Expedia 2013 Annual Report Download - page 54

eLong, as of December 31, 2013. In addition, our room night growth has been healthy, with room nights growing
18% in 2011, 27% in 2012 and 23% in 2013. ADRs for rooms booked on Expedia sites grew 5% in 2011,
declined 2% in 2012, and were essentially flat in 2013.
Air
The airline sector in particular has historically experienced significant turmoil. In recent years, there has
been increased air carrier consolidation, generally resulting in lower overall capacity and higher fares. In
addition, air carriers have made significant efforts to keep seat capacity relatively low in order to ensure that
demand for seats remains high and that flights are as full as possible. Reduced seating capacities are generally
negative for Expedia as there is less air supply available on our websites, and in turn less opportunity to facilitate
hotel rooms, car rental and other services on behalf of air travelers. Ticket prices on Expedia sites increased 1%
in 2013, 4% in 2012 and 11% in 2011. We have encountered pressure on air remuneration as certain supply
agreements renew, and as air carriers and GDS intermediaries re-negotiate their long-term agreements. In
addition, some U.S. air carriers introduced various incentives for customers to book directly with the carrier
versus via online travel agencies. Examples of these incentives include lower fees, advance seat assignments and
greater earning potential for frequent flier miles.
In part as a result of sharply rising average ticket prices, our ticket volumes decreased by 8% in 2011 after
having grown by 11% in 2010. Air ticket volumes grew 9% in 2013 and 7% in 2012, largely due to strong
growth in corporate ticket volumes at Egencia. In addition, in the second half of 2013, Brand Expedia saw
improved ticket volume growth, which we believe is due in part to implementation of a new air technology
platform and the related product enhancements. From a product perspective in 2013, 72% of our revenue comes
from transactions involving the booking of hotel reservations, with 8% of our revenue derived from the sale of
airline tickets. We believe that the hotel product is the most profitable of the products we distribute and
represents our best overall growth opportunity.
Growth Strategy
Product Innovation. Each of our leading brands was a pioneer in online travel and has been responsible for
driving key innovations in the space over the past two decades. They each operate a dedicated technology team,
which drives innovations that make researching and shopping for travel increasingly easier and helps customers
find and book the best possible travel options. In the past several years, we made key investments in technology,
including significant development of our technical platforms that makes it possible for us to deliver innovations
at a faster pace. For example, we launched new global platforms for Hotels.com and Brand Expedia, enabling us
to significantly increase the innovation cycle, thereby improving conversion and driving faster growth rates, for
those brands. Most recently, Expedia signed an agreement to power the technology, supply, and customer service
platforms for Travelocity-branded sites in the United States and Canada, enabling Expedia to leverage its
investments in each of these key areas. We intend to continue leveraging these investments when launching
additional points of sale in new countries, introducing new website features, adding supplier products and
services including new business model offerings, as well as proprietary and user-generated content for travelers.
Global Expansion. Our Expedia, Hotels.com, Egencia, EAN, and Hotwire brands operate both domestically
and through international points of sale, including in Europe, Asia Pacific, Canada and Latin America. We own a
majority share of eLong, which is the second largest online travel company in China. We also own Venere, a
European brand, which focuses on marketing hotel rooms in Europe. Egencia, our corporate travel business,
operates in more than 60 countries around the world and continues to expand, including its 2012 acquisition of
VIA Travel. We also partner in a 50/50 joint venture with AirAsia — a low cost carrier serving the Asia-Pacific
region — to jointly grow an online travel agency business. Although the results for the joint venture are not
consolidated in our financial statements, we consider this business to be a key part of our Asia Pacific strategy. In
2013, approximately 44% of our worldwide gross bookings and 47% of worldwide revenue were international
points of sale up from 22% for both worldwide gross bookings and revenue in 2005. We have a stated goal of
driving more than half of our revenue through international points of sale.
48