Expedia’s New CEO Now Has More Reasons To Grow The Company Even Further

by Trefis Team
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After a spate of acquisitions and strategic investments, while we were waiting to see what Expedia’s next step would be towards the dominance of the online travel market, the sudden exit of its CEO Dara Khosrowshahi to join Uber came as a big surprise. While Mark Okerstrom, Expedia’s erstwhile CFO has been appointed as the new CEO for the company, stakeholders are still wondering how the company will progress under Okerstrom’s guidance. The new incentives that the company is offering to Okerstrom might further inspire him to take Expedia to newer heights of growth.
Expedia’s newly appointed CEO, Mark Okerstrom, currently has some lucrative incentives to grow the company even further. Last week, the company announced that if Okerstrom can help grow Expedia’s stock price to an average of around $200 per share over the six to twelve month-period immediately prior to September 15, 2021, then he would be awarded 300,000 Expedia stock options. The exercise price is $142.13 per share and he would have seven years to exercise the option. There is no potential downside for Okerstrom if the share prices don’t average $200 by the given time period, however, his gains can be even higher if the share prices at that time are significantly higher than $200.
The pace at which Okerstrom is leading HomeAway’s integration, or Trivago’s and Egencia’s growth, makes it seem that the $200 per share price target might be an achievable goal by Expedia’s new CEO. In a recent interview with Skift, Okerstrom mentioned that the company might be focusing currently in pursuing aggressive internal growth rather than going on another shopping spree like it did in 2015 with HomeAway, Orbitz, and Travelocity. Expedia has also recently entered into an alliance with Thomas Cook to provide hotels for its customers.
How Has Expedia Been Performing So Far 
Though Expedia’s bottom line was a bit shaky in Q1 of this year, its Q2 ended on a strong note. All the divisions performed well with Trivago, its metasearch engine (where it has a majority stake), crossed $1 billion in trailing 12-month revenues for the first time in its history. In the first half of 2017, Expedia’s gross bookings rose by 13%, while its revenues, adjusted EBITDA, and room nights grew by 17%, 18%, and 17% respectively. The company’s direct sales and marketing expense grew significantly and the major chunk of it was spent on the Expedia brand and on Trivago. 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.
In May 2017, the company entered into an agreement to acquire the London-based rail service distributor, SilverRail Technologies. Last year, Expedia had started a distribution partnership with the same company. The move can pay off well for Expedia’s long term growth as rail travel is one of the most important modes of transport in Europe and Asia.
In July this year, it announced a further investment in Indonesian OTA leader, Traveloka. This move might help the company to gain a stronger hold in Asia which it has been currently striving towards. Expedia enjoys around 75% of the online travel market in the U.S., however, its position in the emerging markets isn’t so strong. Investments in rail ticket booking and Asian OTAs might be its way to gain a bigger part of those markets.
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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Expedia

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