Expedia 2006 Annual Report Download - page 13

Download and view the complete annual report

Please find page 13 of the 2006 Expedia annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

and an air or car component. Travelers select packages based on the total package price, without being
provided component pricing. The use of the merchant travel components in packages enables us to make
certain travel products available at prices lower than those charged on an individual component basis by travel
suppliers without impacting their established pricing and position models. We are also expanding our use of
third-party provided pre-assembled package offerings, particularly through our international points of sale,
further broadening our scope of products and services to travelers.
Our agency business is comprised of the sale of airline tickets, hotel, cruise and car rental reservations.
Airline ticket transactions make up the majority of this business. Although net revenue per transaction is lower
(as compared to the merchant model), due to the high volume of airline tickets sold, our agency gross
bookings accounted for 59% of total gross bookings for the year ended December 31, 2006.
Relationships with Travel Suppliers, Distribution and Fulfillment Partners
Overview. We make travel products and services available from a variety of large and small commercial
and charter airlines, lodging properties, car rental companies, cruise lines and destination service providers.
We seek to build and maintain long-term, strategic relationships with travel suppliers and global distribution
system (“GDS”) partners. An important component of the success of our business depends on our ability to
maintain our existing, as well as build new, relationships with travel suppliers and GDS partners.
Travel Suppliers. We strive to deliver value to our travel suppliers through a wide range of innovative,
targeted merchandising and promotional strategies designed to increase their revenue, while simultaneously
reducing their marketing transaction and customer service costs. Our Partner Services Group consists mainly
of strategic account managers and local market managers who work directly with travel suppliers to increase
the marketing of their travel products and brands through our points of sale.
In addition, we have developed proprietary, supplier-oriented technology that streamlines the interaction
between some of our websites and hotel central reservation systems, making it easier and more cost-effective
for hotels to manage reservations made through our brands. Through this “direct connect” technology, hotels
can upload information about available products and services and rates directly from their central reservation
systems into our websites, as well as automatically confirm hotel reservations made by our travelers. In the
absence of direct connect technology, both of these processes are generally completed manually via a
proprietary extranet. Our travelers can book reservations with over 30,000 merchant hotel properties
worldwide, of which over 35% are now fully direct-connected.
Distribution Partners. GDSs, also referred to as computer reservation services, provide a centralized,
comprehensive repository of travel suppliers “content” — such as availability and pricing of seats on various
airline point-to-point flights, or “segments.” The GDSs act as intermediaries between the travel suppliers and
online and offline travel agencies, allowing agents to reserve and book flights, rooms or other travel products.
While we have historically used Worldspan as our primary GDS, in light of the deregulated GDS
environment and our desire to ensure the widest possible supply of air content for our travelers, in 2006 we
diversified our use of GDS providers through distribution agreements, and now use Worldspan, Amadeus and
Sabre.
Fulfillment Partners. We outsource certain of our airline ticket fulfillment functions to third-party
suppliers. Such functions include the issuance of airline tickets and related customer services.
Marketing and Promotions
Our marketing programs are intended to build and maintain the value of our various brands, drive traffic
and conversion through our various brands and businesses, lower ongoing traveler acquisition costs and
strategically position our brands in relation to one another. Our long-term success depends on our continued
ability to increase the overall number of traveler transactions in a cost-effective manner.
Our marketing channels primarily include direct and/or personalized traveler communications on our
websites and through e-mail communications, search engine marketing and optimization as well as online and
7