The Month That Was For The Online Travel Agencies

PCLN: Priceline Group logo
PCLN
Priceline Group

May has been an eventful month for some of the biggest online travel companies. Besides their first quarter 2015 earnings release, there was a lot of activity in the China market.  Priceline (NASDAQ:PCLN) and Expedia (NASDAQ:EXPE)  were both vying for Ctrip International‘s (NASDAQ: CTRP) ‘attention’. While Expedia sold its 62% stake in eLong and announced a partnership with Ctrip, Priceline geared up its partnership with the Chinese online travel giant, with the help of additional investments. TripAdvisor (NASDAQ:TRIP) also undertook a rebranding initiative in China. Ctrip displayed top-line growth towards the higher end of management guidance in Q1 2015. At $373 million, Ctrip’s net revenues for Q1 2015 grew by 46% year on year.

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

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Expedia

On May 28th, Expedia announced the selling of €650 million aggregate principal amount of 2.5% senior notes, due 2022. The senior notes will be guaranteed by some of Expedia’s subsidiaries. The offering of the notes is expected to be over by June 3, 2015. Expedia plans to use a part of the net proceeds of the offering to fund a portion of its Orbitz acquisition deal. (Press Release)

In a major divestment move, Expedia ended its 10-and-a-half year relationship with eLong by selling its 62.4% stake in the company to investors, including Ctrip, on May 22nd. Ctrip, the leading Chinese online travel agency (OTA), acquired a 37.6% stake on its erstwhile rival, eLong. Prior to the acquisition, Ctrip’s main competitors in China included Qunar and eLong. [1] [2]

Currently, Expedia and Ctrip have entered into a partnership to share inventory in certain geographies, mainly in the air and packaged tours segment. Priceline, which currently owns 4.66% stake in Ctrip, will remain Ctrip’s primary non-China hotel partner. But Expedia and Ctrip are expected to share hotel inventories as well. [2]

On May 11, Expedia’s Hotels.com introduced a savings program called Secret Prices for its customers. The program offers customers a greater array of competitive hotel deals, most of which are exclusively available on the Hotels.com website. (Press Release)

Expedia released its first quarter earnings on April 30th. The company displayed a 14% year-on-year increase in revenues to $1.4 billion and 19% year-on-year growth in gross bookings ($15 billion). The key factors propelling this growth were the healthy performance of hotel room nights and Expedia’s organic growth. [3]  The company expects positive returns from its acquisitions towards the second half of 2015.

Priceline

Shortly after Expedia’s eLong divestiture and forging of a strategic alliance with Ctrip, Priceline increased its investment on the Chinese online travel leader. On May 26th, Priceline announced that it will invest an additional $250 million on Ctrip via a convertible bond. Post the deal, Priceline could gain up to 15% of stake in Ctrip. [4] Currently, Priceline owns around 5% of Ctrip’s shares. (Read details of the deal here.)

Priceline reported strong Q1 2015 earnings, on May 8th. The Group reported gross profit of $1.7  billion, reflecting 19% year-on-year growth. International operations contributed to over 80% of Priceline’s gross profit. Growth was aided by a 12% increase in gross bookings (which refers to the total dollar value, generally inclusive of all taxes and fees, of all travel services purchased by its customers), to $13.8 billion. Priceline’s growth was broad-based, with increases of 25% in hotel room nights to 105 million and 18% in rental car days to 15 million. The company has guided for slower growth in Q2 2015, primarily because of the weak Euro exchange rate that continues to dampen its performance in the European regions. [5]

TripAdvisor

On June 1, TripAdvisor launched an application for Android Wear smartwatches. The free application, currently available on Google Play, will aid travelers find nearby entertainment destinations and give them access to user reviews and ratings of hotels, restaurants and attractions. (Press Release)

After Priceline and Expedia’s recent trysts with Ctrip and China, TripAdvisor announced a rebranding in China. TripAdvisor’s new global brand name for its Chinese travel websites would be Mao Tu Ying. According to the company, the name is a phonetic combination of Chinese characters for owl and journey. TripAdvisor is famous for the owl in its brand logo. TripAdvisor currently operates four websites in China, a Taiwan site; a mainland China site, Daodao.com (which is rebranding to Mao Tu Ying), a recently launched site in simplified Chinese for overseas Chinese living beyond the Chinese censors and a meta-search site called Kuxun.com. [6]

TripAdvisor acquired yet another restaurant booking website in May. On May 20th, TripAdvisor acquired Australian restaurant booking start-up, Dimmi, for around $25 million. Dimmi has an inventory of 2,500 bookable restaurants on its platform. Dimmi is expecting revenues to the tune of $10 million in 2015. [7]

TripAdvisor announced its first quarter 2014 financial results on May 6th. Revenues for Q1 2015 grew by 29% year on year to $363 million and adjusted EBITDA grew by 4% to $127 million. The core hotel business displayed strong growth. The attractions, vacation rental, and restaurant business grew at an even faster rate. These businesses were a prime revenue driver for the first quarter of 2015. [8]

 Ctrip

Ctrip announced its Q1 2015 earnings on May 13th. The company displayed top-line growth towards the higher end of management guidance, though the bottom line remained dampened. At $373 million, net revenues for Q1 2015 grew by 46% year on year. The main contributors to this growth were accommodation (contributing to 41% of the revenue) and transportation ticketing (contributing 41%). The revenue boost came at the cost of bottom line erosion due to increased investment in product development and marketing efforts. As a result, the net loss attributable to Ctrip’s shareholders was $20 million, as against net income of $19 million in the same prior-year period. [9]

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Notes:
  1. Expedia sells stake in eLong to Ctrip and others for $671 million, tnooz, May 22, 2015 []
  2. Expedia Reverses Course and Sells eLong Stake, Priceline Snubbed, Skift, May 22, 2015 [] []
  3. Expedia, Inc. Reports First Quarter 2015 Results, ExpediaInc, April 30, 2015 []
  4. The Priceline Group Announces Additional Investment in Ctrip, Priceline Press Release, May 26, 2015 []
  5. The Priceline Group Reports Financial Results for First Quarter of 2015, Priceline Press Release, May 7, 2015 []
  6. TripAdvisor Launches New Brand for China Inside and Outside the Firewall, Skift, May 27, 2015 []
  7. TripAdvisor acquires Australian restaurant bookings site Dimmi, The Sydney Morning Herald, May 20, 2015 []
  8. TripAdvisor Reports First Quarter 2015 Financial Results, TripAdvisor Investor Relations, May 6, 2015 []
  9. Ctrip Reports Unaudited First Quarter of 2015 Financial Results, Ctrip Investor Relations, May 13, 2015 []