Economics

Who is making the money (profitability)? How much?
Costs and cost “drivers” – what determines costs?
Revenue and revenue “drivers” – what affects revenue?
Impact of the internet – how does it affect cost and revenue?
Determinants of industry structure – what determines the amount of competition?

Need to cite and link to sources. Be sure to use quotation marks for direct quotes. RDS.

Expedia (Chris Farago)

Revenue 2007: ($2,665,332,000)

  • Revenue increased 19% year-to-year
    • primarily driven by increased worldwide merchant hotel revenue and advertising and media revenue.
    • North America revenue increased 14%
    • Europe revenue increased 34%
    • Other revenue increased 35%

Cost of Revenue 2007: ($562,401,000)
Total Operating Expenses 2007 ($1,573,862,000)

  • $562,401,000 + $1,573,862,000 = $2,136,263,000 (total costs)
  • 2007 cost of revenue was 21.1% of revenue compared with 22.5% in 2006
    • the decrease was primarily due to an increased mix of advertising and media revenue and our various cost efficiency initiatives.
  • $2,665,332,000 (Revenue) – $1,573,862,000 (Costs) = $529,069,000 (Operating Income)
  • 19.8% is the percentage of Total
  • (all figures in millions) Gross bookings in Q4 for North America was $3,136 divided by the revenue made in North America for Q4 which was $452, we can conclude that they make about 6.9% Commission.

If you look at the Q4 07 data you'll see interesting information about how the industry works. See http://media.corporate-ir.net/media_files/irol/19/190013/4Q07Release.pdf. Note gross bookings and revenue. You can estimate their commission.RDS.

*Expedia's Financial Reports

- In 2007, U.S. travel and tourism demand is expected to generate $740 billion in total industry sales, rising 21.9% since 2004.
-The Internet has never been more important to the US travel industry than it is currently: 33 percent of travel revenue will be generated online in 2007.
-In 2006, online travel grossed just under $79 billion, that number is expected to grow to more than $94 billion in 2007 and by 2010, online travel sales are expected to reach $146 billion.
-According to a new JupiterResearch report, travel revenue from online bookings will increase by $43 billion over the next five years, reaching $128 billion in 2011.
- Revenue from online travel bookings in 2006 has already exceeded JupiterResearch’s 2004 forecast of $70 billion by $15 billion.
- The report concludes that air travel alone will see a rise from the 2006 online revenue figure of $49 billion to $72 billion in 2011. According to David Schatsky, President of JupiterKagan, online travel reservations are increasingly being done direct with suppliers. "Online air buyers indicate a preference for airline web sites to avoid service fees and to get loyalty points. Suppliers also enjoy the perception that they will offer better service than intermediaries,” he said (via MarketingVOX). The shift from telephone to online booking for hotels is also set to increase.

Businessweek
Jupiter Research
Biz Report
Biz Report

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