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824 days ago
 

Adding hotels — Is Expedia conceding the race to Booking.com?

Is Expedia, with 150,000 hotels in the fold around the world, finally giving up in its race to outpace Priceline’s brands, which count more than 210,000 hotels in their portfolio?

Over the last couple of years, Expedia officials have emphasized how the company has been building up its global hotel inventory, but Dara Khosrowshahi, Expedia’s CEO, was singing a different tune during yesterday’s first quarter 2012 earnings call.

Expedia is now emphasizing balancing hotel supply and demand, and has abandoned an all-out effort to increase its number of participating hotels, Khosrowshahi said. He adds:

We did have a period over the course of the last few years where we’ve been pretty aggressive in building up our inventory position, helped in part by the agency product that we brought on with Venere. And so we’ve had some time to really have demand catch-up. And I think we’ll see what happens throughout 2012, but our focus is going to be primarily on really sort of optimizing what we’ve got and adding tactically as opposed to a massive acquisition effort.

These statements came as Expedia Inc. saw its global hotel room nights sold increase 24% in the fourth quarter, and if the company’s joint venture with AirAsia were to be included, then the worldwide room night increase would be 27%.

Expedia’s Hotels.com brand, which saw room night growth of 37% during the first quarter, is driving that increase while the Expedia brand has been dragging things down.

“As we mentioned last quarter, all of our major brands other than Expedia, continue to perform well, with combined revenue growth of 27%,” Khosrowshahi said. “Results for the Expedia brand are still not where we want them to be, but they did show improvement.”

Expedia’s performance has been sluggish, officials said, because it is transitioning to the company’s new technology platform later than Hotels.com did, and also because Expedia’s profitability is more dependent on air-hotel packages in contrast to standalone hotel rooms through Hotels.com.

And, with demand for airline tickets down year-over-year, Expedia’s vacation package business has suffered.

Expedia Inc.’s bottom line is also being weighed down by higher technology and headcount expenses, although officials see these burdens lessening through the rest of the year.

During the first quarter, Expedia’s adjusted EBITDA increased 24% year over year on revenue of $816.5 million, a 12% jump.

In other news, Khosrowshahi indicated that Expedia is “working very closely with TripAdvisor on Tingo.”

A new hotel booking site, TripAdvisor’s Tingo rebooks rooms at lower rates when the rate drops and it accesses hotels from the the Expedia Affiliate Network.

While conceding that Expedia and Tingo are in some ways competitors, “in a bigger way, we think that it’s a partner,” Khosrowshahi said.

On the mobile front, Hotels.com’s apps for iOS and Android have been leading the way, with more than 5 million downloads since their launch a year ago.

In contrast, the Expedia Hotels app, designed by the acquired Mobiata team, launched a month earlier than the Hotels.com apps, and have been downloaded at a lower frequency with more than 2 million downloads.

Expedia expects to launch an air-ticket app later in 2012.

Note: Photo courtesy of Shutterstock

 

 
 
Dennis Schaal

About the Writer :: Dennis Schaal

Dennis Schaal was North American editor for Tnooz.

 

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  1. Jim

    Look at the numbers, Dennis. Expedia dominated the market a few years ago – they saw the threat from Priceline coming a mile off and have taken years to act and too little too late. By a timid strategy I mean not just the number of hotels (which is still a fraction of global hotel numbers) but their whole approach to selling hotels online.

    Project Priceline’s growth forward and Expedia will be a mere bit player in a few years time. Venere wasn’t a major player in Europe so was never going to solve the problem.

    You hit the nail on the head by saying Expedia executives are constantly talking – while they’re doing that, Priceline’s are executing.

     
  2. Graeme Evans

    It looks to me as though both strategies are based on quantity over quality; these aggressive growth and purchasing strategies will eventually limit the the unique accommodation offerings and leave a bland product range dominated by the larger hotel portfolios. I’ve always been told that size isn’t important!

     
  3. Dennis Schaal

    Dennis Schaal

    Jim: I don’t think that’s true about Expedia waving the white flag years ago. Expedia acquired Venere and introduced the agency model in Europe, all with an eye toward competing with Booking.com. And over the last year, or more, Expedia executives have constantly been talking about the company’s pace in bringing on additional hotels.

     
  4. Jim

    Booking are doing both. In Q4 2011 Expedia sold 22m room nights vs Priceline 34m room nights – PCLN is growing more than twice as fast.

    Expedia waved a white flag to Priceline years ago through a timid hotel strategy.

     
 
 

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