Orbitz 2010 Annual Report Download - page 50

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mainly due to an increase in average net revenue per car booking, primarily driven by the re-negotiation of
contracts with certain car suppliers during the second quarter of 2008. Lower car volume partially offset the
higher average net revenue per transaction.
International other net revenue increased primarily due to an increase in travel insurance revenue and an
increase in car net revenue. The increase in travel insurance revenue was largely due to the introduction of a
new travel insurance product on one of our ebookers websites as well as higher attachment rates for travel
insurance. Higher volume and higher net revenue per car booking drove the increase in car net revenue.
Cost of Revenue
2008 2007
$
Change
%
Change(a)
Years Ended
December 31,
(in millions)
Cost of revenue
Customer service costs ................................ $ 61 $ 68 $(7) (10)%
Credit card processing fees ............................. 42 41 1 3%
Other............................................. 60 48 12 25%
Total cost of revenue ............................... $163 $157 $ 6 4%
(a) Percentages are calculated on unrounded numbers.
The increase in cost of revenue was driven by an $8 million increase in affiliate commissions, a $4 million
increase in GDS connectivity costs, a $3 million increase in charge-backs and a $1 million increase in credit
card processing fees, partially offset by a $7 million decrease in customer service costs and a $3 million
decrease in ticketing costs.
The increase in affiliate commissions was primarily due to the growth of our private label business.
Higher transaction volume from our international locations primarily drove the increase in GDS connectivity
costs. The increase in charge-backs was due primarily to an increase in fraudulent credit card usage at one of
our international locations. We installed new revenue protection software and instituted tighter security
measures, and as a result, we experienced a significant decrease in these charge-backs towards the end of the
second quarter of 2008 that continued through the remainder of the year. Growth in our merchant bookings
resulted in higher credit card processing fees.
Lower domestic transaction volume primarily drove the decrease in customer service costs. Ticketing
costs decreased during 2008 as the industry continued to move towards electronic ticketing to meet the
International Air Transport Association mandate to eliminate paper tickets.
Selling, General and Administrative
2008 2007
$
Change
%
Change(a)
Years Ended
December 31,
(in millions)
Selling, general and administrative
Wages and benefits(b) ................................ $160 $160 — —
Contract labor(b) . . .................................. 34 38 $ (4) (10)%
Network communications, systems maintenance and equipment . . 33 36 (3) (8)%
Other............................................. 45 67 (22) (35)%
Total selling, general, and administrative ............... $272 $301 $(29) (10)%
(a) Percentages are calculated on unrounded numbers.
(b) The amounts presented above for wages and benefits and contract labor are net of amounts capitalized.
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