Expedia 2014 Annual Report Download - page 53

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many regions by the strengthening U.S. dollar. We have had success adding supply to our marketplace with
approximately 435,000 properties on our global websites, including eLong, as of December 31, 2014. In addition,
our room night growth has been healthy, with room nights growing 27% in 2012, 23% in 2013 and 26% in 2014.
ADRs for rooms booked on Expedia sites declined 2% in 2012, were essentially flat in 2013 and increased 2% in
2014.
Air
The airline sector in particular has historically experienced significant turmoil, including significant air
carrier consolidation in the United States, which has generally resulted in lower overall capacity and higher fares.
As the demand for travel continued to increase in 2014, air carriers have kept capacity growth relatively low. The
significant decline in fuel prices in the second half of 2014 did not translate into reduced air fares, resulting in
record levels of profitability for the U.S. air carriers, further strengthening their position. Ticket prices on
Expedia sites remained flat in 2014 and increased 1% and 4% in 2013 and 2012, respectively. We continue to
encounter pressure on air remuneration as air carriers combine and as certain supply agreements renew.
Air ticket volumes grew by 28% in 2014 primarily due to volume driven by Brand Expedia’s marketing
agreement with Travelocity along with ongoing improvements for the Brand Expedia sites themselves. Air
volumes improved 9% in 2013 largely due to strong growth in corporate ticket volumes at Egencia.
From a product perspective in 2014, 70% of our revenue came from transactions involving the booking of
hotel reservations, with 8% of our revenue derived from the sale of airline tickets. We believe that the hotel
product is the most profitable of the products we distribute and represents our best overall growth opportunity.
Advertising & Media
Our advertising and media business is principally driven by revenue generated by trivago, a leading hotel
metasearch site, in addition to Expedia Media Solutions, which is responsible for generating advertising revenue
on our global online travel brands. In 2014, we generated a total of $479 million of advertising and media
revenue representing 8% of total revenue, up substantially from $319 million in 2013.
Growth Strategy
Product Innovation. Each of our leading brands was a pioneer in online travel and has been responsible for
driving key innovations in the space over the past two decades. They each operate a dedicated technology team,
which drives innovations that make researching and shopping for travel increasingly easier and help customers
find and book the best possible travel options. In the past several years, we made key investments in technology,
including significant development of our technical platforms that makes it possible for us to deliver innovations
at a faster pace. For example, we launched new global platforms for Hotels.com and Brand Expedia, enabling us
to significantly increase the innovation cycle, thereby improving conversion and driving faster growth rates, for
those brands. In 2013, Expedia signed an agreement to power the technology, supply, and customer service
platforms for Travelocity-branded sites in the United States and Canada, enabling Expedia to leverage its
investments in each of these key areas. The shift of Travelocity-branded sites to the Expedia technology platform
was successfully completed over the course of 2014. In November 2014, Expedia completed the acquisition of
Wotif Group and subsequently announced plans to shift the Wotif Group sites and operations onto the Expedia
platform. In January 2015, we acquired the Travelocity brand and other associated assets from Sabre. The
strategic marketing and other related agreements previously entered into were terminated. We intend to continue
leveraging these investments when launching additional points of sale in new countries, introducing new website
features, adding supplier products and services including new business model offerings, as well as proprietary
and user-generated content for travelers. Additionally, we are finding key commercial deals and acquisitions
which enable us to leverage our existing technology and operations infrastructure to amplify our growth.
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