How Is Expedia Planning To Boost Its Future Performance?

by Trefis Team
-1.22%
Downside
135
Market
133
Trefis
EXPE
Expedia
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Expedia (NASDAQ: EXPE) is going through a tough time. While its chief rival, Priceline, seems to be eating into its market share, its acquisition related problems are eroding its bottom line. The company recently presented a lackluster third quarter performance report. Its results were mainly dampened by a loss to the tune of $8 million and an excessive spending on its metasearch arm, Trivago, and its vacation rental platform, HomeAway, and around $15 million to $20 million of its profits were eroded due to the natural calamities like hurricanes and earthquakes. The company’s previous CEO, Dara Khosrowshahi, believed in growth by acquisition and towards that end, Expedia had been on a shopping spree over the last few years to ultimately have consolidated the North American online travel market with an over 70% market share. That’s not all, Expedia also acquired Australia’s biggest OTA, Wotif, to gain a major share of the said market, as well. However, Mr. Khosrowshahi resigned from his post in August this year to join Uber’s leadership and his successor Mark Okerstrom is trying to channel the company towards the path of profitability by following a different strategy, that is, through the pursuit of organic growth. Mr. Okerstrom mentioned that though the company will still be interested in strategically important acquisition targets, however, its main aim will be to grow organically through the in-house brands including Hotels.com, Expedia, and HomeAway. Expedia’s platforms currently include around 500,000 accommodation properties including hotels and vacation rentals. We have a $141 price estimate for Expedia’s stock, which is around 15% higher than the current market price.

What Is Expedia’s New Growth Strategy?

  • Unlike Mr. Khosrowshahi who wanted to make Expedia go all out to build a global image, Mr. Okerstrom aims to make Expedia locally relevant on a global scale.
  • This implies that the company will focus on its offerings specific to different regions and improve upon those services. This include: growing the accommodation supply on a local level, improving the language translation pertaining to various regional markets, and investing more on the technological and marketing fronts.
  • Mr. Okerstrom seems to believe that improving in each and every market with its existing products gives Expedia a better chance to build brand loyalty and lure newer customers, thereby helping it in its pursuit of becoming a global leader, rather than the company shopping for other entities to add on to its market share without thoroughly understanding the market.
  •  Expedia will also focus more on the technology and customer service aspect of its platforms and invest aggressively to enhance these areas.

 

 

 

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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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