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What Drove Expedia’s Strong Quarterly Performance?

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Aug. 11 2015, Updated 9:07 a.m. ET

Core OTA and Trivago lead growth

Revenue growth was driven by both Expedia’s (EXPE) core online travel agency (or OTA) business and Trivago. Core OTA revenues increased by 15% to $1,463 million in 2Q15 as compared to $1,268 million in 2Q14. Trivago also recorded strong growth of 25% with sales of $90 million.

Expedia’s agency business saw the most growth of 18% year-over-year (or YoY) to $459 million as compared to $388 million in 2Q14. Advertising and media revenues followed closely with a 16% growth in revenues to $143 million as compared to $123 million in 2Q14. Merchant business grew by 8% to $1,061 million from $984 million.

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Higher gross bookings

For the second quarter of 2015, the company’s total bookings increased 20% YoY backed by a strong OTA business, including strong performance at Brand Expedia and Hotels.com. The growth would have been at 28% excluding the negative impact of currency fluctuations. The total domestic gross bookings grew by a strong 18% YoY to $9.3 billion, while higher growth was seen in international gross bookings, which increased by 25% to $5.8 billion. EXPE’s international bookings were 38% of the total worldwide bookings.

Room nights grew, but revenue per night declined

Hotel room nights also grew by 35% YoY, driven by 24% in domestic growth and 50% in international growth. However, the company’s lower commission strategy in international markets and its spending on loyalty programs and promotions resulted in lower revenue per night and average daily rates for the company. As a result, revenue per night decreased by 16%. Air tickets sold grew by 26%, of which 20% was organic, while revenue per ticket decreased by 10%.

Properties

The overall performance of the company was driven by all of its divisions. The company added ~27,000 properties this quarter and now has added more properties in the first half of 2015 than it added in all of 2014. This is indicative of the company’s aggressive expansion plans to grow its business.

Expedia competes with major online travel companies such as Priceline Group (PCLN), Ctrip (CTRP), Orbitz (OWW), Travelzoo (TZOO), and Tripadvisor (TRIP). EXPE makes up 0.52% of the Consumer Discretionary Select Sector SPDR (XLY).

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