BELLEVUE, Wash.—Feb. 9, 2012—Expedia, Inc. (NASDAQ: EXPE) today announced financial results for our fourth quarter and year ended December 31, 2011.
. Total room night growth of 19% in the fourth quarter 2011 represented accelerated growth compared to 17% room night growth reported for the third quarter 2011 as a result of faster growth in both the APAC and Americas regions.
. Free cash flow increased 32% to $618 million for the year due to strength in our merchant hotel business.
. During the quarter, we repurchased 3.1 million shares on a pre-reverse split basis for $83 million. For the year, we repurchased 10.6 million shares on a pre-reverse split basis for $283 million.
. On December 20, 2011, we completed the spin-off of TripAdvisor, Inc. to Expedia stockholders. TripAdvisor consists of the domestic and international operations previously associated with Expedia’s TripAdvisor Media Group and is now a separately traded public company, trading under the symbol “TRIP” on The Nasdaq Global Select Market.
Financial Summary & Operating Metrics (figures in $MMs except per share amounts)
Y / Y
Discussion of Results
Gross Bookings, Revenue & Revenue Margins
Gross bookings increased 10% (10% excluding foreign exchange) for the fourth quarter of 2011 compared with the fourth quarter of 2010, primarily driven by 19% growth in hotel room nights through strong performances at Hotels.com brands, Expedia Affiliate Network, Hotwire and Egencia. Average daily room rates grew 2% for the quarter. Average airfares for the fourth quarter of 2011 were up 10% year-over-year which was almost entirely offset by an 8% decline in tickets sold. Domestic bookings increased 7% and international bookings increased 15% (15% excluding foreign exchange) for the fourth quarter of 2011. International bookings totaled $2.5 billion for the fourth quarter of 2011, accounting for 39% of worldwide bookings compared to 38% in the prior year.
Gross bookings increased 12% (10% excluding foreign exchange) for the year primarily driven by 18% growth in hotel room nights and 5% growth in hotel average daily rates. Average airfares for the year were up 11% versus 2010 which was offset by an 8% decline in tickets sold. Domestic bookings increased 6% and international bookings increased 23% (18% excluding foreign exchange) for the year. International bookings totaled $11 billion for 2011, accounting for 39% of worldwide bookings compared to 36% in the prior year.
Revenue increased 7% (8% excluding foreign exchange) for the fourth quarter of 2011, primarily driven by an increase in hotel room nights stayed partially offset by a decrease in revenue per room night. Domestic revenue increased 4% while international revenue increased 10% (14% excluding foreign exchange) for the quarter. International revenue equaled $333 million for the fourth quarter of 2011, representing 42% of worldwide revenue compared to 41% in the prior year.
Revenue increased 14% (11% excluding foreign exchange) for the year, primarily driven by an increase in hotel room nights stayed partially offset by a decline in air tickets sold. Domestic revenue increased 7% while international revenue increased 25% (20% excluding foreign exchange) for the year. International revenue equaled $1.5 billion for the year, representing 42% of worldwide revenue compared to 38% in the prior year.
Revenue as a percentage of gross bookings (“revenue margin”) was 12.5% for the fourth quarter, a decrease of 34 basis points compared to the fourth quarter of 2010. The primary drivers were rising average air ticket prices (as our remuneration generally does not vary with the price of the ticket), changes in our hotel product mix as well as competitive pricing actions and lower net air supplier economics partially offset by growth in our higher margin hotel business. Revenue margin was 11.8% for the year, essentially flat compared to 2010.
Product & Services Detail
As a percentage of total worldwide revenue in the fourth quarter of 2011, hotel accounted for 73%, air accounted for 9% and all other revenue sources accounted for the remaining 18%.
Worldwide hotel revenue increased 12% for the fourth quarter driven by a 19% increase in room nights stayed partially offset by a 5% decrease in revenue per room night. Revenue per room night decreased primarily due to competitive pricing actions on hotel rooms and changes in our hotel product mix, impacts of foreign currency and accruals for loyalty programs at Expedia and Hotels.com partially offset by a 2% increase in average daily hotel rates.
Worldwide air revenue decreased 19% for the fourth quarter due to an 11% decrease in revenue per ticket and an 8% decrease in air tickets sold. The decrease in ticket volume was partially due to a 10% increase in average air ticket prices.
Revenue per ticket declined due to lower net supplier economics and the acceleration of merchant air revenue in fourth quarter 2010 partially offset by certain regional and interline consumer booking fees.
All other revenue (primarily car rentals, advertising revenue from our transaction websites, destination services and fees related to our corporate travel business) increased 2% for the fourth quarter.
Expedia, Inc. increased our stake in Chinese online travel site, eLong, to 67%, or 63% on a fully-diluted basis, to further enable us to grow our position in a key, international market.
The Expedia brand launched a localized site in Argentina, the fastest-growing online travel market in Latin America. Expedia also launched a full service site in Mexico, enabling consumers in Mexico to book flights and dynamic packages on www.Expedia.mx.
Expedia expanded its joint venture with AirAsia by introducing sites in Vietnam, Hong Kong and Taiwan, extending its reach to 11 countries throughout Asia Pacific.
Hotels.com experienced healthy room night growth across all regions during the fourth quarter as benefits continue from a faster pace of innovation on the new platform which launched in early 2010.
Egencia expanded its services to Bulgaria, Chile, Colombia, Morocco, South Korea, and Turkey through the Egencia Global Alliance, a network of strategic partnerships with leading local travel management companies. Egencia now has a presence in 47 countries across the globe.
Traveler Value Proposition and Innovation
Expedia, Inc. acquired Traveldoo, a European provider of best-in-class self-booking tools and services for business travel management. This acquisition addresses a new segment of the market not currently serviced through the diversified portfolio of corporate travel solutions offered by Egencia™ and will be operated autonomously.
Expedia released an Expedia Hotels app for iPad and Android tablets with content in 16 languages, giving users the ability to research and book stays at more than 130,000 participating properties worldwide.
Hotels.com introduced exclusive mobile-only hotel deals, offering consumers a simple way to access last-minute discounted hotel deals on the go.
Venere.com® launched a mobile site, giving smartphone users the ability to book stays at any of the 100,000 properties offered on Venere sites.
In addition to a redesigned website, CarRentals.com™, part of the Hotwire Group, launched prepaid car rental bookings becoming the first and only online travel agency to offer discounted, published car rental rates for consumers that choose to pay at the time of booking.
Media, Advertising and Distribution
Expedia Affiliate Network (EAN) signed agreements to power hotel bookings for major US-based carriers United Air Lines, Continental Airlines and Delta Air Lines. EAN will also power online travel bookings for several international online travel agent affiliates, including Spain-based OTA Rumbo; Turkish OTA YKM Turizm; and leading Taiwanese OTA EzFly.
Expedia Media Solutions, the advertising sales division of Expedia, introduced integrated social media opportunities to enhance campaigns for Expedia.com advertising partners.
EAN launched its Smart Cross-Sell product, giving airline affiliates the opportunity to cross-sell hotel offers that best match a consumer’s profile, helping maximize ancillary revenue and grow brand loyalty through an improved traveler booking experience.
Expedia signed partnership agreements with a number of notable travel suppliers, including major U.S. carrier Delta Air Lines; leading European airlines, Air France-KLM and Alitalia; Asia’s largest airline, China Southern; Taiwan-based carrier, China Airlines; Aeroflot, Russia’s national carrier, and Leonardo Hotels, a hotel company with properties throughout Europe and Israel.
Subsequent to year-end, Expedia, Inc. reorganized our Partner Services Group aligning specific product functions more closely with complementary brands within Expedia, Inc. The reorganization included the formation of a new Global Lodging Group that includes Hotels.com, Venere.com and all existing lodging supply-related functions. Though organizationally aligned to Hotels.com and Venere.com, the Global Lodging Group will continue to serve all Expedia, Inc. brands and B2B business units.
At quarter end, Expedia global websites featured almost 149,000 bookable properties. Expedia sites offer over 95,000 hotels in EMEA and APAC countries.