16 February 2006

Expedia quarterly profit falls

Expedia Inc. said on Wednesday its quarterly profit fell 43 percent, missing analysts’ expectations and sending its shares down 15 percent in after-market trading.

Expedia, which was spun off from IAC/InteractiveCorp in August, said international growth slowed from earlier in the year due to competition in Europe, and revenue per room night declined in Expedia’s hotel business.

Revenue as a percentage of bookings, essentially Expedia’s cut of a sale, fell for both domestic hotels and domestic airlines.

Domestic hotels have been doing well, while airlines have seen fuller planes and thus may have less need to depend on third-party travel sites. Higher operating expenses, including marketing costs, also cut into profits.

Chief Executive Dara Khosrowshahi said on a conference call that worldwide competition from suppliers as well as travel agencies intensified in 2005. In Europe, he said Expedia had also seen an aggressive push into the online space by the traditional offline travel agencies.

Aaron Kessler, an analyst at Piper Jaffray, said increase in competition was not a new trend, and added that third-party travel sites needed to differentiate themselves in the market.

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