Expedia 2012 Annual Report Download - page 61

of Taxation has claimed totals $110 million, comprised of $78 million relating to tax liability from January 2000
to December 2011 and $32 million in interest from January 2000 to December 2012 for Expedia, Hotels.com and
Hotwire (“the Expedia Subsidiaries”). In a hearing on March 8, 2013, the court will determine the amount, if any,
of penalties, which the Director of Taxation has asserted should be 50% of the tax liability for the Expedia
Subsidiaries. The final assessed amount will remain uncertain until such time as the court has resolved these
issues. It is likely that the state will seek to require us to pay an amount equal to the taxes and interest prior to
appealing the court’s ruling. During the year ended December 31, 2012, we accrued $110 million, which is our
best estimate of the probable amount we will pay prior to appealing the court’s ruling. It is also reasonably
possible that we will be required to pay penalties and an additional assessment for 2012 and other items, which
we estimate could be up to $60 million. The ultimate resolution of these contingencies may be greater or less
than the liabilities recorded and our estimates of possible penalties and additional assessments.
Segments
We have two reportable segments: Leisure and Egencia. Our Leisure segment provides a full range of travel
and advertising services to our worldwide customers through a variety of brands including: Expedia.com and
Hotels.com in the United States and localized Expedia and Hotels.com websites throughout the world, Expedia
Affiliate Network, Hotwire.com, Venere, eLong and Classic Vacations. Our Egencia segment provides managed
travel services to corporate customers in North America, Europe, and the Asia Pacific region.
Operating Metrics
Our operating results are affected by certain metrics, such as gross bookings and revenue margin, which we
believe are necessary for understanding and evaluating us. Gross bookings represent the total retail value of
transactions booked for both agency and merchant transactions, recorded at the time of booking reflecting the
total price due for travel by travelers, including taxes, fees and other charges, and are generally reduced for
cancellations and refunds. As travelers have increased their use of the internet to book travel arrangements, we
have generally seen our gross bookings increase, reflecting the growth in the online travel industry, our organic
market share gains and our business acquisitions. Revenue margin is defined as revenue as a percentage of gross
bookings.
Gross Bookings and Revenue Margin
Year ended December 31, % Change
2012 2011 2010 2012 vs 2011 2011 vs 2010
($ in millions)
Gross Bookings
Leisure $30,374 $26,567 $24,021 14% 11%
Egencia 3,585 2,614 1,944 37% 34%
Total gross bookings $33,959 $29,181 $25,965 16% 12%
Revenue Margin
Leisure 12.3% 12.3% 12.0%
Egencia 8.1% 6.9% 7.4%
Total revenue margin 11.9% 11.8% 11.7%
The increase in worldwide gross bookings in 2012 as compared to 2011 was primarily driven by 27%
growth in hotel room nights and 7% increase in air tickets. The increase in worldwide gross bookings in 2011 as
compared to 2010 was primarily driven by 18% growth in hotel room nights and 5% in hotel ADRs. Revenue
margin was largely consistent for 2012 compared to 2011 as well as for 2011 compared to 2010.
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