Expedia Flexes Its Muscles

Expedia solidified its place at the head of the
thriving online travel industry, reporting strong first-quarter earnings.

For the first three months of the year, Expedia, which was recently bought
by USA Networks, returned net income of $5.7 million, or 9 cents a share,
compared to a $17.6 million loss in last year’s first quarter. After-tax
adjusted earnings were $28.4 million, or 46 cents per share, easily beating
the 26 cents per share forecast by analysts polled by Thomson
Financial/First Call.

Revenue for the first quarter was $116 million, more than double last year’s
first-quarter figure. Gross bookings rose 64 percent year-over-year to $1.1

“These numbers are the result of consumers and suppliers embracing the
travel marketplace we have built at Expedia and the success of our
technology-driven and diversified business plan,” Richard Barton, CEO and
president of Expedia, said in a statement.

The company Expedia’s vacation packages and hotel deals led the way, with
merchant revenue quadrupling from Q1 2001.

Expedia’s gross bookings show that the gap is widening in its competition
with Travelocity, the former top online travel company. In its first-quarter
financial report, parent company Sabre reported Travelocity took in $783
million in gross travel bookings, a decrease of 6 percent from the previous
year’s period.

Since Sept. 11, when the share prices of online travel companies took a
nosedive, Expedia has shown remarkable resilience. After a drop-off in
bookings in the months immediately following the attacks, Expedia’s business
quickly rebounded. According to Nielsen/NetRatings, Expedia’s Web site is
the most visited travel site, with 11.6 million unique visitors in March.

“When the tide rises, all boats rise with it,” said Phillip Wolf, CEO and
president of PhoCusWright, an online travel consultancy. The plug was pulled
twice by the general economic downturn and Sept. 11. First, the boats went
down and we saw a couple of travel boats begin to rise.”

Lurking close to Expedia, however, is Orbitz. Created by major airlines,
Orbitz has defended itself against accusations that it is an illegal
monopoly unfairly benefiting from “most favored nation” status bestowed by
the airlines that created it. In only 10 months of operation, Orbitz has
risen to be the No. 3 player in the online travel industry.

At stake is a big market that promises to get bigger. According to a report
last week by ComScore Networks, online travel sales totaled just shy of $7
billion in the first quarter of this year, accounting for 41 percent of all
e-commerce sales.

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