Orbitz 2010 Annual Report Download - page 49

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A decrease in domestic volume resulted in a $35 million decrease in air net revenue, which was partially
offset by a $7 million increase in air net revenue driven by higher net revenue per air ticket. The decrease in
volume was partially due to increased competition and the adverse impact of economic conditions on air
traveler demand. The higher net revenue per air ticket was primarily due to an increase in service fees charged
on our Orbitz and CheapTickets websites, an increase in incentive revenue earned from GDS services provided
by Worldspan resulting from the re-negotiation of our GDS contract in July 2007, and a shift in our carrier
mix. A reduction in paper ticket fees partially offset these increases, as the industry continues to move towards
electronic ticketing to meet the International Air Transport Association mandate to eliminate paper tickets.
Lower net revenue per air ticket and the impact of the sale of our offline U.K. travel subsidiary in July
2007 primarily drove the decrease in international air net revenue. Competitive pressures drove the decrease in
net revenue per air ticket. This decrease was largely offset by an increase in air net revenue resulting from
higher international volume.
Hotel. Net revenue from hotel bookings increased $4 million, or 2%, to $239 million for the year ended
December 31, 2008 from $235 million for the year ended December 31, 2007. Foreign currency fluctuations
resulted in an increase of $1 million in hotel net revenue. In addition, hotel net revenue increased $4 million
year-over-year due to purchase accounting adjustments, which reduced our net revenue by $4 million for the
year ended December 31, 2007. The decrease in net revenue from hotel bookings, excluding the impact of
foreign currency fluctuations and the purchase accounting adjustments, was $1 million.
Higher average net revenue per transaction, primarily due to an increase in merchant hotel mix, resulted
in a $7 million increase in domestic hotel net revenue. This increase was partially offset by a $6 million
decline in domestic hotel net revenue due to lower volume, which resulted primarily from increased
competition and the adverse impact of economic conditions. International hotel net revenue decreased
$2 million due to lower volume.
Dynamic packaging. Net revenue from dynamic packaging bookings increased $9 million, or 9%, to
$114 million for the year ended December 31, 2008 from $105 million for the year ended December 31, 2007.
Of this increase, almost nil was due to foreign currency fluctuations.
Higher volume drove a $5 million increase in domestic dynamic packaging net revenue. The increase in
volume is largely due to an increase in supplier-driven sales promotions in 2008, enhancements we made to
our car packaging product during 2008 and a general shift in traveler preference from stand-alone travel
products towards dynamic packaging. International net revenue from dynamic packaging increased $4 million.
Advertising and media. Advertising and media net revenue increased $17 million, or 40%, to $60 million
for the year ended December 31, 2008 from $43 million for the year ended December 31, 2007. Of this
increase, almost nil was due to foreign currency fluctuations.
The increase in net revenue from advertising and media was primarily attributed to the launch of a new
advertising campaign during 2008 promoting a third party’s fee membership programs. The terms of this
agreement were more favorable than the terms with our former membership program advertiser. Advertising
revenue also increased as a result of our continued efforts to seek out new opportunities to further monetize
traffic on our websites.
Other. Other net revenue increased $17 million, or 16%, to $118 million for the year ended
December 31, 2008 from $101 million for the year ended December 31, 2007. Foreign currency fluctuations
resulted in an increase of $1 million in other net revenue. In addition, other net revenue increased $2 million
year-over-year due to purchase accounting adjustments, which reduced our other net revenue by $2 million for
the year ended December 31, 2007. The increase in other net revenue, excluding the impact of foreign
currency fluctuations and the purchase accounting adjustments, was $14 million.
Domestic other net revenue increased due to an increase in travel insurance revenue and net revenue from
car bookings. The increase in travel insurance revenue was driven primarily by higher attachment rates for
travel insurance and more favorable economics resulting from the execution of a new agreement with our
travel insurance provider, which was effective in 2008. The increase in net revenue from car bookings was
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