Expedia 2009 Annual Report Download - page 47

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cases been able to introduce differentiated features and content compared with the legacy online travel agency
companies; although in most cases they are not providing actual travel booking services. Some of these
competitors have raised significant amounts of capital and have begun to aggressively market their service
offerings. In early 2009, TripAdvisor.com launched a competitive metasearch travel offering featuring a Fee
Estimator enabling customers to see the price of their flight including various airline fees such as baggage
charges.
The online travel industry has also seen the development of alternative business models and variations in the
timing of payment by travelers and to suppliers, which in some cases place pressure on historical business
models. In particular, the agency hotel model has seen rapid adoption in Europe, and Expedia has only recently
introduced a competitive offering. While agency hotel is an important component of our European strategy, we
expect it will take time to gain traction with incremental hotel suppliers, and for Expedia to drive meaningful
demand to those hotels.
Intense competition has also historically led to aggressive marketing spend by the travel suppliers and
intermediaries, and a meaningful reduction in our overall marketing efficiencies and operating margins. In 2009,
we experienced a reversal of these trends due to several factors including the softer macro environment, lower ad
rates and a pullback in spend by some of our online competitors impacted by lower fee revenues, but there can be
no assurance that reversal will continue in the future.
Strategy
We play a fundamental role in facilitating travel, whether for leisure, unmanaged business or managed
business travelers. We are committed to providing travelers, travel suppliers and advertisers the world over with
the best set of resources to serve their travel needs by leveraging Expedia’s critical assets — our brand portfolio,
technology and content innovation, global reach and breadth of product offering. In addition, we intelligently
utilize our growing base of knowledge about destinations, activities, suppliers and travelers and our central
position in the travel value chain to more effectively merchandise our travel offerings.
A discussion of the critical assets that we leverage in achieving our business strategy follows:
Portfolio of Travel Brands. We seek to appeal to the broadest possible range of travelers, suppliers and
advertisers through our collection of industry-leading brands. We target several different demographics, from the
value-conscious traveler through our Hotwire brand to luxury travelers seeking a high-touch, customized
vacation package through our Classic Vacations brand.
We believe our flagship Expedia brand appeals to the broadest range of travelers, with our extensive product
offering ranging from single item bookings of discounted product to dynamic bundling of higher-end travel
packages. Our hotels.com site and its international versions target travelers with premium hotel content such as
360 degree tours and hotel reviews. In the United States, hotels.com generally appeals to travelers with shorter
booking windows who prefer to drive to their destinations, and who make a significant portion of their travel
bookings over the telephone.
Through Egencia, we make travel products and services available on a managed basis to corporate travelers
in North America, Europe and the Asia Pacific region. Further, our TripAdvisor Media Network allows us to
reach a broad range of travelers with travel opinions and user-generated content.
We believe our appeal to suppliers and advertisers is further enhanced by our geographic breadth and range
of business models, allowing them to offer their products and services to the industry’s broadest range of
travelers using our various agency, merchant and advertising business models. We intend to continue supporting
and investing in our brand portfolio, geographic footprint and business models for the benefit of our travelers,
suppliers and advertisers.
Technology and Content Innovation. Expedia has an established tradition of technology innovation, from
Expedia.com’s inception as a division of Microsoft to our introduction of more recent innovations such as
Expedia’s introduction of its “Expedia Easy Manage” program, offering smaller properties in secondary and
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