Expedia’s Strategy Changes Might Help Improve Its Performance In 2018

January 22nd, 2018 by Trefis Team
-21.72%
Downside
184
Market
144
Trefis
EXPE: Expedia logo
EXPE
Expedia

Expedia (NASDAQ: EXPE) has gone through a rough year in 2017, going by the performance of its first nine months. The company is facing several problems in relation to its acquisitions, like in Q3 2017, its earnings were dampened due to an excessive spending on its metasearch arm, Trivago, and its vacation rental platform, HomeAway. Before that, its performance was adversely impacted by problems of integrating Orbitz into its platform. Expedia’s former CEO, Dara Khosrowshahi, believed in growth by acquisition and towards that end, Expedia had been on a shopping spree over the last few years to ultimately have consolidated the North American online travel market with an over 70% market share. However, after Mr. Khosrowshahi’s resignation in August 2017 and post his successor Mark Okerstrom’s assuming the position, the company is  turning to a different strategy to attain growth. Mr. Okerstrom mentioned that though the company will still be interested in strategically important acquisition targets, however, its main aim will be to grow organically through the in-house brands including Hotels.com, Expedia, and HomeAway. Expedia’s platforms currently include around 500,000 accommodation properties including hotels and vacation rentals. These changes in strategies might help Expedia in recovering from its current slump and in delivering an improved performance in 2018. We have a $133 price estimate for Expedia’s stock, which is around 5% higher than its current market price.

Expedia Might Usher In A Brighter 2018 Under The Guidance Of Its New CEO

Unlike Mr. Khosrowshahi who wanted to make Expedia go all out to build a global image, Mr. Okerstrom aims to make Expedia locally relevant on a global scale. Hence, the company will focus on its offerings specific to different regions and improve upon those services. These include: growing the accommodation supply on a local level, improving the language translation pertaining to various regional markets, and investing more on the technological and marketing fronts. Mr. Okerstrom seems to believe that improving in each and every market with its existing products gives Expedia a better chance to build brand loyalty and bring in newer customers, thereby helping it in its pursuit of becoming a global leader, rather than the company shopping for other entities to add on to its market share without thoroughly understanding the particular market. Expedia will also focus more on the technology and customer service aspect of its platforms and invest aggressively to enhance these areas.

 

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
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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