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Expedia hotel growth keeps profit slide modest

July 27, 2012 | Online Travel

Expedia's robust hotel revenue growth offset pressure from continued heavy technology spending, keeping the second quarter's profit decline unexpectedly shallow. Worldwide hotel revenue for the second quarter increased 16 per cent, driven by a 22 per cent rise in room nights stayed.

The report relieved market worries about online travel demand. Shares in the online travel agent--which operates its namesake brand, as well as Hotels.com and Hotwire--jumped 14% to $52.20 in after-hours trading. Through the close, the stock has risen 57% so far this year.

Wall Street had anticipated a much starker slide in adjusted earnings per share, as well as weaker revenue. The company also increased its outlook for the year, predicting full-year adjusted earnings growth in a high single-digit percentage with the possibility of low double-digit growth. It had predicted mid-single-digit percentage growth in April.

Expedia's results followed other mixed reports for online travel. Google Inc (GOOG) had touted global travel strength in its report, but TripAdvisor Inc. (TRIP)--a former unit of Expedia--spoke of relatively weak conversion rates for its booking partners. TripAdvisor shares have lost 22% of their value this week after it reported a weak top line.

Expedia's gross bookings increased 13%, while the number of transactions rose 20%. World-wide hotel revenue, the biggest contributor to the top line, improved 16% on a 22% rise in room nights stayed. Average daily room rates declined 1%, as foreign-exchange and rapid growth in its Asia Pacific hotel business--where revenue per room night is lower--hurt the rate.

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