Expedia 2015 Annual Report Download - page 28

• Incidents of actual or threatened terrorism;
• Periods of political instability or geopolitical conflict in which travelers become concerned about safety
issues;
• Natural disasters or events such as severe weather conditions, volcanic eruptions, hurricanes or
earthquakes;
• Travel-related accidents or the grounding of aircraft due to safety concerns; and
• Health-related risks, such as the Ebola, H1N1, SARs and avian flu outbreaks.
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 otherwise post security 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. Moreover, there can be no assurances that the
rates we pay for the processing of customer credit and debit card transactions will not increase which could
reduce our revenue thereby adversely affecting our business and financial performance.
In addition, credit card networks, such as Visa, MasterCard and American Express, have adopted rules and
regulations that apply to all merchants who process and accept credit cards and include the Payment Card Industry
Data Security Standards, or the PCI DSS. Under these rules, we are required to adopt and implement internal
controls over the use, storage and security of card data. We assess our compliance with the PCI DSS rules on a
periodic basis and make necessary improvements to our internal controls. Failure to comply may subject us to fines,
penalties, damages and civil liability and could prevent us from processing or accepting credit cards.
Our results of operations and financial positions have been negatively affected by our acceptance of fraudulent
bookings made using credit and debit cards or fraudulently obtained loyalty points. We are sometimes 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.
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