Expedia 2005 Annual Report Download - page 5

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2005 was a successful year for Expedia, Inc. I want to spend some time on just a subset of the
noteworthy financial and operational accomplishments which my 6,500 colleagues at Expedia delivered in
2005.
Our financial highlights included:
‚ $15.6 billion in worldwide gross bookings, up 22% over 2004;
‚ $2.1 billion in revenue with $627 million in OIBA, maintaining an OIBA margin near 30%; and
‚ $850 million in cash flow from operations and $798 million in free cash flow
In keeping with long-standing Expedia tradition, we continued to innovate on behalf or our travelers
and supplier partners in 2005: we introduced the Expedia Promise and the Expedia Best Price Guarantee,
formalizing our commitment to our travelers and introducing the industry's broadest and richest price
guarantee Ì offering not merely to match competitor prices, but to also offer a $50 travel coupon to our
valued travelers. We introduced our Personal Trip Guides, offering travelers extensive post-booking content
about their destinations, including weather forecasts, sites of interest and activities, great restaurants and
maps of the surrounding area.
We laid the foundation to radically improve our relations with suppliers through the formation of our
Partner Services Group, or ""PSG.'' PSG is dedicated to partnering with, serving, and adding incremental
demand and value to our travel supply partners. One example of this activity was an innovative three-year
strategic partnership with Marriott International, designed to reward Expedia for delivering business to
Marriott's properties during off-peak travel periods. We live in the intersection of travel supply and
demand, and with scale, and improved technical capabilities and supplier relations, we will increasingly be
positioned to optimize our front end demand with available supply to the mutual benefit of our travelers,
suppliers, and our ultimate profitability.
We made progress on our multi-brand strategy: successfully re-branding our Hotels.com franchise,
resulting in four straight quarters of accelerating growth; aggressively growing TripAdvisor, the premier
global information and advice destination on the web and now the world's second most visited travel
website; nearly doubling Hotwire's profitability; and placing our high end Classic Vacations on the growth
path again, expanding into Tahiti as its newest destination.
Finally, we continued to develop our highest growth areas Ì International and Corporate Travel.
International bookings hit nearly $3.5 billion, up 50% from 2004 and accounting for 22% of our worldwide
gross bookings. Unlike our significant competitors, we have established our leading position in Europe
almost entirely through organic growth, and most recently we launched an Australian point of sale at
www.expedia.com.au, our second Asia Pacific market, and the eighth worldwide Expedia-branded website.
Our Expedia Corporate Travel business has come into its own, reaching over 3,000 cumulative clients,
driving 85% domestic online adoption and growing more than 90% to over $700 million in gross bookings,
making it a top-10 corporate travel agency.
We cannot, however, rest on our laurels. The travel distribution business is intensely competitive, and
we anticipate that the year ahead will be our most challenging and competitive yet, on a global basis. In
order to stay ahead of our competition, we have embarked on an ambitious investment plan in our content,
technology, systems, and capabilities in three key areas:
‚ First, we are building our services to be more than simple transactional engines. We are creating
value-added content to inspire our travelers at the very start of their trip planning process,
expanding our merchandising capabilities to sell a greater variety of product, and Ì once our
travelers have purchased our products Ì providing them with the content and services to maximize
the enjoyment of their trip.
‚ Second, we are improving our ability to attract and retain our travelers by investing in our direct
marketing capabilities and technology, developing broad promotion and loyalty programs, and
making significant investments in improving traveler service across our brand portfolio.