expedia

Expedia, Inc.

Company Profile

Publication Date: 5 Aug 2010

www.datamonitor.com

Asia PacificAmericasEurope, Middle East & AfricaLevel 46245 5th Avenue119 Farringdon Road2 Park Street4th FloorLondonSydney, NSW 2000New York, NY 10016EC1R 3DAAustraliaUSAUnited Kingdom

t: +61 2 8705 6900t: +1 212 686 7400t: +44 20 7551 9000f: +61 2 8088 7405f: +1 212 686 2626f: +44 20 7551 9090e: [email protected]: [email protected]: [email protected]

ABOUT DATAMONITOR

Datamonitor is a leading business information company specializing in industry analysis.

Through its proprietary databases and wealth of expertise, Datamonitor provides clients with unbiasedexpert analysis and in depth forecasts for six industry sectors: Healthcare, Technology, Automotive,Energy, Consumer Markets, and Financial Services.

The company also advises clients on the impact that new technology and eCommerce will have ontheir businesses. Datamonitor maintains its headquarters in London, and regional offices in NewYork, Frankfurt, and Hong Kong. The company serves the world's largest 5000 companies.

Datamonitor's premium reports are based on primary research with industry panels and consumers.We gather information on market segmentation, market growth and pricing, competitors and products.Our experts then interpret this data to produce detailed forecasts and actionable recommendations,helping you create new business opportunities and ideas.

Our series of company, industry and country profiles complements our premium products, providingtop-level information on 10,000 companies, 2,500 industries and 50 countries. While they do notcontain the highly detailed breakdowns found in premium reports, profiles give you the most importantqualitative and quantitative summary information you need - including predictions and forecasts.

All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic,mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc.

The facts of this profile are believed to be correct at the time of publication but cannot be guaranteed. Please note that thefindings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faithfrom both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Datamonitorcan accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.

Expedia, Inc. © Datamonitor

Expedia, Inc.

TABLE OF CONTENTS

Company Overview..............................................................................................4

Key Facts...............................................................................................................4

Business Description...........................................................................................5

History...................................................................................................................6

Key Employees...................................................................................................10

Key Employee Biographies................................................................................11

Major Products and Services............................................................................15

Revenue Analysis...............................................................................................16

SWOT Analysis...................................................................................................17

Top Competitors.................................................................................................22

Company View.....................................................................................................23

Locations and Subsidiaries...............................................................................26


Expedia, Inc.TABLE OF CONTENTS

COMPANY OVERVIEW

Expedia (the company) is an online travel company which offers travel products and services. Thecompany provides, on a stand-alone and package basis, products and services provided by airlines,lodging properties, car rental companies, destination service providers, cruise lines and other travelproduct and service companies. The company primarily operates in the US. It is headquartered inBellevue, Washington and employs 7,960 people.

The company recorded revenues of $2,955.4 million during financial year ended December 2009(FY2009), an increase of 0.6% over FY2008. The reason for the increase in revenues was primarilydue to strong performance in its leisure and TripAdvisor media network segments. The operatingprofit of the company was $571.4 million during FY2009, as compared to operating loss of $2,428.9million in FY2008. The net profit was $299.5 million in FY2009, as compared to net loss of $2,517.8million in FY2008.

KEY FACTS

Expedia, Inc.Head Office333 108th Avenue NEBellevueWashington 98004USA

1 425 679 7200Phone

1 425 679 7240Fax

http://www.expediainc.comWeb Address

2,955.4Revenue / turnover(USD Mn)

DecemberFinancial Year End

7,960Employees

EXPENASDAQ GlobalSelect Market Ticker


Expedia, Inc.Company Overview

BUSINESS DESCRIPTION

Expedia is the one of the leading online travel companies in the world. The company operates morethan 90 points of sale globally in over 60 countries, with sites in North and South America, Europe,the Middle East and the Asia-Pacific region.

The company has created a global travel marketplace used by a wide range of leisure and corporatetravelers, offline retail travel agents and travel service providers.These services are made available,on a stand-alone and package basis, including travel products and services provided by numerousairlines, lodging properties, car rental companies, destination service providers, cruise lines andother travel product and service companies. Additionally, it also offers travel and non-travel advertisersaccess to a potential source of incremental traffic and transactions through its various media andadvertising offerings on both the TripAdvisor Media Network and on its transaction-based websites.

The company's portfolio of brands includes: Expedia.com, hotels.com, Hotwire.com, Egencia,TripAdvisor, Expedia Local Expert, Classic Vacations, Venere and eLong. The company's brandsprovide a wide selection of travel products and services, from simple, discounted travel to morecomplex, luxury travel. Its travel offerings primarily consist of airline flights, hotel stays, car rentals,destination services, cruises and package travel, which encompasses multiple travel products.

*The company operates through three reportable business segments: leisure, TripAdvisor MediaNetwork and Egencia.

The leisure segment offers a full range of travel and advertising services to its worldwide customersthrough a variety of brands including: Expedia.com and hotels.com in the US and localized Expediaand hotels.com websites throughout the world.

TheTripAdvisor Media Network segment provides advertising services to travel suppliers on itswebsites like information about cities, hotels, restaurants and activities in a variety of destinationsthrough tripadvisor.com.

The Egencia segment offers managed travel services to corporate customers in North America,Europe, and the Asia Pacific region.

* The company reorganized its business segments in FY2009 into three reportable segments: leisure,TripAdvisor media network and Egencia from its earlier two reportable segments, North Americaand Europe. The restructuring of the business segments was due to reorganization of its businessaround its global brands.


Expedia, Inc.Business Description

HISTORY

Expedia was initially launched by Microsoft as an online travel information service in 1994. Thecompany launched its online sales division in 1996. In 1999, the company offered its initial publicoffering (IPO). Later in the year, the company acquired rivals Travelscape.com and VacationSpot.com.

In 2001, Expedia collaborated with ticketing giant Ticketmaster to enable consumers to accessTicketmaster events. In the same year, Microsoft sold its 65% stake in the company to USA Interactive,following the downturn in the US travel market.

USA Interactive (now InterActiveCorp (IAC), Expedia and Equinox Merger Corporation enteredplanned to merge operations in 2003. Consequently, Expedia became a wholly owned subsidiaryof InterActiveCorp.

In 2004, the company acquired Egencia, an online corporate travel management company withoperations in France, Belgium and the UK, the acquisition further strengthened its operations inEurope.

The company settled trademark dispute proceedings against Expedia Services, a professionalservices firm in the UK in 2004. Expedia Services ceased using the Expedia name, mark and anysimilar words or colorings in any future business transactions including customer dealings, financialtrading, corporate branding and advertising.

IAC completed the spin-off of Expedia in 2005. In the same year, Expedia tied up with HiltonInternational in a global agreement that allowed Hilton to add over 400 of its properties to Expedia'spreferred hotel program.

In a move to strengthen its product portfolio, Expedia signed a number of agreements in 2006.Expedia signed a three-year agreement with The Louvre Hotel Group. This agreement added morethan 600 properties across Europe to Expedia's hotel offering on all Expedia and Hotels.com brandedpoints of sale globally. It also signed a long-term agreement with Kimpton Hotels, which providedgreater access to Kimpton's inventory and rates. Also in 2006, Expedia announced a relationshipwith BedandBreakfast.com, which brought a wide range of bed and breakfast offerings to Expediatravelers. In the same year, Expedia expanded its marketing and distribution partnership with HyattHotels & Resorts.

Expedia formed a long-term technology partnership with Amadeus IT Group, a player in technologysolutions for the travel and tourism industry, in 2006. In the same year, Expedia and ContinentalAirlines entered a five-year strategic partnership under which Continental's range of products andservices, including all fares and inventory, would be marketed through Expedia.com and its affiliatesites.


Expedia, Inc.History

Expedia.com, the company's online travel site entered a long-term strategic relationship with CondeNast in 2006 to serve as the exclusive online travel and booking engine for Conde Nast's web siteConcierge.com.

Expedia entered a partnership with Sofitel, a brand of Accor hotels in 2006.Through this agreement,Sofitel would be available on all Expedia and hotels.com sites globally.

Expedia announced a new five-year strategic partnership with United Airlines (United) in 2006, underwhich all of United's published fares, schedules and inventory were made available throughExpedia.com and its affiliate sites to travelers worldwide.

AirTran Airways, a subsidiary of AirTran Holdings, and Expedia signed a new four-year strategicpartnership in 2006. The agreement was primarily focused towards marketing of AirTran Airways'range of products and services, including all fares, schedules and inventory, through Expedia.com.In the same year, the company launched its Japanese web site, Expedia.co.jp.

Expedia partnered with Jin Jiang International Hotel Management Company (JJIHMC), the largesthotel owner and operator in China, in 2007. Under the agreement, JJIHMC offered its entire inventoryof hotels to Expedia customers.

The company reached a multi-year agreement with Hertz, one of the general use car rental brands,in 2007 to continue its participation in the Expedia Preferred Rental Car Program.

Expedia signed a new long-term strategic agreement with Frontier Airlines in 2007, under whichFrontier Airlines' fares, schedules and inventory were available through Expedia's portfolio of brands.In the same year, Expedia expanded and extended its multi-year partnership with Omni Hotels forproviding Omni with online marketing opportunities across the Expedia network of travel sites.

Expedia entered a long-term strategic partnership with CruiseShipCenters International, a cruisevacation specialist, in 2007. The company launched its Spanish website, Expedia.es during thesame year.

Expedia announced a new agreement with American Airlines, in 2007; under this agreement all ofAmerican Airlines published fares, schedules and inventory, were offered to travelers throughExpedia.com, Expedia.ca, and Expedia Corporate Travel.

The company entered a new multi-year strategic partnership with Alaska Airlines and Horizon Air in2007. Under the agreement, all of the carriers' published fares, schedules and inventory were offeredthrough Expedia.com and Expedia.ca.

Further in 2007, the company launched its New Zealand website (www.expedia.co.nz). Expedia andIHG (InterContinental Hotels Group) entered a multi-year agreement during the same year. Theagreement allowed consumers to book IHG hotels on Expedia sites globally.



Expedia and CruiseShipCenters International, a North American cruise vacation specialist, launchedtheir new combined brand, Expedia CruiseShipCenters in 2007.

Expedia Corporate Travel changed its name to Egencia in 2008. In addition, Expedia acquired Italy'sVenere Net ApA from Advent International in the same year. Later in 2008, Expedia signed a longterm global agreement with Dubai's Jumeirah Group, a hospitality management company; underthe agreement Jumeirah hotels would be made available on all Expedia and hotels.com brandedpoints of sale globally.

Expedia signed another long term, strategic supply agreement with Red Lion Hotels, a full-servicechain of hotels providing business and leisure travelers, for supporting booking at all of Red LionHotel's 50 properties on Expedia and hotels.com branded sites worldwide.

Further in 2008, Expedia announced a new organizational structure that aligned its worldwide brandsand technology functions to support more than 60 global points of sale in more than 40 countries.Additionally, Expedia announced a new multi-year, global agreement with SAS Scandinavian Airlines,the largest listed airline and travel group in the Nordic countries. Under the agreement, SAS productsand fares were made available worldwide on Expedia- branded sites, and through Egencia. Thedeal was an extension of the existing relationship between Expedia and SAS and marks SAS's firstglobal agreement with an online travel company.

In July 2009, Expedia.com, an Expedia company, selected The Martin Agency as its new advertisingagency of record. The Martin Agency will be responsible for Expedia.com's advertising includingbroadcast, print, radio, and digital brand marketing.

Expedia announced a global partnership agreement with Prince Hotels & Resorts, the largestindependent hotel chain in Japan in September 2009. Under the agreement, Expedia will add PrinceHotels properties to the selection on its more than 70 Expedia- and hotels.com-branded sites in 55countries worldwide.

In December 2009, the company launched the Egencia Global Alliance to expand its network ofstrategic partnerships with leading local travel management companies (TMCs) and provide furtherglobal support to clients around the world.With this global alliance, Expedia extended its geographicalfootprint to offer its services in new regions including Argentina, Hungary, Russia, Romania, UnitedArab Emirates, Singapore, Taiwan, Hong Kong and Uruguay.

Expedia signed a global partnership agreement with Top International Hotels, a Germany-basedhotel brand with more than 250 three- to five-star properties across Europe in March 2010. Underthe new agreement, all of Top International properties will be available on more than 90 Expediaand hotels.com branded sites worldwide. In the same month, the company expanded its EgenciaGlobal Alliance with leading local travel management companies (TMCs) in Brazil, Mexico, Japan,Czech Republic, Slovakia, Austria and Malaysia. Furthermore, Expedia also signed a global marketingand distribution agreement with Air Pacific Airlines.



In April 2010, the company signed an agreement with China's Motel 168 Hotel Chain, a leadingbudget hotel brand with more than 300 hotels in 50 cities across China.

The company signed a global partnership agreement in June 2010, with Iberostar Hotels & Resorts,a Spanish hotel chain with properties in 16 countries throughout the Caribbean, South America,Europe and North Africa. Under this agreement, Iberostar’s portfolio of beachfront properties will beavailable to the millions of consumers who shop and book travel on more than 90 Expedia andHotels.com -branded sites worldwide each month.



KEY EMPLOYEES

CompensationBoardJob TitleName

4843696 USDExecutive BoardPresident and Chief ExecutiveOfficer

Dara Khosrowshahi

4502703 USDExecutive BoardChairman and Senior ExecutiveBarry Diller

Executive BoardVice ChairmanVictor A. Kaufman

329994 USDNon Executive BoardDirectorA. George Battle

319994 USDNon Executive BoardDirectorJonathan L. Dolgen

Non Executive BoardDirectorWilliam R. Fitzgerald

314994 UGXNon Executive BoardDirectorCraig A. Jacobson

329994 USDNon Executive BoardDirectorPeter M. Kern

Non Executive BoardDirectorJohn C. Malone

285369 USDNon Executive BoardDirectorJose A. Tazon

1775915 USDSenior ManagementExecutive Vice President and ChiefFinancial Officer

Michael B. Adler

Senior ManagementExecutive Vice President and ChiefTechnology Officer

Pierre V. Samec

Senior ManagementSenior Vice President, CorporateDevelopment

Mark Okerstrom

Senior ManagementSenior Vice President and ChiefAccounting Officer

Patricia Zucotti

Senior ManagementCo-President, Expedia PartnerServices Group

Dhiren Fonseca

Senior ManagementCo-President, Expedia PartnerServices Group

Gary Fritz

Senior ManagementPresident, Expedia WorldwideEric Grosse

Senior ManagementPresident, hotels.com Worldwide &Venere.com

David Roche

Senior ManagementPresident, Hotwire GroupClem Bason

Senior ManagementPresident and Chief ExecutiveOfficer, TripAdvisor.com

Stephen Kaufer

Senior ManagementPresident, Expedia Affiliate NetworkHenrik Kjellberg

Senior ManagementPresident, EgenciaRob Greyber

Senior ManagementCo-President, Classic VacationsGreg Bernd

Senior ManagementCo-President, Classic VacationsDavid Hu

Senior ManagementChief Executive Officer, eLong, Inc.Guangfu Cui


Expedia, Inc.Key Employees

KEY EMPLOYEE BIOGRAPHIES

Dara Khosrowshahi

Board: Executive BoardJob Title: President and Chief Executive OfficerAge: 40

Mr. Khosrowshahi currently serves as the President and Chief Executive Officer at Expedia. He hasbeen the Chief Executive Officer at Expedia since it spun off from IAC/InterActiveCorp (IAC) inAugust 2005. Prior to that, he was acting Chief Executive Officer of the travel portfolio within IACfrom 2004. Previously, Mr. Khosrowshahi had served as Executive Vice President and Chief FinancialOfficer at IAC/InterActiveCorp since 2002.

Barry Diller

Board: Executive BoardJob Title: Chairman and Senior ExecutiveSince: 2005Age: 68

Mr. Diller has been the Chairman and Senior Executive at Expedia since 2005. He also serves asthe Chairman and Chief Executive Officer at IAC/InterActiveCorp since 1995. Since 1992, Mr. Dillerserved as Chief Executive Officer for a number of predecessor companies engaged in media andinteractivity prior to the formation of IAC. He also serves on the boards of The Washington PostCompany and the Coca-Cola Company. Mr. Diller is also a trustee of New York University and serveson the Executive Board for the Medical Sciences at UCLA.

Victor A. Kaufman

Board: Executive BoardJob Title: Vice ChairmanSince: 2005Age: 66

Mr. Kaufman has been the Vice Chairman at Expedia since 2005. He has been a Director atIAC/InterActiveCorp (IAC) and its predecessors, since 1996 and has been the Vice Chairman of IACsince 1999. Previously, Mr. Kaufman served as the Chairman and Chief Financial Officer at IAC.Prior to joining IAC, he worked in various roles with Savoy Pictures Entertainment, including that ofChairman, Chief Executive Officer, and Director.

A. George Battle


Expedia, Inc.Key Employee Biographies

Board: Non Executive BoardJob Title: DirectorSince: 2005Age: 66

Mr. Battle has been a Director at Expedia since 2005. He served as the Executive Chairman of AskJeeves from January 2004 till July 2005 and as the Chief Executive Officer from December 2000until January 2004. Mr. Battle currently serves as Chairman of the Board at Fair Isaac Corporation,a position he has held since 2002 and a member of the Board of OpenTable, Inc.

Jonathan L. Dolgen


Mr. Dolgen has been a Director at Expedia since 2005. He is a private investor and has served asa senior advisor to Viacom, since 2004. Also since 2004, Mr. Dolgen has been a principal of WoodRiver Ventures. Prior to joining Viacom, he held various positions at Columbia Pictures Industries,Inc., Twentieth Century Fox and Fx, Inc., and Sony Pictures Entertainment. Mr. Dolgen holds a JDdegree from New York University and a BS degree from Cornell University.

William R. Fitzgerald


Mr. Fitzgerald has been a Director at Expedia since 2006. He has served as a Senior Vice Presidentof Liberty Media since 2000. In addition, he also serves as Chairman and Chief Executive Officerat Ascent Media Corporation. Mr. Fitzgerald received his undergraduate degree from IndianaUniversity Kelley School of Business and a master's degree from the Kellogg School of Business atNorthwestern University.

Craig A. Jacobson




Mr. Jacobson is a Director at Expedia since 2007. He was a founding partner at the law firm ofHansen, Jacobson, Teller, Hoberman, Newman & Richman, where he practiced entertainment lawfor the past 20 years. Mr. Jacobson is a member of the Board of Trustees at the USC Fine ArtsSchool and a member of the Board of Directors of Aver Media, a privately-held Canadian lendinginstitution.

Peter M. Kern


Mr. Kern has been a Director at Expedia since 2005. He also serves as a Managing Partner ofInterMedia Partners (InterMedia). Prior to working at InterMedia, Mr. Kern was Senior ManagingDirector and Principal of Alpine Capital. He joined Alpine when the company merged with his ownfirm, Gemini Associates (Gemini), in 2001. Prior to founding Gemini, Mr. Kern was at the HomeShopping Network and Whittle Communications. He holds a BS from the Wharton School at theUniversity of Pennsylvania.

John C. Malone


Mr. Malone has been a Director at Expedia since 2005. He has served as Chairman and a Directorof Liberty Media Corporation (LMC) since 1990. Mr. Malone has also served as President and ChiefExecutive Officer of the organization since 2004. Previously, Mr. Malone held the positions ofChairman and a Director of Liberty Satellite & Technology. He also served in various roles atTele-Communications (TCI), first as a Director and Chief Executive Officer from 1994 to 1996, thenas Chairman of the Board from 1996 to 1999. Mr. Malone is also a Director at The Bank of NewYork, Liberty Media International and UnitedGlobalCom, Inc.

Jose A.Tazon


Mr. Tazon has been a Director at Expedia since 2009. Previously, he served as the non-executiveChairman of the Board of Directors of Amadeus IT Group SA ("Amadeus"), a leading provider of IT



solutions to the travel and tourism industry. Mr. Tazon received advanced degrees inTelecommunications Engineering and Data Processing from the Universidad Politecnica, Madrid,Spain.

Michael B. Adler

Board: Senior ManagementJob Title: Executive Vice President and Chief Financial OfficerAge: 45

Mr. Adler currently serves as the Executive Vice President and Chief Financial Officer at Expedia.Most recently, he served as senior vice president of financial planning and analysis forIAC/InterActiveCorp. Mr. Adler received a Bachelor's of Science Degree in Economics from TheWharton School, University of Pennsylvania, and a Juris Doctor's Degree from The University ofPennsylvania Law School.

Pierre V. Samec

Board: Senior ManagementJob Title: Executive Vice President and Chief Technology OfficerSince: 2009Age: 46

Mr. Samec has been the Executive Vice President and Chief Technology Officer at Expedia since2009. He had previously served as Senior Vice President, Engineering since joining Expedia in2006. Prior to joining Expedia, Mr. Samec had been Senior Vice President of the Product Group ofCartesis since 2004. He holds a general engineering degree from Ecole des Mines de Paris, and amaster's of science and Doctorate's degrees in geophysics from Stanford University.

Mark Okerstrom

Board: Senior ManagementJob Title: Senior Vice President, Corporate Development

Mr. Okerstrom is currently the Senior Vice President, Corporate Development at Expedia. Prior tojoining Expedia, he was with strategy consultancy Bain & Company in Boston and San Francisco.Mr. Okerstrom holds a MBA from Harvard Business School and a law degree from the University ofBritish Columbia.



MAJOR PRODUCTS AND SERVICES

Expedia is a provider of online travel services. The company’s key services include the following:

Services:

Online travel services

Stand-alone and packaged travel products and services provided by airlines, lodging properties, car rental companies, destination service providers, cruise lines and other travel product and service companies.

Media and advertising offerings for travel and non-travel advertisers

Brands:

Expedia.comhotels.comHotwire.comEgenciaTripAdvisorExpedia Local ExpertClassic Vacations eLongCruiseShipCentersVenere


Expedia, Inc.Major Products and Services

REVENUE ANALYSIS

Expedia recorded revenues of $2,955.4 million during FY2009, an increase of 0.6% over FY2008.For FY2009, the US, the company's largest geographic market, accounted for 63.1% of the totalrevenues.

Expedia generates revenues through three business segments: leisure (89.2% of the total revenuesduring FY2009), TripAdvisor Media Network (7.2%), and Egencia (3.7%).

Revenue by segment

During FY2009, the leisure segment recorded revenues of $2,635 million, an increase of 0.3% overFY2008. The TripAdvisor Media Network segment recorded revenues of $212 million in FY2009,an increase of 5.5% over FY2008.

The Egencia segment recorded revenues of $108 million in FY2009, a decrease of 1.8% as comparedto FY2008.

Revenue by geography

The US, Expedia's largest geographical market, accounted for 63.1% of the total revenues in FY2009.Revenues from the US reached $1,866 million in FY2009, a decrease of 3.7% as compared toFY2008.

All other countries accounted for 36.9% of the total revenues in FY2009. Revenues from all othercountries reached $1,089.4 million in FY2009, an increase of 8.9% over FY2008.


Expedia, Inc.Revenue Analysis

SWOT ANALYSIS

Expedia offers a wide range of product and services to its customers. Its offerings include acomprehensive array of travel products and services to travelers. The company facilitates travelproducts and services either as stand-alone products or as part of package transactions. Broadrange of product and service offering helps the company to hedge its operations against down turnin any particular segment, which aids in sustaining revenue growth. However, challenges in domesticand global economic conditions could adversely impact Expedia's businesses and financialperformance.

WeaknessesStrengths

Legal cases adversely affect the company'sbrand image

Broad range of product and serviceofferings reduce business riskGrowing international business presencerelieves pressure on domestic marketStrong portfolio of travel brands

ThreatsOpportunities

Regulation and lawsGlobal partnership agreementsGlobal economic situation may continue tohave an adverse effect on businessperformance

Growing demand for online travel industry

High dependence on travel suppliers andother intermediaries

Strengths

Broad range of product and service offerings reduce business risk

Expedia offers a wide range of product and services to its customers. Its offerings include acomprehensive array of travel products and services to travelers. The company facilitates travelproducts and services either as stand-alone products or as part of package transactions. It makesavailable travel products and services provided by several airlines, lodging properties, car rentalcompanies, destination service providers, cruise lines and other travel product and service companies.Additionally, it also offers various media and advertising offerings to travel and non-travel advertiserson both the TripAdvisor Media Network and on its worldwide websites such as Expedia.com andhotels.com.


Expedia, Inc.SWOT Analysis

Broad range of product and service offering helps the company to hedge its operations against downturn in any particular segment, which aids in sustaining revenue growth.

Growing international business presence relieves pressure on domestic market

Expedia is one of the largest online travel agency with strong international presence in 60 countries.During FY2008–09, it launched ‘’the Egencia Global Alliance’’ to expand its network of strategicpartnerships with leading local travel management companies (TMCs) and provide further globalsupport to clients around the world. With this launch, Expedia expanded its geographical footprintto offer its services in new regions including Argentina, Hungary, Russia, Romania, United ArabEmirates, Singapore, Taiwan, Hong Kong and Uruguay.

The company's growing international presence has resulted in significant growth, in terms of increasedrevenue generating capacity from the international markets. For instance, year on year (YOY) basis,the revenues from international markets contributed 34.0% to total revenues in FY2008, 36.9% inFY2009, against 32.0% in FY2007. Furthermore, the revenues from international markets grew ata compounded annual growth rate (CAGR) of 13% for period spanning FY2007–09.

Expedia currently operates more than 90 global points of sale in about 60 countries, as comparedto 60 global points of sale globally in over 40 countries in FY2008. The company's internationaloperations are spread across North America, South America, Latin America, Europe, Middle East,Africa and Asia-Pacific. Growing international business presence reduces the company's exposureto country specific factors such as changes in economic conditions and most importantly, increasingcompetition from other players in the market.

Strong portfolio of travel brands

Expedia owns a wide portfolio of travel brands. The company leverages its brand portfolio to targeta wide range of travelers, travel suppliers and advertisers. For instance, it targets several differentdemographics, from the value-conscious traveler through Hotwire brand to luxury travelers seekingcustomized vacation package through Classic Vacations brand.

Expedia brand also appeals to the wide range of travelers, with extensive service offering rangingfrom single item bookings of discounted product to bundling of higher-end travel packages. Itshotels.com site and its international versions target travelers with premium hotel content aboutlodging properties, such as 360 degree tours and hotel reviews. Through Egencia, it makes travelproducts and services available on a managed basis to corporate travelers in North America, Europeand the Asia Pacific region. Further, its TripAdvisor Media Network allows it to reach a broad rangeof travelers with travel opinions and user-generated content.

The portfolio of strong travel brands enables the company to appeal to a diverse range of travelers,suppliers and advertisers, which in turn enhances its market position.

Weaknesses



Legal cases adversely affect the company's brand image

Expedia and its subsidiaries are subject to several legal proceedings and claims. These includeproperty, personal injury, contract, alleged infringement of third-party intellectual property rights andother claims. Many of these lawsuits have been in proceedings since 2003. In addition, during June2009, a new class action suit was filed against Expedia Canada by a consumer alleging disclosuresrelated to “taxes and service fees”. It seeks damages in the amount of CAD$50 million ($43.7 million)for the class as well as interest, fees and alternate damages measures.

Any unfavorable outcome out of these legal cases will not only result in financial damages for Expedia,but also affect the company's brand image.

Opportunities

Global partnership agreements

The company signed a global partnership agreement with Top International Hotels in March 2010,a Germany-based hotel brand with more than 250 three- to five-star properties across Europe.According to the new agreement, all of Top International's Hotel properties will be available on morethan 90 Expedia and hotels.com -branded sites worldwide. Furthermore, in April 2010, it also signedan agreement with China's Motel 168 Hotel Chain, a leading budget hotel brand with more than 300hotels in 50 cities across China.

Later in June 2010, Expedia entered an agreement with Iberostar Hotels & Resorts, a Spanish hotelchain with properties in 16 countries throughout the Caribbean, South America, Europe and NorthAfrica. Under this agreement, Iberostar’s portfolio of beachfront properties will be available to themillions of consumers who shop and book travel on more than 90 Expedia and Hotels.com -brandedsites worldwide each month.

Partnership agreements such as these is likely to help Expedia to increase its online hotel productoffering services, which could lead to more customer traffic, which in turn, augers well for thecompany’s future growth.

Growing demand for online travel industry

Global travel trends are changing rapidly, especially since the advent of the Internet and the digitalera. These days more and more travelers are going online to plan, book, and even review theirholidays. In 2009, the online tourism bookings reached $153 billion from the US and Europe aloneand the average global growth rate in travel bookings made online is 34.6% per annum.This growingtrend is expected to continue even in FY2010. The growing online travel market provides goodopportunity for service providers such as Expedia to grow its business in the long term. Expedia canfurther leverage its travel brand name to increase its revenues and profits.



Threats

Regulation and laws

The company operates in travel industry which makes it to comply with stringent laws and regulationswithout fail. These laws and regulations increase the company’s compliance cost structure. As thecompany operates in varied markets, it is subject to comply with both domestic and internationalregulations. For instance, Expedia’s operations are subject to regulation by the U.S. Department ofTransportation and various other rules and regulations governing the provision of air transportation,including those relating to advertising and accessibility. With the growing international presence ofthe company, Expedia is also increasing its exposure to comply with the international laws andregulations applicable to travel agents in every market they operate. For instance, the EuropeanEconomic Community Council Directive on Package Travel Package Holidays and Package Toursimposes various obligations upon marketers of travel packages like Expedia, such as disclosureobligations to consumers and liability to consumers for improper performance of the package,including supplier failure. The company’s heavy exposure towards both domestic and internationalregulations might increase its compliance cost structure, which in turn puts pressure on margins.

Global economic situation may continue to have an adverse effect on business performance

Travel expenditures have direct correlation with personal and business discretionary spending levels.It tends to decline during economic downturns. In the second half of 2009, there was a rapid softeningof domestic and global economic conditions, and the outlook for 2010 is uncertain.

The slowing of the domestic and global economies has increased unemployment and reduced thefinancial capacity of both corporate and leisure travelers, thereby slowing spending on the servicesit provide. The worsening of domestic and global economic conditions could adversely impactExpedia's businesses and financial performance.

High dependence on travel suppliers and other intermediaries

Expedia dependence on its travel suppliers and other intermediaries is very high which offers it aweak bargaining power. Over the last several years, Expedia has experienced downward pressureon remuneration from its suppliers. A substantial portion of Expedia's revenue is derived fromcompensation negotiated with travel suppliers and global distribution system (GDS) partners forbookings made through its websites. Over the last several years, air and hotel travel suppliers havereduced or in some cases eliminated payments to travel agents and other travel intermediaries. Inaddition, as the company’s hotel remuneration varies with the room rates paid by travelers (AverageDaily Rates, or “ADRs”), to the extent ADRs grow more slowly than anticipated or decline, its revenuefor each room sold will generally be proportionately lower.The company also witnessed a significantdecline in ADRs, which began in late 2008 and continued into 2009, and negatively impacted itshotel booking revenue. Any further decline in ADRs could negatively impact its hotel booking businessfurther.



The company’s high dependence on suppliers and other intermediaries offers strong bargainingpower to its suppliers who can bargain hard and further reduce or eliminate compensation, whichcould negatively impact its revenues and margins.



TOP COMPETITORS

The following companies are the major competitors of Expedia, Inc.

Orbitz Worldwide, Inc.Priceline.com, IncorporatedOnline Vacation Center Holdings Corp.Sabre Holdings Corporation


Expedia, Inc.Top Competitors

COMPANY VIEW

A statement by Dara Khosrowshahi, President and Chief Executive Officer at Expedia is given below.The statement has been taken from the company's 2009 annual report.

To our stockholders:

As the global economy began to melt down in late 2008, Expedia, like many companies, experiencedone of the most uncertain times in its history.The only thing we were certain of was that 2009 wouldbring unprecedented challenges. We took the opportunity to look hard at our business, evaluatingthe long-term competitiveness of our products and whether we were optimally structured as a globalcompany. Amidst the uncertainty, we sought not to simply weather the down turn, but to betterposition Expedia for long-term growth, regardless of the economic climate.

In anticipation of the challenges 2009 would bring, we reorganized the business from its previousregional orientation to a global brand orientation, establishing worldwide organizations for the Expedia,Hotels.com and Expedia Affiliate Network businesses. Importantly, this enabled us to institute aglobal view across our business, leverage best practices across geographies, and scale platformsand systems to achieve greater efficiency. As a result, our business teams and technology teamsare working more closely together, driving accountability and closer coordination among thesegroups.

We also recognized that we needed to knock down barriers that were keeping consumers frombooking travel with us, and to attract and retain an ever increasing customer base. We reinvigoratedour intent to always put travelers first, and as a result, we eliminated or reduced fees across virtuallyall of our products and in most geographies in which we operate. We also expanded our loyaltyprograms, most notably the Hotels.com welcomerewards program, which is one of the simplest andmost successful loyalty programs in online travel, with members receiving one free night for every10 room nights they book with Hotels.com. These moves, combined with substantially lower hotelroom and air ticket pricing, resulted in share gains and unit volume growth we would be proud of inany economy.

We are certain that our products and services are now more compelling than they have ever been.As a public demonstration of the company’s efforts to put travelers first in every thinkable way, ourflagship booking brand Expedia.com recently rebranded itself with the tagline “Where you bookmatters,” an assertion we strongly believe in, and on which our employees are dedicated to deliveringevery day.

At the same time, the company is committed to fiscal discipline, and in 2009 we found manyopportunities to be more efficient. We made investments in platforms and infrastructure that webelieve can save us money in the near-term and scale well over time. Investments in credit cardpayment processing and air fulfillment technology have driven efficiencies in our cost of sales.Investments in call center technology have and will continue to improve service and drive efficiencies


Expedia, Inc.Company View

in our customer service operations. In addition, we have consolidated the Hotels.com business fromtwo platforms onto one, which will improve our ability to more rapidly and efficiently innovate goingforward. While oriented for growth, our company is run with a discipline to leverage our cost baseso that our growth is scalable.

International growth is one of our top priorities, and we are driving for international revenue toconstitute 50% of our mix within the next five years. The global Hotels.com brand has been able tonimbly enter and gain traction in new markets, now serving consumers in more than 70 countries.We operate 19 Expedia-branded sites worldwide, and our corporate travel brand Egencia is nowserving 31 countries. TripAdvisor has 19 country specific sites, including several in Europe, as wellas Brazil and India. In addition, TripAdvisor has invested aggressively in China with the launch ofDaoDao.com and the acquisition of Chinese meta-search site Kuxun. Our private label EAN businesshas also integrated its global functions and considerably improved its growth rate.

Key to our international expansion efforts is our ability to expand the depth, breadth and quality ofthe product in our marketplace across air, hotel, car and other products. As a key example, welaunched the Expedia Easy Manage program, our agency hotel model, in Europe in the spring of2009. With our Easy Manage agency and Expedia Special Rate merchant models, we can nowbetter address the varied business needs of our hotel partners and offer them the right frameworkwithin which to take advantage of Expedia’s global scope and scale. We now have over 40,000merchant and agency hotel properties in Europe with direct Expedia contracts, and we expect tocontinue to significantly grow this supply base in 2010.

We are also focused on Asia Pacific and Latin America, where we see outsized potential for growthin these less penetrated markets. Today, APAC and Latin America make up approximately 5% ofour business, a figure that we think we can double in the next couple of years.

Our media businesses, TripAdvisor Media Network and Expedia Media Solutions Group, continueto grow their leadership positions. In an environment where many companies shrank year-over-year,our advertising and media revenue grew 10% in 2009, accounting for more than 10% of our worldwiderevenues.We have continued to expand the breadth of our media product base, both geographicallyand with new products such as TripAdvisor Business Listings, TripAdvisor Flights, FlipKey VacationRentals and Expedia StorePoint Expandables. Our execution in travel media continues to set usapart competitively, hedges a portion of our marketing spend and add a complementary and highlyprofitable dimension to our portfolio of leading consumer travel booking brands.

Our solid performance in 2009 has confirmed that our business model is resilient and our successisn’t dictated by one type of economic environment over another. We have a strong balance sheet,an improved investment grade credit profile, and we generated $584 million of free cash flow for theyear. As a result, we are in a position that we can appropriately invest in our businesses, continueto make opportunistic acquisitions, and still generate excess cash to return to our investors. To thisend, we paid our first ever quarterly cash dividend in March 2010.

Though some may say that paying a dividend is a sign of slowing growth, it is actually a reflectionof the confidence that we have in our business and especially our employee base. 2009 was a



difficult year for our employees — we effected a huge reorganization, including a painful downsizing,we didn’t grant broad-based raises, and we reduced bonuses following poor 2008 results, all in thecontext of a deep worldwide recession. But our teams bore down and executed, and delivered asolid year. We are not where we want to be, but we have an organization with big dreams, a teamthat is passionate about our company and our industry, and the scale, global brands and technologyto continue to lead the industry into the future.

We are proud to lead this company and we thank you for your support.



LOCATIONS AND SUBSIDIARIESHead Office

Expedia, Inc.333 108th Avenue NEBellevueWashington 98004USAP:1 425 679 7200F:1 425 679 7240http://www.expediainc.com

Other Locations and Subsidiaries

Carrentals, LLCActivity Information Center, Inc.1202 Lexington Avenue910 Honoapiilani HighwaySuite 112Suites 14New York CityLahainaNew York 10028-1439Hawaii 96761USAUSA

Egencia LLCClassic Vacations, LLC3150 139th Avenue SE5893 Rue FerrariBellevueSan JoseWashington 98005California 95138USAUSA

Travelscape, LLCTripAdvisor LLC10190 Covington Cross Drive141 Needham StreetLas VegasNewtonNevada 89144Massachusetts 02464USAGBR


Expedia, Inc.Locations and Subsidiaries

expedia

Documents

Transcript of expedia