Though Short Term Profitability Might Remain Dampened, Expedia’s Focus On Expanding Services And Geographical Presence Might Generate Long Term Growth

July 26th, 2017 by Trefis Team
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Expedia is slated to release its Q2 2017 earnings on July 27th. After delivering a strong 2016 with over 30% growth in its top line and nearly 40% growth in EBITDA, the company had decided to invest more on its products and marketing in 2017 to generate further growth. Expedia’s Orbitz integration has been completed. The company is strengthening the marketing plans for some of its brands such as Travelocity, Orbitz, Hotwire, and Wotif. In Q1 2017, Expedia’s revenues at around $50 million beat consensus estimates, however its earnings per share at $0.05 was lower than the expected earnings per share by $0.02. Expedia’s acquired brands in the other segments, though a smaller part of the overall business currently, are growing significantly and showing signs of becoming major drivers of growth for the company in the future. The company aims to double its gross bookings through both organic and inorganic growth by 2020.

After Consolidating Its Position In The U.S. Expedia Is Looking To Expand In Asia

Currently Priceline and Expedia together enjoy over 90% of the U.S. online travel market share with Expedia alone holding over 70% share with its acquisitions such as Orbitz, Travelocity, and HomeAway. However, Expedia might have realized that the secret to growing further lies in emerging markets such as Asia. According to Greg Schulze, Expedia Group’s senior vice-president for commercial strategy and services, the company is focusing on Asia owing to the fact that over 50% of the world’s millennials, known for being tech-savvy, reside in the continent. According to Euromonitor International, the Asia-Pacific market is currently the fastest growing region for online travel agents.

Expedia is taking steps to grow its Asia presence. Its regional headquarters in Singapore has grown in manpower and increased investments in technology, notable among which was the launch of its “innovation lab” in April. Expedia’s annual $1 billion investment in technology and its team of over 5,000 engineers and data scientists ensure that the company will try to capture more of the market through its technological edge in the future.
However, Expedia is yet to develop a stronghold in the Asian market. Priceline has a dedicated travel site, Agoda.com, for the Asia Pacific region along with its Booking.com, the most popular online accommodation booking platform in the world. Ctrip, the leader in China’s online travel market and currently the second largest OTA in terms of market capitalization, has also said that it is focusing on capturing more markets in Asia currently, as these have a higher scope of growth than some of the already established markets in the West.
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Expedia’s Investment In SilverRail Might Offer It Unique Advantages

While its closest rival, Priceline, boasts of its impressive organic growth rate, Expedia continues pursuing its growth by acquisition strategy. In May, the company entered into an agreement to acquire the London-based rail service distributor, SilverRail Technologies. Last year, Expedia had started a distribution partnership with the same company. The move can pay off well for Expedia’s long term growth as rail travel is one of the most important modes of transport in Europe and Asia. Expedia’s investment in the online booking sector for rail would imply more innovative and expanded offerings. Also, being an early mover in this segment might mean the company gets the advantage of building a loyal customer base and tie ups with the best companies. Currently, SilverRail witnesses over 1 billion online searches for rail and around 25 million bookings, annually. It distributes tickets for more than 35 rail providers and carriers and handles over 1,500 corporate customers globally.

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Notes:

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2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Expedia

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