Expedia 2015 Annual Report Download - page 51

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As the demand for travel continued to increase in 2014 and 2015, air carriers kept capacity growth relatively low.
The significant decline in fuel prices that started in the second half of 2014 did not immediately translate into
reduced air fares, resulting in record levels of profitability for the U.S. air carriers, further strengthening their
position. However, in 2015, there has been evidence of discounting by the U.S. carriers while currency
headwinds and weaker macroeconomic trends put pressure on international results. Ticket prices on Expedia sites
excluding eLong increased 2% in 2013, declined 1% in 2014 and declined 11% in 2015 as short-haul traffic and
low cost carriers grew alongside increasingly competitive airline pricing. We continue to encounter pressure on
air remuneration as air carriers combine and as certain supply agreements renew.
Air ticket volumes excluding eLong increased 35% in 2015 primarily due to strong growth on Brand
Expedia sites and the acquisition of Orbitz. Air volumes improved 30% 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.
From a product perspective in 2015, 69% of our revenue came from 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 travel 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 2015, we generated a total of $564 million of advertising and media
revenue (excluding eLong) representing 9% of total revenue in 2015, up from $469 million in 2014.
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. Each Expedia technology platform is operated by
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 converted the Wotif.com site to 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. In September
2015, Expedia completed the acquisition of Orbitz Worldwide, including all of its brands. In December 2015,
Expedia completed the acquisition of HomeAway, Inc., including all of its brands. 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.
Global Expansion. Our Expedia, Hotels.com, Egencia, EAN, and Hotwire brands operate both domestically
and through international points of sale, including in Europe, Asia Pacific, Canada and Latin America. We own
Venere, a European brand, which focuses on marketing hotel rooms in Southern Europe; Wotif Group, which has
sites in Australia and New Zealand; and ebookers, which operates in a number of international countries.
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