On the heels of Travelport's aborted IPO, Expedia Inc. President and CEO Dara Khosrowshahi says there are no plans to spin out TripAdvisor into a public company.
Khosrowshahi, who declined to speculate about Travelport's decision, said Expedia will continue to be "opportunistic" about TripAdvisor's status, but "as long as TripAdvisor is executing well, it will remain inside the company." A financial analyst had asked Khosrowshahi about TripAdvisor's IPO prospects during Expedia Inc.'s fourth quarter earnings-conference call today.
In playing down the idea of a TripAdvisor IPO, Khosrowshahi says one of the standard justifications for pursuing an IPO is if a business unit is suffering as part of a larger company. And, he says this is certainly not the case with TripAdvisor, which enjoys in-house advertising from the likes of Expedia.com, Hotwire and hotels.com.
And, he believes Expedia's advertising and media business -- as practised on Expedia's transaction sites as well as on TripAdvisor -- is a key differentiator between Expedia and its competitors.
In 2009, Expedia's advertising and media revenue increased 10% to $311 million, and it accounted for 11% of global revenue.
And 11% of revenue is a lot when you consider that the media business is a high-margin business. In other words, 11% in media revenue translates into a much higher percentage of profit.
Actually, in 2009, Expedia's transaction websites -- including Expedia.com, Hotwire and hotels.com -- generated a 21% increase in advertising revenue and the TripAdvisor Media Network -- including TripAdvisor, BookingBuddy, CruiseCritic, HolidayWatchdog, SeatGuru and others --contributed a 6% advertising-revenue increase.
Khosrowshahi says Expedia's advertising and media business acts as a hedge against an expected tougher advertising environment in 2010 when Expedia will have to go out and spend search-engine marketing dollars.
Another benefit of keeping TripAdvisor in-house, Khosrowshahi tells analysts, is that TripAdvisor President and CEO Stephen Kaufer and his management team doesn't have to be "distracted by calls like this."
As long as TripAdvisor continues to "execute, it is fine where it is," Khosrowshahi says.
For the fourth quarter, Expedia Inc. posted a profit of $102.2 million on revenue of $697.5 million, a 12% increase. In the fourth quarter of 2008, Expedia Inc. lost $2.75 billion, largely because of a $3 billion impairment charge.
In Expedia's hotel business, the company grew its global room nights 23% to 69.7 million in 2009, picking up marketshare.
Khosrowshahi says it's difficult to pinpoint where Expedia's hotel marketshare gains are coming from, especially since Priceline and Orbitz Worldwide haven't reported their fourth quarter numbers yet.
He believes the marketshare gains are coming primarily from offline agencies, but some of it could be coming from OTAs, as well.
In the competition with Booking.com in Europe, Khosrowshahi says Expedia Inc. added 9,000 agency-model hotels in Europe in 2009, bringing the total to around 16,000, and expects to add around another 9,000-10,000 in 2010.
With Venere in the fold, 2009 was all about getting infrastructure and inventory in place, and in 2010 Expedia is confident it will start driving demand for hotels through tactics such as search engine optimization and search-engine marketing, Khosrowshahi says.
Khosrowshahi says Spain, where Expedia's hotel penetration has been a bit low, and eastern Europe, present substantial growth opportunities for the company's hotel business.