In the third quarter, Expedia Inc. made some money, $144.9 million, a 23% increase, and produced very solid growth in total transactions, including air ticket and hotel-room bookings, but saw its revenue margin decline as revenue per air ticket and revenue per room night plummeted.
Officials overall were pleased with the results, but warned of a continued tough environment in 2010.
If you don't feel like sitting through the third-quarter webcast, officials touched on some hot-button issues, and following are some of the highlights.
Choice Hotels and Best Western
Expedia Inc. President and CEO Dara Khosrowshahi downplayed the import of losing Choice Hotels.
"As far as the financial impact, it is minimal to none," Khosrowshahi says, noting that Expedia has been able to recapture the volumes.
He says the dispute is not about economics, but pertains to "rate and inventory parity."
"To the extent that Choice doesn't want to work under those terms, we won't be doing business with one another," Khosrowshahi says.
I would color this as tough talk and negotiating bluster as Hotels reports the two sides returned to bargaining late last week.
And, contrary to a credible report from Adam Kirby that there is stirring in the ranks at Best Western, too, Khosrowshahi points out that Expedia hasn't had a chain-wide agreement with Best Western and that relations are good with Best Western properties.
The Slow-to-Build Agency Hotel Model in Europe and Asia-Pacific
CFO Michael Adler is bullish on Expedia's pushing to compete with Booking.com as Expedia builds its agency-hotel model, Easy Manage, in Europe and Asia-Pacific. He says once the program gets up to speed, it will result in incremental bookings, but getting to that point likely will take longer than investors expect.
Khosrowshahi notes that 6,500 properties have signed up for Easy Manage, but that is just phase 1. "We think significant production will be delayed by a couple of quarters" as it takes time to "actually build a scalable lodging machine."
All things being equal, a hotel using an agency model with Expedia has less impact than one signed on as a merchant-model partner, Khosrowshahi says, so the number of Easy Manage properties will have to be "quite high" before Expedia reaps substantial benefits.
Moral of the story? Booking.com, you have at least a year or two before Expedia can give you a worthy fight.
Market Share Gains
Expedia Inc. saw its global room nights and air ticket volumes in the third quarter grow 27% each. (Incidentally, Expedia Inc.'s air ticket revenue -- not number of transactions -- was about 12% of total revenue in the third quarter and officials expect that percentage to decline in coming years.)
So, did Expedia steal the air ticket volumes from Continental Airlines or Priceline?
Khosrowshahi says it's hard to tell, but he thinks most of the growth in Expedia's air gross bookings came at the expense of offline or traditional travel agencies.
And the gains in hotel transactions? Khosrowshahi says it is difficult to parse.
"In terms of whom we are taking share from specifically, we just don't know," he says.
Note to myself: I am very happy that I am not the only one who grapples with who is stealing what from whom.
China: Expedia versus Ctrip
Khosrowshahi detailed Expedia Inc.'s two-pronged strategy in China.
eLong, which he termed Expedia Inc.'s "Expedia.com in China," will remain the company's only transactional play there, and it faces a very tough competitor in Ctrip.
But, Expedia Inc. is is building a very big media play in China, as well, with TripAdvisor's Daodao.com, which launched in April, as the foundation. Expedia also has an agreement in place to buy China-based metasearch company Kuxun, and is still in acquisition mode in China.
Khosrowshahi says Daodao.com will be agnostic, and hopes to welcome Ctrip as a participant and advertiser.
He thinks Expedia Inc. is the best-positioned the global online travel company in China, and that Daodao could be one of TripAdvisor's most profitable global undertakings within 10 years.
He's indeed bullish on China.
TripAdvisor's 3 Growth Areas
In fact, Khosrowshahi's feelings on TripAdvisor border on euphoria, as he refers to the "enormously profitable base-TripAdvisor business."
That core TripAdvisor business, which saw record revenue of $97 million in the third quarter, a 14% increase, is fueling its own investments into three areas that Khosrowshahi views as promising.
1. Air metasearch with TripAdvisor Flights.
2. China with Daodao and Kuxun.
3. The vacation-rental business with Expedia Inc.'s majority stake in FlipKey.
Khosrowshahi says if CPC pressures ease next year, then it should be a great period domestically and internationally for TripAdvisor.
That's good news for Expedia Inc. and perhaps not-so-good news for travel advertisers.