Key Takeaways From Expedia’s Q1 2017 Earnings Results: Non-Core Segments Promise Higher Future Growth

by Trefis Team
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Expedia’s first quarter 2017 results were out on April 27th. Though its revenues beat consensus expectation by around $50 million, its earnings per share at $0.05 was lower than the expected earnings per share by $0.02. Expedia’s core OTA business (that includes brands like Expedia.com, Hotels.com, Orbitz, Travelocity and Wotif) has grown by 10% Y-o-Y to $1.7 billion while its adjusted EBITDA stood at $306 million reflecting a Y-o-Y increase of 5%. The company’s net loss increased by 21% Y-o-Y to reach around $2.2 billion. As we’d mentioned in its pre-earnings article, Expedia’s acquired brands in the other segments, though a smaller part of the overall business currently, are growing significantly and showing signs of becoming major drivers of growth for the company in the future.
Q12017

Trivago: One Of The Fastest Growing Metasearch Engines

Due to the influx of metasearch giants like Facebook and Google expanding into the travel business, the importance of a strong metasearch engine becomes imperative to today’s online travel agencies. According to Expedia’s CEO, Dara Khosrowshahi, Trivago (Expedia’s metasearch arm where it has a majority stake) is one of the fastest growing metasearch platforms which receive huge advertisement revenues from OTAs like Priceline and Expedia. Trivago, after going public last year, has registered a 62% Y-o-Y growth in its revenues to $286 million while its EBITDA soared by a whopping 169% to $21 million in Q1 2017.

 
 Egencia: Technological Advantage Might Spur Growth
Expedia’s corporate travel arm, Egencia’s revenues grew by 12% Y-o-Y to $123 million while its adjusted EBITDA rose by 76%. According to Khosrowshahi, Egencia’s experience of spending years in integrating acquisitions like Via Travel (2012) and Orbitz for Business (2015) into its own platform now gives it an unique technological advantage over its peers.
 HomeAway: Online Integration Of More Properties And Enhanced User Experience Might Lead To Higher Future Growth
After HomeAway, Expedia’s vacation rental platform, witnessed around $15 billion worth of annual offline transactions last year, Expedia is striving to grow the number of properties that can be booked online on HomeAway. At present, around 1.4 million properties are available online on HomeAway and they account for 85% of HomeAway’s total inventory. Along with this, the priority is also on improving the search engine marketing and user experience on the HomeAway platform. The management also wants to eventually provide instant approval to accommodation bookers rather than making them wait for 24-hours.
There is still work left to be done in order to make property owners more aware of how they can benefit by the online display, sort, and ordering on the HomeAway platform and hence HomeAway still has quite far to go in order to integrate and expand properties for online booking further. In Q1 2017, HomeAway’s adjusted EBITDA declined by around 66% to $6 million due to an increased spend in technology and marketing. HomeAway’s top line grew by 30% to $185 million while the rooms booked on the HomeAway platform grew by 18% Y-o-Y.
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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
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