Shrinking Margins, Increasing Costs = Lower Profits

29 May, 2006 by Martin Kelly

The latest results from US travel industry giants Expedia and Sabre Holdings do not make pretty reading for either investors or the online travel industry.

In short, sales are up but profits are down thanks to rapidly shrinking margins and increasing costs.

Expedia’s profit of US$23 million for the first quarter was 51% less than a year before.

Sabre Holdings – which apart from the GDS, owns Travelocity (Zuji) – did slightly better. Its first quarter profit of US$32 million was only 34% under the weather.

Both stocks have been hammered as a result. Expedia shares fell around 30% in a day. Sabre’s share price has been on a slow descent, shedding around 25% of their value since January.

Headlines from the Expedia results include:

Bookings value up 14%, but revenue margin down by around 10%
Airline margins down 9%
Hotel margins down 7% (on a revenue per room basis)
Less Americans, in particular, are buying its holiday packages
Costs increased more than 10%, particularly in marketing

At Sabre:

Operating costs grew 26.5%
The operating margin fell more than 30% (to 9.2%)
Travelocity hotel room night sales were up 54% (probably due to recent acquisition Lastminute.com)
Total packaging revenue grew 38% (see above)
GDS revenue increased 7%

Interesting reading, don’t you think?

So what’s the take-out, takeaway, whatever?

Become a supplier and sell direct (ha, just kidding).

Ends.

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Events

'REAL TIME - Sydney, March 30'

When: March 30, 2012
Where: Amora Hotel Jamison
Program: Real Time
Bookings: $499 + gst Early Bird

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Rachel Argaman, CEO, Toga Hospitality
Dave Audley, Heading of Consulting, Experian Hitwise
Quentin Briard, GM Australia & NZ, Club Med
Daniel Bridges, Head of Travel, Trade Me (NZ)
Julio Bruno, Global Vice President Sales, TripAdvisor
James Cassidy, HomeAway.com.au
Robbie Cooke, CEO, Wotif.com
Will Deague, CEO, Art Series Hotels
Dean Dransfield, Director, Dransfield Hotels and Resorts
Bob East, CEO, Mantra Resorts
Leah Lipman, Area Director Reveneue Management Australasia, IHG
Simon McGrath, CEO, Accor Australia
Bryon Merzeo, Analyst, STR Global
Bernard O’Keefe, Group Online Marketing Manager, Hamilton Island
Todd Parker, Founder, Parker Travel Collection
Nikolai Pitchforth, Head of Online Travel, Google
Brett Pointon, Founder, Oaks Hotels and Resorts
Anton Stanish, GM, The Stayz Group
Janet Wilson, Managing Director, Nationwide Hospitality

It'll be a great day. As usual, the focus will be on distribution, marketing, sales, innovation and technology for both hoteliers and Online Travel Agents.

Sponsors:

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Returning September 17, 2012

The date has been set for TRAVELtech 2012 - Monday, September 17.

Meanwhile, thanks to everyone who attended TRAVELtech: Best of Enemies in Sydney recently.

It was a fantastic event, lots of fun with a touch of controversy.

Please check out the photographs or use this link to see great 360 degree panorama shots of the conference from Panedia.

TRAVELtech is Australia's original web travel, marketing and distribution event, featuring a compelling program, great speakers and fantastic networking.

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