Expedia Is Expected To Deliver A Strong Third Quarter Under Its New CEO
Expedia is slated to release its Q3 2017 earnings on October 26th. Though Expedia’s bottom line was a bit shaky in the first quarter 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.
Expedia’s CEO Departure
The biggest highlight for the company over the past quarter has been the resignation of its former CEO Dara Khosrowshahi. Khosrowshahi has led Expedia since 2005 and his tenure is most notable for the spate of acquisitions that was undertaken by the company a couple of years ago that included names like Orbitz, HomeAway, and Travelocity. These deals consolidated Expedia’s position in the U.S. online travel market with an over 75% market share. Mark Okerstrom, Expedia’s erstwhile CFO has been appointed as the new CEO for the company.
Expedia’s Growth Pace Is Likely To Continue
Expedia’s newly appointed CEO, Mark Okerstrom, currently has some lucrative incentives to grow the company even further. The company has promised Okerstrom that if he 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 price does not average $200 by the given time period, however, his gains can be even higher if the share price at that time is 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.
Segment-Wise Progress
Expedia’s core OTA segment is currently growing at a healthy pace with the aggressive marketing campaigns driving the demand for the global brands. Its HomeAway brand, that is currently on a transition path, witnessed 45% growth in gross bookings with a 31% revenue rise in the second quarter. The online booking experience is being enhanced with more properties being brought into the digital platform. Around 1.5 million properties are currently available online on HomeAway and they account for over 85% of HomeAway’s total inventory. The number of integrated properties is expected to rise further with the progress of this year.
Egencia, Expedia’s corporate travel arm, is currently the fourth largest travel management company in the world. The brand experienced a growth in gross bookings and revenues to the tune of 5% and 8%, respectively. There are indications that Egencia might be looking for acquisition targets to expand itself in the near future.
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