RealTime IT News

Travelocity Expects 9% Revenue Decline

Travelocity.com Inc. said its fourth quarter revenues are expected to come in at $68 million, about 9 percent lower than previous guidance, but analysts at Goldman, Sachs were relatively sanguine about it.

The online travel operation said that despite the reduced revenues, "pro forma earnings per share are expected to be within the guidance given in October of 8 to 11 cents."

Fort Worth, Texas-based Travelocity also said it expects 20 percent to 30 percent revenue growth for 2002. Still, the market reacted negatively and Travelocity stock was down $2.79 in the early going to $24.65.

The company, which just announced an online marketing partnership with Continental Airlines , attributed the revenue shortfall to un expectedly slow sales of airline tickets during the December holiday travel period due to airline capacity reductions, combined with the lingering effects of the September and November tragedies and related air fare reductions.

Goldman had been expecting $74.2 million in revenues. Analysts said in an advisory to clients that if there were market share losses, "we think they would be attributable to less merchant business and thus a lower level of benefit from the ability to capture discounted fares, diversification of products, and aggressive pricing by Orbitz (the travel site run by a consortium of airlines)."

On the positive side, Travelocity said advertising and other non-transaction revenues are expected to slightly exceed its previous guidance.

GS maintained its fourth quarter estimates for Expedia and Priceline . For Expedia, the GS revenue estimate is $65 million, a sequential decline of 18 percent. For Priceline, its revenue estimate of $232.9 million represents a sequential decline of 23 percent.

"Looking forward to 2002, we expect strong revenue growth of 20 percent to 30 percent," said Terrell B. Jones, president and chief executive officer of Travelocity. "Today's announcement with Continental and arrangements with other major airlines demonstrate Travelocity's importance as a distribution and marketing channel ... In December, we ... opened our call center in Pennsylvania dedicated to vacations and cruises and we announced the implementation of merchant model technology using Contour software. These are all key aspects of our revenue diversification and growth strategy for 2002."

The deal with Continental (financial details were not disclosed) lets Travelocity provide its members with travel deals on Continental via joint promotions, advertising and e-mail campaigns.