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What Do Expedia’s Key Metrics Suggest ahead of 3Q Results?

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Expedia’s gross bookings have risen

Gross bookings is a metric used to measure the total value of all travel services that customers purchase. Expedia’s (EXPE) gross bookings have risen 25.0% YoY (year-over-year) to $18.8 billion in 2Q16, driven by strong growth in the core OTA (online travel agency) business. Segment-wise, core OTA has risen 25.0% to $17.1 billion, and Egencia has risen 22.0% to $1.7 billion.

Expedia’s gross booking growth has been on an upward trend. Gross bookings rose 24.0% in 2015, 28.0% in 2014, and 16.0% in the two years before that. On a constant dollar basis, growth would be much higher.

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Room nights and revenue per room night

Hotels accounted for 61.0% of Expedia’s 2Q16 revenue. Room nights continue to rise at a strong pace, driven by both Brand Expedia and Hotels.com. Expedia’s hotel revenues rose 14.0% YoY in 2Q16 due to a 20.0% rise in room nights. However, revenue per room night fell 5.0% YoY, driven by a 1.0% fall in average daily rates.

Air tickets rise, revenue per ticket falls

Sales of online air tickets have risen in the last few quarters. Air travel accounts for 9.0% of Expedia’s revenue. Expedia’s revenue per ticket rose 3.0% in 2Q16. Ticket volumes also registered a strong growth of 45.0% YoY, with acquisitions contributing about a 36 percentage point growth. Overall air ticket revenue rose a strong 50.0% YoY, with acquisitions contributing about a 30 percentage point growth.

Advertising and media

Advertising is currently EXPE’s fastest growing business, but it accounts for only 9.0% of its revenues. The Trivago and Orbitz acquisitions continue to benefit Expedia, with its advertising revenues rising 42.0% YoY in 2Q16.

TripAdvisor (TRIP) and Priceline (PCLN), which has a significant stake in Chinese OTA player Ctrip.com International (CTRP), are Expedia’s major rivals. EXPE forms 3.0% of the First Trust Dow Jones Internet ETF (FDN).

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