Expedia 2008 Annual Report Download - page 17

Part I. Item 1A. Risk Factors
You should carefully consider each of the following risks and uncertainties associated with our company
and the ownership of our securities. Additional risks not presently known to us or that we currently deem
immaterial may also impair our business operations.
Global economic conditions may continue to have an adverse effect on our business and financial
performance.
Travel expenditures are sensitive to personal and business discretionary spending levels and tend to
decline or grow more slowly during economic downturns, including downturns in any of our major markets. In
the second half of 2008, there was a rapid softening of domestic and global economic conditions, and the
outlook for 2009 is uncertain. This slowing of the domestic and global economies has increased unemployment
and reduced the financial capacity of both corporate and leisure travelers, thereby slowing spending on the
services we provide. The continuation, or worsening, of domestic and global economic conditions could
continue to adversely affect our businesses and financial performance.
Declines or disruptions in the travel industry could adversely affect our business or financial
performance.
Our business and financial performance are affected by the health of the worldwide travel industry,
including by decreases in hotel occupancy rates, hotel average daily rates, decreases in airline capacity or
rising airline ticket prices, all of which we have recently experienced. Events or weakness specific to the air
travel industry that could negatively affect our business also include continued fare increases, travel-related
strikes or labor unrest, bankruptcies or liquidations and fuel price volatility. Additionally, our business is
sensitive to safety concerns, and thus our business has in the past and may in the future decline after incidents
of actual or threatened terrorism, during periods of political instability or geopolitical conflict in which
travelers become concerned about safety issues, as a result of natural disasters such as hurricanes or
earthquakes or when travel might involve health-related risks, such as avian flu. Such concerns could result in
a protracted decrease in demand for our travel services. This decrease in demand, depending on its scope and
duration, together with any future issues affecting travel safety, could significantly and adversely affect our
business and financial performance over the short and long-term. In addition, the disruption of the existing
travel plans of a significant number of travelers upon the occurrence of certain events, such as actual or
threatened terrorist activity or war, could result in the incurrence of significant additional costs and constrained
liquidity if we provide relief to affected travelers by not charging cancellation fees and/or by refunding the
price of airline tickets, hotel reservations and other travel products and services.
We operate in an increasingly competitive global environment.
The market for the services we offer is increasingly and intensely competitive. We compete with both
established and emerging online and traditional sellers of travel services, including online travel agencies,
travel suppliers, large online portal and search companies, traditional travel agencies, meta search companies
and operators of travel industry reservation databases. Some of our competitors, particularly travel suppliers
such as airlines and hotels, may offer products and services on more favorable terms, including lower prices,
no fees or unique access to proprietary loyalty programs, such as points and miles. Many of these competitors,
such as airlines, hotel and rental car companies, have been steadily focusing on increasing online demand on
their own websites in lieu of third-party distributors such as the various Expedia sites. For instance, some low
cost airlines, which are having increasing success in the marketplace, distribute their online supply exclusively
through their own websites. Suppliers who sell on their own websites typically do not charge a processing fee,
and, in some instances, offer advantages such as increased or exclusive product availability and their own
bonus miles or loyalty points, which could make their offerings more attractive to consumers than offerings
like ours. In addition, we face increasing competition from other travel agencies, which in some cases may
have favorable offerings for both travelers and suppliers, including pricing, connectivity and supply breadth.
We also compete with other travel agencies for both travelers and the acquisition and retention of supply.
Increasing competition from current and emerging competitors, the introduction of new technologies and the
expansion of existing technologies, such as metasearch and other search engine technologies, may force us to
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