Weekly Online Travel Agency Notes: Expedia, TripAdvisor, Ctrip, Travelzoo

Last week the online travel space was marked by acquisitions and strategic alliances. Expedia (NASDAQ:EXPE) acquired Travelocity’s U.S. and Canadian websites, after a year of strategic partnership between the two entities. TripAdvisor (NASDAQ: TRIP) entered into an agreement with leading international news website CNN, whereby the TripAdvisor reviews and ratings will be available on CNN Travel’s website.

Chinese online travel giant  Ctrip International (NASDAQ:CTRP) expanded its partnership agreement with leading Chinese car rental company, eHi services. Travelzoo (NASDAQ: TZOO) posted yet another quarter of disappointing earnings due to the lack of adequate demand for its new offerings and due to the increased investments undertaken by the company to construct its hotel booking platform and refurbish other travel related products and services.

Below we give a quick rundown on the most notable events in the last week related to these companies.

See Our Complete Analysis for These Companies Here

Expedia

On January 23, Expedia (NASDAQ: EXPE) acquired Travelocity for $280 million, from its parent company Sabre Corp. The acquisition is a progression from the 2013 strategic agreement between Expedia and Travelocity, wherein Expedia provided content, inventory, customer service and technology to Travelocity’s U.S. and Canadian websites, while Travelocity focused on brand marketing and received a performance-based marketing fee. The acquisition pertains to Travelocity’s websites in the U.S. and Canada. Expedia intends to retain the Travelocity brand, alongside Expedia’s signature brands such as Hotels.com, Hotwire, Venere, and so on. The Travelocity brand name will further help Expedia in acquiring the former’s loyal customer base that approximately amounts to 20 million. ^{[1] [2]}

On a separate note, Expedia has announced that it will report its fourth quarter and full year results for the period ending December 31, 2014 on February 5. ^[3] Expedia has experienced a healthy 2014, so far. The world’s second largest online travel services provider (in terms of gross booking volume of $39.2 billion) displayed a 22% year-on-year increase in revenues for the first nine months of 2014, to $4.4 billion. The key factors propelling this growth were the healthy performance of the hotel room nights and air tickets segments. The top line growth, combined with the disciplined investments in selling and marketing, led to a solid bottom line. Net Income for the first nine months of 2014 increased by 141% year-on-year to $332 million.

Our price estimate of $84 for Expedia is slightly below the current market price. We forecast the company to report revenues of approximately $6 billion for FY 2014. Our GAAP and non-GAAP diluted EPS estimates stand at $3.10 and $4.16, respectively.

TripAdvisor

On January 21, TripAdvisor (NASDAQ: TRIP) entered into an alliance with CNN, one of the leading international news brands. According to the partnership, CNN International’s global travel portal, CNNTravel.com will be integrated with the TripAdvisor website, and the CNN readers can check TripAdvisor’s reviews and ratings in real time. Hotels mentioned in CNN Travel articles can be booked through TripAdvisor, and the reviews, photos, and other details of the hotels would be readily available. One of the biggest advantages for CNN Travel readers will be that they will have access to the best available prices through TripAdvisor’s hotel price comparison search. The TripAdvisor content and booking functionality will also be available for CNN’s 4,000 partner hotels on the CNN Travel homepage. ^[4]

Our valuation of $94 for TripAdvisor is at a considerable premium to the current market price. Our 2014 revenue estimate for the company stands at $1.27 billion. Our GAAP and non-GAAP diluted EPS estimates stand at $2.50 and $2.80, respectively.

Ctrip

On January 21st, Ctrip International (NASDAQ:CTRP) announced the expansion of its strategic partnership with eHi Car Services Limited, a leading car rentals service provider in China. Under the current agreement, Ctrip will integrate eHi’s chauffeured car services, including airport pick-up and drop-off and other business transportation services, into its corporate and individual service offerings. Ctrip’s official website, mobile applications, and offline channels will feature eHi’s services. The expanded partnership is a  progression from the earlier agreement wherein eHi was appointed the designated partner for Ctrip’s car rental services. As a part of the previous agreement, eHi’s online reservation services were integrated in Ctrip’s mobile application platform. ^[5]

Our Ctrip price estimate to $43 is 14% lower than the current market price. For FY 2014, we forecast a revenue of approximately $1.27 billion.

Travelzoo

Travelzoo (NASDAQ: TZOO), the global internet media player, released its fourth quarter results on January 22nd. The company posted $31.5 million in revenues for the fourth quarter of 2014, representing a 16% year-on-year decline, due to poor performance of its Local Deals, Search and Getaway segments. For the full year 2014, Travelzoo’s revenue witnessed a 10% year-on-year decline to $142.1 million. ^[6]

Travelzoo expects the trend of year-on-year revenue decline to continue in the next quarter. due to increased investment in product development, professional, and marketing related costs. Over the next few quarters, Travelzoo intends to increase is quarterly member acquisition and other marketing spending to the tune of $2 million to $3 million, year-on-year. ^[7]

Our price estimate of $21 for Travelzoo is at a significant premium to the current market price. We are in the process of updating our valuation for the company.

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1. Sabre and Expedia Announce Expedia’s Acquisition of Travelocity, Expedia Press Release, January 23, 2015 [↩]
2. Expedia Acquires Travelocity for $280 million, Skift, January 23, 2015 [↩]
3. Expedia, Inc. to Webcast Fourth Quarter and Full Year 2014 Results on February 5, 2015, Expedia Press Release, January 22, 2015 [↩]
4. CNN and TripAdvisor announce first-of-its-kind partner, Breaking Travel News, January 21, 2015 [↩]
5. eHi Car Services and Ctrip launch next phase of strategic partnership, Travel Daily News Asia, January 22, 2015 [↩]
6. Travelzoo Reports Fourth Quarter 2014 Results, Travelzoo, January 2015 [↩]
7. Travelzoo’s Fourth Quarter Earnings Transcript, Seeking Alpha, January 2015 [↩]