How Has 2016 Been For Expedia And What Are Its Current Focus Areas?

January 4th, 2017 by Trefis Team
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Expedia’s chief has recently claimed that the company is aiming to be the world’s first $100 billion travel agency in the next couple of years. The company, currently witnessing around 30% topline growth, carries on over $71 billion in annual transactions across its platform. Expedia’s 2016 has been a mixed one so far. Though Expedia started its first quarter of 2016 on a strong note mainly because of the inorganic impact of its acquisitions, Expedia’s Q2 2016 results received a setback with the company struggling to integrate all its acquired entities into a single platform, thereby causing technical glitches. However, the company was back on track towards its rapid growth in Q3 2016 after the completion of its integrations. Expedia’s current goal is to double its gross bookings by 2020 through both organic and inorganic growth. The company’s main focus for growth is its core OTA segment. However, its other segments, like Egencia, the corporate travel arm, is also continuing to gain market share and witnessing profitability growth. Egencia is undergoing an internal restructuring as a part of its 10-year growth plan. Below we discuss a few of the notable acquisitions of Expedia that have witnessed significant developments in 2016 and could be  headed toward large future growth. We also look into the strategic focus areas of the company.

 Trivago’s Journey Post Its IPO Has Begun

Expedia’s revenues from the advertising and media segment comes mainly from its metasearch arm, Trivago, the company where Expedia has around a 62% stake. Trivago recently raised an initial public offering (IPO) of $184 million in net proceeds (after excluding the bankers and owners shares) and is currently listed on the NASDAQ with the ticker symbol, ‘TRVG.’ Though Trivago raised much less than was expected in its IPO, given its past growth trends and new plans for further developments, it is expected that Trivago might have its eye set on long term growth.

HomeAway Is Expected To Demonstrate Significant Growth

Though currently HomeAway is undergoing a transition, the brand is being pegged as one of the most profitable acquisitions for Expedia. Also, the brand’s service fee is expected to give a major boost to its revenues in the future. In early 2016, HomeAway, started imposing a booking fee to the tune of ~6% of the rental amount excluding taxes and any refundable deposits for its vacation rentals. Expedia’s management has high expectations from HomeAway expecting it to generate around $350 million in EBITDA in 2018. However, analysts claim that the figure could go much higher than that to reach up to $600 million by that time.

The company aims on taking HomeAway’s business from offline to online. Prior to its acquisition, HomeAway was delivering around $15 billion worth of annual transactions online. The brands under Expedia’s umbrella might further help in cross selling HomeAway’s products and expand its reach.

homeaway

(Source: Expedia Investor Presentation)

 

What Are The Areas Of Expedia’s Current Focus?

  • The company is concentrating on social media and voice interaction in order to expand its customer reach. Recently, it announced voice activated searches on its platform through Amazon Alexa.
  • Expedia is upgrading the functionalities of its PartnerCentral, the tool through which hoteliers can compare the pricing and availability versus other rival OTA websites.
  • It is growing the Expedia Affiliate Network by offering better perks to hotel suppliers. Expedia had recently strengthened its partnerships with hotel chains such as Marriott International and Red Lion Hotels.
  • Currently, 50% of Expedia’s traffic comes from mobile and hence the company is investing in more innovative features and better services through this medium.
  • Geographic expansion is one of the key focus areas for the company as currently only one-third of its bookings come from outside the U.S.  Compared to that, Priceline has 90% of its revenues coming from international markets. Expedia’s chief had expressed that the company’s first priority is to expand in the Asia Pacific markets, such as Taiwan, China, and South Korea. It is planning on doubling its investments in India where it estimates that there is a market for over one billion outbound travelers.

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