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"Expedia today is announcing the inauguration of a dividend policy. Nothing otherwise could demonstrate our belief in the enduring strength of our business models and the sustainability of our cash flows as becoming a dividend paying company,"

- Barry Diller, Expedia, Inc.'s Chairman and Senior Executive


  • We are not concerned about their hotel inventory in an upturn
  • Have a history of doing well in a rising ADR environment
  • Not saying they are cyclical per say, just that they can generate good results in both up and downturns
  • Supplier margins are the most important driver of margins in the long term
  • Q12010 marketing will return to normal seasonality patterns and will be materially up y-o-y- faster than OIBA (operating income before amortization) growth
  • Expect full year FCF to be in line or better than OIBA growth


  • International and Europe booking patterns?
    • Fairly stable throughout the quarter bookings.  ADR's got better throughout the quarter though and see those trends continuing in Jan
  • They are continuing to gain level in their marketing expenditures. They are getting much better on data collection and improving spend efficiency. CPT (commission per transaction) trends have been quite positive, but expect that to become less of a benefit going forward. Also shifted some channels of marketing to less expensive ones. 2010 comps are difficult though - so they will reinvest more in the brand and there they will have some marketing deleverage in the 1H2010.
  • Expecting OIBA growth north of 9% in 2010
  • Expecting some level of volume impact as ADRs shift, but expect strong inventory in any environment
  • Growing room nights in a negative ADR environment puts margin pressure on their business
    • since they get less $$ per transactions but similar costs
  • Booking window?
    • Saw it lengthen slightly in the first quarter, no real change in the 4Q. 
  • There was a slight mix shift into air vs. hotel and that impacted their margins a bit. Expect air fares to be flattish to slightly up going forward. Air fare was down 4% in Q4 and 18% in Q3
  • Cruise business has lower margin but higher OIBA
  • Anticipate margins to be flat to slightly up, when air fare goes up that negatively impacts their margins
  • Improvement in fares and ADRs?
    • RevPAR improvement is due to a combination of easy comps and their comps where probably easier than industry and the fundamentals are also getting better. Egencia is showing nice growth due to business travel growth and new account additions
    • Hotwire continues to perform very well but they are seeing weakness on the car side, as fleet sizes have decreased. On the hotel side its still very strong - up over 30% in the Q
  • Air volumes & over ride payments? Their revenues are 80% based on volumes and 20% are due to higher prices.  So they don't expect to see big changes in revenue per ticket
  • Too early to tell if their new marketing campaign is having a positive impact yet, but they have seen an increase in google searches
  • Packages saw 33% transaction growth, an acceleration from 3Q but total $ only increased by 16%.  Obviously the disconnect was from lower ADRs
  • FX had a large impact on their business in this quarter, but the Q1 benefit won't nearly be as large
  • Doesn't know why Travelport pulled their IPO, but they will likely keep working with GDS's (Sabre, Amadeus and Travelport)
  • Who are they gaining share from?
    • Hard to tell since they are the first OTA to report. Its probably coming from offline travel agencies and maybe a little from other OTA's
  • Dividend?
    • Had excess cash flow and now they renewed their R/C so dividend is the start or returning cash to shareholders
  • Have 16,000 agency hotels and vast majority of those are in Europe.  Overall added 22% to merchant inventory
  • Spain is a target for them - think that their penetration is a bit low there.  They are continuing to acquire inventory in Eastern Europe. Expect to add 8-9k hotels in 2010
  • Taking TripAdvisor public? 
    • Fundamental reason to take them public is if TripAdvisor was suffering inside of Expedia - and that's not the case. They are run separately 
    • TripAdvisor also provides EXPE with a great hedge again marketing costs
    • Expect it to increase as a % of the company
  • M&A in Asia
    • Like putting small amounts of money to work in Asia given the high risk/high return nature of the opportunities
  • Will start lapping the elimination of fees in the US around Q1 and therefore expect more growth in the business in Q1 & Q2 in volume.  Q1 will be the most difficult comp. Will have a very modest increase in air revenues