Expedia Inc. saw net income in the three months ending September 30 decline by 28% to $59 million over the same quarter in 2005. Operating income before amortization was down by 2% in the quarter to $180 million due to higher operating expenses – particularly selling and marketing costs. Gross bookings rose by 8% to $4.2 billion, including a 2% rise in the US and a 29% increase in international reservations. Revenue was up by 5% to $613.9 million, mainly driven by increased worldwide merchant hotel revenue but offset by a decline in US domestic air revenue. Domestic revenue was down by 3% while international revenue was up by 30%. Worldwide merchant hotel revenues increased by 14%, primarily driven by a 9% rise in room nights stayed including rooms delivered as part of holiday packages, as well as a 5% increase in revenue per room night, the online company said. But Expedia added that "hotel room suppliers have taken advantage of higher occupancies and the efficacy of their own online distribution to negotiate more favourable terms". Worldwide air revenues slumped by 23% due to a 17% decline in revenue per ticket and a 6% drop in tickets sold. "The decrease in revenue per air ticket reflects reduced economics stemming from recently negotiated GDS and airline agreements as well as continued reductions in agency compensation by [US] domestic carriers," Expedia said. "The decline in air tickets sold reflects continued challenges in obtaining air inventory in light of record industry load factors and the reduction in relative capacity of carriers participating in our worldwide marketplace." President and CEO Dara Khosrowshahi said: "We made positive strides this quarter in stabilising the company's operating profitability as we continued to lay groundwork in the technology, supply partnerships and traveller features that we believe will result in sustained transaction and bookings growth over the longer term."  Report by Phil Davies

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USER COMMENTS

Nick Cooper Director, Villa Plus 10 November 2006, 17:05:54 GMT Where are the profits? I have always said that these "dynamic" companies such as Expedia can only make a good profit if they get good commissions from airlines and hoteliers. If you feel airlines and hoteliers will not give them good commission rates, then their business model will not generate significant profits.