.
Net revenue from eBookers accounted for 23% of Orbitz Worldwide’s total net revenue through the end of 2011, up from ¬†18% at the end of 2010.
“Standalone hotel net revenue was $50.1 million in the fourth quarter of 2011, down 3% year over year,” Orbitz says. “This decline was driven primarily by lower volume for HotelClub, partially offset by continued strength at eBookers.”
HotelClub had moved to the global technology platform by the beginning of the fourth quarter of 2011, but its performance was hampered by the complexity of its loyalty program, and its presence in multiple countries and use of multiple languages, officials said.
And, there was a different tale at eBookers, based in the UK. eBookers’ strategy has been to promote beach destinations, and it saw higher volumes in vacation packages because of this approach, Orbitz Worldwide said.
Orbitz Worldwide CFO Russ Hammer said Orbitz.com and CheapTickets have shown improvements in performance so far in 2012. That upbeat performance at the two US-based online travel agencies, along with a potential turnaround at HotelClub and the implementation of a private label deal with American Express, should improve earnings in the second half of the year, he added.
Specifically, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) will suffer during the first half of 2012 because of the investments Orbitz is making in the Amex partnership, but will improve in the fourth quarter, Hammer said.
One goal of the new technology platform is to boost Orbitz Worldwide’s hotel business, where margins are much higher than in air ticket sales.
But, standalone air revenue (i.e. flights as part of vacation packages) still eclipsed standalone hotel revenue in the fourth quarter, $59.3 million to $50.1 million, respectively.