Expedia 2011 Annual Report Download - page 11

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We also distribute airline tickets, hotel rooms, cruises and car rentals on an agency model basis, with airline
ticket transactions currently making up 56% of our agency business for the year ended December 31, 2011. With
our acquisition of Venere in 2008, followed by the 2009 launch of our Expedia Easy Manage agency product
targeted for small hotels and hotels in secondary or tertiary cities, we expanded the scale of our agency hotel
business significantly. We expect our agency hotel business to become a bigger part of our hotel mix and overall
agency model business mix over time.
Relationships with Travel Partners
Overview. We make travel products and services available from a variety of hotel companies, large and
small commercial airlines, 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 supply partners through a wide range of innovative,
targeted merchandising and promotional strategies designed to generate consumer demand and increase their
revenue, while simultaneously reducing their overall marketing transaction and customer service costs. Our
strategic account managers and local hotel market managers work directly with travel suppliers to optimize the
exposure of their travel products and brands through our points of sale, including participation in need-based,
seasonal and event-driven promotions and experimentation within the new channels we are building.
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.
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. Our relationships
with GDSs primarily relate to our air business. We use Sabre and, to a lesser extent, Amadeus and Travelport as
our GDS segment providers in order to ensure the widest possible supply of content for our travelers.
Marketing and Promotions
Our marketing programs are intended to build and maintain the value of our various brands, drive traffic and
ultimately bookings through our various brands and businesses, optimize ongoing traveler acquisition costs and
strategically position our brands in relation to one another. Our long-term success and profitability depends on
our continued ability to maintain and increase the overall number of traveler transactions flowing through our
brand and shared global platforms in a cost-effective manner.
Our marketing channels primarily include online advertising including search engine marketing and
optimization as well as meta-search, social media sites, such as Facebook and Twitter, offline advertising, direct
and/or personalized traveler communications on our websites as well as through direct e-mail communication
with our travelers. Our marketing programs and initiatives include promotional offers such as coupons as well as
seasonal or periodic special offers from our travel suppliers based on our supplier relationships. In addition, we
offer several traveler loyalty programs to our worldwide travelers, including Welcome Rewards®on Hotels.com
global websites and, beginning in 2011, Expedia Rewards on Expedia.com. The cost of these two loyalty
programs is recorded as a reduction of revenue in our financial statements.
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