Expedia 2009 Annual Report Download - page 13

Download and view the complete annual report

Please find page 13 of the 2009 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 128

  • 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
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

As merchant of record, we generally have certain latitude to establish prices charged to travelers (as
compared to agency transactions). Also, we generally negotiate supply allocation and pricing with our suppliers,
which enables us to achieve a higher level of net revenue per transaction as compared to that 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 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 currently make up the majority of this business. In the third quarter of 2008, we
acquired Venere, an agency-based online hotel business in Europe and since then have launched Expedia Easy
Manage, which is our agency hotel offer for small hotels and hotels in secondary or tertiary cities. Although net
revenue per transaction is lower compared to the merchant model, due to the high volume of airline tickets sold
our agency gross bookings accounted for 58% of total gross bookings for the year ended December 31, 2009.
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, including participation in our seasonal
and event-driven promotions.
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 now book reservations with over 64,000 merchant hotel properties worldwide, of which
approximately 56% 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
travel agencies, allowing agents to reserve and book flights, rooms or other travel products.
We use Sabre and Amadeus as our primary GDS segment providers. Prior to 2007, we primarily used
Worldspan. We added the additional GDSs in order to ensure the widest possible supply of air content for our
travelers.
7