Expedia’s Earnings: VIA, Asia And Mobile Growth In Focus

Expedia (NASDAQ:EXPE) is expected to announce its Q2 2o12 results on Thursday, July 26. Though, Expedia posted a net loss of $3.3 million last quarter, its revenues registered a 12% y-o-y increase mainly on account of increase in hotel bookings and growing demand from international markets. Expedia’s, along with the rest of the online travel industry’s, top line continues to be impacted by the tough macroeconomic conditions and a volatile exchange rate. However, we believe that the company is in a position to post another quarter of strong results backed by growth in Europe and Asia.

Here, we briefly discuss certain trends that might impact the company’s earnings this quarter and determine its performance for the rest of the year.

See our complete analysis for Expedia

Acquisition Of VIA Travel To Boost Growth In Europe

During the first quarter, Expedia’s corporate travel management arm, Egencia, announced its plan to acquire the leading corporate travel company, VIA Travel. VIA travel is the largest management company in Nordic countries and we feel its addition to Expedia will further enhance the latter’s growing corporate travel service portfolio, strengthening its position in international markets.

Particularly, the acquisition will further open up opportunities to strengthen Expedia’s position in the European markets. Currently, the company accounts for around 5% of the online travel segment in Europe. At 42%, the online travel segment as a percentage of total travel market for Europe is lower than that for US, thus offering tremendous opportunity for growth.

Growing Opportunities In The Asian Markets

The Asia-Pacific region also offers great long-term growth prospects and thus remains one of the primary focus of Expedia. The company intends to tap the potential in these economies by leveraging its diversified assets including Air-Asia Expedia joint venture, eLong, hotels.com, Egencia and other affiliate businesses.

The online travel segment in the Asia-Pacific region has been growing at an rapid pace and currently accounts for around 24% of the total travel market in the region, which we estimate to rise further in the future. Expedia accounts for only 4% of the Asia-Pacific online travel market, but with an increasing number of partnerships and a continuous focus to leverage the long term growth opportunity, we can expect to see a gain in Expedia’s market share in this region.

The international markets formed 39% of Expedia’s gross bookings and 40% of total Q1 revenues ,and it envisions more than half of gross bookings and revenue through international points of sale in the near future. The recent partnership with Thomas cook India, expansion of tie-up with Air-Asia and seven new strategic alliances by Egencia, are evident of the company’s focus to expand its presence in international markets. (Read Related Article: Expedia’s Global Growth Soars With Asian Partnerships)

Increasing Presence In The Mobile Travel Space

In recent years, the emergence of alternate platforms – such as smartphones and tablets – have registered significant growth, which is expected to continue at a rapid pace in the years ahead. Targeting the mobile travel space, Expedia added yet another dimension to its growth strategy last year by launching a number of applications for the iPhone and Android users.

Expedia received ~4% traffic through mobile bookings in 2011, and with increasing mobile penetration around the world, we expect this fraction to only increase, supported by exponential growth in the smartphone using population.

If online travel agencies fail to keep up with innovation in this space, they face the risk of losing out a growing user base of online travel bookings via mobile devices. However, we feel that the recent deal with Fotopedia gives Expedia the added opportunity to leverage growth in the mobile space. (Read Related Article: Expedia Taps Fotopedia’s Growing User Base By Lending Its Hotel Booking Apps)

We are in the process of updating our current price estimate of $33.19 for Expedia.

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