Expedia 2006 Annual Report Download - page 12

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also maintain both U.S. points of sale and additional points of sale outside the United States. Lastly, we offer
Chinese travelers a wide array of products and services through our majority ownership in eLong.
We intend to continue investing in and growing our existing international points of sale, including the
expected launch of an Expedia-branded site in India in 2007. We anticipate launching points of sale in
additional countries where we find large travel markets and rapid growth of online commerce. Future launches,
such as India, may occur under our flagship Expedia brand, through one of our other brands, or through
acquisition of third-party brands, as in the case of eLong.
ECT currently conducts operations in the United States, Belgium, Canada, France, Germany and the
United Kingdom. We believe the corporate travel sector represents a large opportunity for Expedia, and we
believe we offer a compelling technology solution to small and medium-sized businesses seeking to control
travel costs and improve their employees’ travel experiences. We also believe that expanding our corporate
travel business also increases our appeal to travel product and service suppliers, as the average corporate
traveler has a higher incidence of first class and international travel than the average leisure traveler. We intend
to continue investing in and expanding the geographic footprint of our ECT business.
In expanding our global reach, we are leveraging our significant investment in technology, operations,
brand building, supplier integration and relationships and other areas since the launch of Expedia.com in 1996.
We intend to continue leveraging this investment when launching new countries, introducing website
features, adding supplier products and services or adding value-added content for travelers. As a result, we
have been able to launch several websites — including Expedia-branded sites in Japan, Denmark, Norway and
Sweden — relatively quickly and cost effectively.
Our scale of operations also enhances the value of technology innovations we introduce on behalf of our
travelers and suppliers. As an example, our traveler review feature — whereby Expedia travelers have created
over 300,000 qualified reviews of hotel properties — is able to accumulate a larger base of reviews due to the
higher base of online traffic that frequents our various websites.
Breadth of Product Offering. In general, through our websites, we believe we offer a comprehensive
array of innovative travel products and services to travelers. We plan to continue improving and growing these
offerings, as well as expand them to our worldwide points of sale over time.
The majority of our revenue comes from transactions involving the sale of airline tickets and the booking
of hotel reservations, either as stand-alone products or as part of package transactions. We are working to grow
our package business as it results in higher revenue per transaction, and we also seek to continue diversifying
our revenue mix beyond core air and hotel products to car rental, destination services, cruise and other product
offerings, as well as by increasing the mix of revenue from advertising we derive from our travel partners and
suppliers.
Merchant and Agency Business Models
We make travel products and services available both on a stand-alone and package basis, primarily
through two business models: the merchant model and the agency model. Under the merchant model, we
facilitate the booking of hotel rooms, airline seats, car rentals and destination services from our travel suppliers
and for such bookings, we are the merchant of record. Under the agency model, we act as an agent in the
transaction, passing reservations booked by our travelers to the relevant airline, hotel, car rental company or
cruise line.
As merchant of record, we generally have certain latitude to establish prices charged to travelers (as
compared to agency transactions). Also, we negotiate inventory allocation and pricing with our suppliers which
enables us to achieve a higher level of net revenue per transaction as compared to those provided through the
agency model.
Through our Expedia-branded websites, travelers can dynamically assemble multiple component travel
packages in a single transaction at a lower price as compared to booking each component separately. Packages
assembled by travelers through the packaging model on these websites include a merchant hotel component
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