By Martin Kelly, Editor, Travel Trends
Marketing for growth will become an even bigger priority for the world’s biggest online travel seller, Expedia, which has just reported a 7% increase in gross bookings to US$5.4bn for the September quarter.
The extra money will be deployed in new, faster-growing markets, such as Asia Pacific, a star performer for the web conglomerate, while Expedia’s North American marketing spend will be stagnant at best.
Expedia spent almost US$300m on ‘selling and marketing’ during the September quarter – 35.6% of revenue.
“We expect selling and marketing spend to increase as a percentage of revenue as we invest in our higher growth and international businesses, expand our sales teams and grow our global advertising and media business,” said CEO Dara Khosrowshahi.
During the September quarter he said “Increases in direct spend at our Europe and APAC business were partially offset by decreases for both Expedia.com and hotels.com in North America.”
Almost 80% of Expedia’s ‘selling and marketing’ budget is spent on advertising, primarily search engine marketing, TV, private label and affiliate programs. Staffing costs account for the balance.
Khosrowshahi indicated that cuts are on the way in some more mature areas of the company.
“Because the economic turmoil caused a broad pull back in travel spend in September and October, we have adjusted our spending and investment levels, and will push for further efficiencies in the fourth quarter and beyond as we look for maximum return for every dollar that we spend.”
International markets are now the future for Expedia – European bookings were up 13% while ‘Other Bookings’ (primarily Egencia and Asia Pacific) increased 25%. In contrast, North American bookings grew just 1%.
However, cross-border selling comes with significant risk. The company attributed its 5% decrease in net profit to US$94.8m to a US$21m foreign exchange loss.
Expedia Inc owns the Expedia, hotels.com. Hotwire.com, Tripadvisor, Egencia, Classic Vacations, venere and eLong.com brands.
Travel Trends: November 5, 2008