A Closer Look At Expedia’s Operating Expenses

Expedia‘s (NASDAQ: EXPE) overall operating expenses grew 11% year-over-year to $8.5 billion in 2018, largely driven by higher selling and marketing (S&M) and technology and content (T&C) expenses. Going forward, we expect Expedia’s operating expenses to increase by 7% in 2019.

We have created an interactive dashboard on How Expedia’s Operating Expenses Will Grow In 2019, which outlines our forecasts for the company’s operating expenses. You can modify our forecasts to see the impact any changes would have on the company’s operating expenses. In addition, you can also see all of our Information Technology company data here. Expedia’s stock price is up more than 10% since the beginning of 2019. We have maintained our price estimate for Expedia at $126, which is slightly ahead of the current market price.

Selling and Marketing Expense: This primarily relates to direct costs, which includes traffic generation costs from search engines and internet portals, television, radio and print spending; and indirect costs, which includes stock-based compensation costs

• Expedia incurred $5.7 billion of selling and marketing expenses in 2018. (67% of the total operating expenses)
  • In 2018, direct costs grew 7% y-o-y, driven by ongoing marketing expenses at Expedia Partner Solutions, Hotels.com, and HomeAway (81% of total S&M expense.)
  • Indirect costs grew 17% y-o-y, driven by growth in personnel in the lodging supply organization.
• S&M expense added $2.4 billion in total operating expenses from 2015 to 2018 (CAGR of 19%)
• In 2019, we expect the company’s selling and marketing expense to grow at a slower rate and add nearly $150 million to total operating expenses. The company expects a bigger impact on the cost rationalization efforts at Trivago in 2019.

Technology and Content Expense: These costs include product development and content expenses, as well as technology costs to support infrastructure

• Expedia incurred $1.6 billion of technology and content expenses in 2018 (67% of the total operating expenses).
• T&C expense added $790 million in total operating expenses from 2015 to 2018 (CAGR of 25%)
• We expect T&C expense to add nearly $350 million to operating expenses in 2019.
  • This is due to higher cloud cost as well as continued investments in product enhancements and platform initiatives across the company in 2019. Expedia expects cloud expenses to increase from $141 million in 2018 to around $250 million in 2019.

General and Administrative Expense(G&A): These costs include personnel-related costs and fees for external professional services.

• Expedia incurred $800 million of general and administrative expenses in 2018 (9% of the total operating expenses).
• G&A expense added $230 million in total operating expenses from 2015 to 2018 (CAGR of 12%).
• In 2019, we expect G&A expense to add nearly $70 million to operating expenses.

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