Expedia Says Marketing Costs To Rise Further

Expedia boss Dara Khosrowshahi, the man in charge of travel’s biggest marketing budget, believes online marketing costs will continue to rise.

“We are seeing the price of reaching the online consumer, in particular, increasing on a year-on-year basis” he told analysts.

“We’re able to offset some of that with conversion improvements and leveraging the fixed cost base of the business.

“But in the online channels, we see things getting more expensive, not less expensive.”

Expedia is now spending well in excess of USD2bn a year on sales and marketing.

In the 2nd quarter sales and marketing costs reached USD737m,  increasing 26% year on year.

Sales and marketing now consumes 49.3% of revenue.

It is also helping to drive very strong growth at Expedia: gross bookings increased 29% while EBITDA rose 35% for the quarter.

He said while marketing costs are rising, Expedia has been able to benefit from a trend for consumers to spend more in a single transaction.

“We are now able to increasingly up-sell our customers into multiple transactions, buying more than one item at a time.

“And your revenue per consumer, as a result, goes higher. And you only have a single marketing cost against that.”

Also, to counter mainstream marketing costs Expedia is continually looking to diversify.

“The teams are consistently looking for pockets of demand that we don’t have a lot of competition in,” Mr Khosrowshahi said.

“And sometimes you find those pockets and you invest in those pockets.

“We’re also quite interested in some of the newer social channels, Facebook, Twitter etc to see whether we can drive volume at reasonable prices.

“And I’d say we’ve had some limited success there, chiefly because those areas haven’t scaled.

“But we’re very, very interested in scaling them.”

He confirmed Expedia has no interest in participating in TripAdvisor’s instant booking product.

“We’re not participating in the product. It’s not a channel that is of interest to us. I don’t see that changing.

“And at this point, we don’t really see any effect in our business, as you can tell by the room night growth.”

He said Expedia’s car hire business had bounced after “we shifted the complete car path to the new platform and saw very strong, nearly immediate improvements and conversion of volume trends.

“The team will continue to test and learn on the car platform to drive additional improvements, and we’re optimistic about the potential.

“We believe this is another strong proof point of the technology advantages gained through investments that we’ve made over the past years.

“In addition, we recently completed the acquisition of the Auto Escape Group, which is made up of 2 European car rental brands, Auto Escape and Car del Mar.

“This business will join our CarRentals.com team, and we expect the acquisition to help our efforts to drive growth in our global car rental business.”

He declined to discuss Expedia’s plans for its recent acquisition of Wotif.

“Our deal is currently under regulatory review and Wotif still needs shareholder approval of the transaction.

“So while we can say that we’re looking forward to welcoming Wotif to the Expedia family, we’re limited in what we can share about any specific future plans.

“We expect the deal to close in the fourth quarter of this year, and we should be able to share more at a later date.”

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