Expedia 2007 Annual Report Download - page 46

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Revenue margin, which is defined as revenue as a percentage of gross bookings, increased 30 basis points
in 2007 compared to 2006. In 2007, revenue margin increased 53 basis points in our North America segment.
The increase in worldwide and North America revenue margin in 2007 was primarily due to an increased mix
of advertising and media revenue partially offset by a decline in revenue per air ticket. Revenue margin
decreased 69 basis points in our Europe segment in 2007 as compared to 2006 primarily due to lower air
commissions and booking fees as well as lower revenue resulting from more competitive hotel pricing.
Revenue margin decreased 59 basis points in 2006 compared to 2005. The decrease was primarily due to a
decrease in air revenue per ticket, coupled with an increase in average worldwide airfares of 9% for 2006
compared to 2005, as our remuneration generally does not vary with the price of the ticket.
Results of Operations
Revenue
2007 2006 2005 2007 vs 2006 2006 vs 2005
Year Ended December 31, % Change
($ in thousands)
North America ........... $1,897,995 $1,666,804 N/A 14% N/A
Europe ................. 606,997 452,012 N/A 34% N/A
Corporate and Other ....... 160,340 118,770 N/A 35% N/A
Total revenue .......... $2,665,332 $2,237,586 $2,119,455 19% 6%
In 2007, the increase in revenue was primarily due to increases in worldwide merchant hotel revenue and,
to a lesser extent, advertising and media revenue.
Worldwide merchant hotel revenue increased 19% in 2007 compared to 2006. The increase was primarily
due to a 12% increase in room nights stayed, including rooms delivered as a component of vacation packages
as well as a 6% increase in revenue per room night. Revenue per room night increased due to a 6% increase
in worldwide ADRs partially offset by a 13 basis point decline in hotel raw margin (defined as hotel net
revenue as a percentage of hotel gross revenue).
Worldwide air revenue decreased 2% in 2007 compared to 2006 due to a 12% decrease in revenue per air
ticket partially offset by an increase of 12% in air tickets sold. The decrease in revenue per air ticket primarily
reflects decreased compensation from air carriers and GDS providers, and to a lesser extent, reduced air
service fees versus the prior year period.
Package revenue grew 7% in 2007 compared to the prior year primarily due to higher European package
bookings.
The remaining worldwide revenue other than merchant hotel and air discussed above, which includes
advertising and media, agency hotel, car rental, destination services, and cruises, increased by 38% in 2007
compared to 2006 primarily due to an increase in advertising and media revenue as well as car rental
revenues.
In 2006, the increase in revenue was primarily driven by increased worldwide merchant hotel revenue,
partially offset by a decline in our domestic air revenue. In 2006, domestic revenue growth remained flat and
international revenue increased by 24% compared to 2005.
Worldwide merchant hotel revenue increased 13% in 2006 compared to 2005 primarily due to a 10%
increase in room nights stayed, including rooms delivered as a component of vacation packages, as well as a
2% increase in revenue per room night. Revenue per room night increased due to a 6% increase in worldwide
ADRs, partially offset by a 100 basis point decrease in hotel raw margins (defined as hotel net revenue as a
percentage of hotel gross revenue). Our merchant hotel raw margins decreased in 2006 and 2005 as hotel room
suppliers have taken advantage of higher occupancies and the efficacy of their own online distribution to
negotiate more favorable terms.
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