20 February 2009

Expedia's near $3 Billion Q4 loss.


Expedia announced a massive writedown of its goodwill resulting in a net $2.76 billion loss. Expedia's revenue was down 6.7% for the last quarter of 2008, to $620.8 million. Gross sales were down 11%, to just over $4 billion.

This is about what we have been seeing for the last quarter from everyone. about a 10% drop in traffic. Expedia's traffic reductions come in the USA and indeed worldwide and display some worrying trends for the company. While the profitability/yield curve improved - it is clear that the business has lost momentum and will now trade at or below the transaction traffic in the market. While this does not mean that consumers are abandoning Expedia and OTA's in droves for conventional travel agents - it does mean that there is clearly a resetting of the world order. Online has stabilized its share of the market and has reached the point of maturity (let's not say saturation for now). For the online travel agency sector to grow its share of the global market - there needs to be something of greater value in its proposition to the consumer.

Surprisingly I see this as an opportunity for a sea change in the market. I believe that the GDS powered OTAs will start to lessen their dependency on sole/primary content sources such as a GDS. I believe we will see a rise in alternative content sources. I also foresee that airlines and suppliers will pursue a third way. With maturity in their own direct distribution and stagnation in both Corp (TMC) agency and OTA business - there is now a clear gap for alternative forms of distribution to take hold and establish themselves. The form of these alternative distribution channels is not yet clear. But in this downturn - the consumer will have a flight to value.

Can you say that about your distribution?


No comments: