Expedia 2014 Annual Report Download - page 27

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, working capital 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 severe weather conditions, actual or threatened terrorist activity or war,
could result in the incurrence of significant additional costs and decrease our revenues leading to constrained
liquidity if we, as we have done historically in the case of severe weather conditions, provide relief to affected
travelers by refunding the price or fees associated with airline tickets, hotel reservations and other travel products
and services.
We are subject to payments-related and fraud risks.
We have agreements with companies that process customer credit and debit card transactions, the volume of
which are very large and continue to grow, for the facilitation of customer bookings of travel services from our
travel suppliers. These agreements allow these processing companies, under certain conditions, to hold an
amount of our cash (referred to as a “holdback”) or require us to post a letter of credit equal to a portion of
bookings that have been processed by that company. These processing companies may be entitled to a holdback
or suspension of processing services upon the occurrence of specified events, including material adverse changes
in our financial condition. An imposition of a holdback or suspension of processing services by one or more of
our processing companies could materially reduce our liquidity.
Our results of operations and financial positions have been negatively affected by our acceptance of
fraudulent bookings made using credit and debit cards. We may be held liable for accepting fraudulent bookings
on our websites or other bookings for which payment is subsequently disputed by our customers both of which
lead to the reversal of payments received by us for such bookings (referred to as a “charge back”). Accordingly,
we calculate and record an allowance for the resulting credit and debit card charge backs. Our ability to detect
and combat fraudulent schemes, which have become increasingly common and sophisticated, may be negatively
impacted by the adoption of new payment methods, the emergence and innovation of new technology platforms,
including smartphones and tablet computers, and our global expansion, including into markets with a history of
elevated fraudulent activity. If we are unable to effectively combat fraudulent bookings on our websites or
mobile applications or if we otherwise experience increased levels of charge backs, our results of operations and
financial positions could be materially adversely affected.
In addition, when onboarding suppliers to our websites, we may fail to identify falsified or stolen supplier
credentials, which may result in fraudulent bookings or unauthorized access to personal or confidential
information of users of our websites and mobile applications. A fraudulent supplier scheme could also result in
negative publicity, damage to our reputation, and could cause users of our websites and mobile applications to
lose confidence in the quality of our services. Any of these events would have a negative effect on the value of
our brands, which could have an adverse impact on our financial performance.
We have foreign exchange risk.
We conduct a significant and growing portion of our business outside the United States. As a result, we face
exposure to movements in currency exchange rates, particularly those related to the British pound sterling, euro,
Canadian dollar, Australian dollar, Thai baht, Brazilian real, and Nordic currencies.
These exposures include but are not limited to re-measurement gains and losses from changes in the value
of foreign denominated monetary assets and liabilities; translation gains and losses on foreign subsidiary
financial results that are translated into U.S. dollars upon consolidation; fluctuations in hotel revenue due to
relative currency movements from the time of booking to the time of stay; planning risk related to changes in
exchange rates between the time we prepare our annual and quarterly forecasts and when actual results occur;
and the impact of relative exchange rate movements on cross-border travel such as from Europe to the
United States and the United States to Europe.
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