IT looks like the namesake of the world’s largest online travel company, Expedia, aka “the parent” – is becoming a drag on its “children” – Hotels.com and TripAdvisor – which are outperforming it in just about every respect according to the company’s Jekyll and Hyde first quarter results (revenue up, profit down thanks to an expense blow out). “We saw a healthy revenue growth across most of our brands, with the notable exception of Expedia,” Chief Financial Officer Michael Adler told analysts, adding that Hotels.com now sells more room nights than Expedia.
“Hotels.com saw both room night growth, and total revenue growth accelerate nicely in Europe and Asia Pacific,” he said. “Our WelcomeRewards program continues to do well, and is helping to drive hotel bookings in North America where Hotels.com room night growth accelerated from 14% in the fourth quarter, to a very robust 27% in the first quarter.
“Hotels.com Global Standalone Hotel business is now larger than that for the Expedia brand and we’re certainly glad to see that momentum. And while the Expedia brand grew hotel revenue at rates similar to last quarter, air tickets were down double digits year-over-year.
“Of the $60 million increase in selling and marketing expense, a little over 40% was for the Expedia brand, essentially all of which was for international efforts in Europe and Asia pacific.
“Hotels.com made up nearly 30% of the total increase, with that spend relatively balanced across regions. TripAdvisor accounts for over 20% of the increase as it continues to drive volume growth around the world.”
CEO Dara Khosrowshahi said TripAdvisor, which Expedia will be spinning off later this year, “experienced robust growth in its three main revenue categories during the first quarter of 2011, including over 25% growth in the cost per clicks, CPC-based revenue, on 30% growth in click volume, over 10% increase in display advertising revenue, and over 300% growth in other revenue, which includes our new Business Listings product that we’re very excited about.”
However, Expedia itself is a concern, he said.
“On the financial front, while our top line was quite healthy considering the relatively reduced quality of our air inventory on Expedia (due to American Airlines dispute), our bottom line was a bit weaker than expected.
“We saw continued higher average ticket prices challenging Expedia’s air volumes, lower customer discounts in the opaque channel available to both Hotwire and Expedia packages, and higher than expected G&A, due primarily to legal costs and related reserves, the timing of which we just can’t control.”
The focus on the US aspects of the Expedia result seems to indicate that the website is faltering in the United States while its aggressive international expansion is yet to take up the slack, a situation that could continue for some time.
But Khosrowshahi doesn’t really see any other option, telling analysts that the Asia Pacific region will be a major focus with the platform set to be its curious joint venture with low cost carrier, AsiaAsia.