Orbitz 2011 Annual Report Download - page 39

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39
(d) For the years ended December 31, 2011, 2010 and 2009, $122.8 million, $127.2 million and $117.2 million of our total
net revenue, respectively, was from incentive payments earned for air, car and hotel segments processed through GDSs.
Net revenue increased $9.3 million, or 1%, for the year ended December 31, 2011 compared with the year ended
December 31, 2010, and $19.8 million, or 3%, for the year ended December 31, 2010 compared with the year ended December
31, 2009.
Air. Net revenue from air bookings decreased $9.4 million, or 3%, for the year ended December 31, 2011 compared with
the same period in 2010. Excluding the impact of foreign currency fluctuations, net revenue from air bookings decreased $14.7
million. Domestically, air net revenue decreased $20.3 million for the year ended December 31, 2011 compared with the same
period in 2010, driven by a $27.2 million decrease due to lower transaction volume. In addition, the termination of the Charter
Associate Agreement between American Airlines and us effective December 2010 resulted in the recognition of $5.6 million in
revenue in the fourth quarter of 2010 (see Note 8 - Unfavorable Contracts of the Notes to Consolidated Financial Statements).
These decreases were partially offset by a $12.5 million increase due to higher average net revenue per airline ticket. The lower
domestic transaction volume was primarily driven by a decline in transactions for our domestic leisure brands due to actions
taken by certain airlines to limit the forward distribution of their fares on meta-search sites, such as Kayak, higher air fares and
a fare structure change implemented by a major airline and, to a lesser extent, due to the lack of American Airlines content on
our Orbitz.com and Orbitz for Business websites through June 1, 2011. We were able to replace much of the American Airlines
ticket volume through substitution for other airlines offered on our websites. The higher average net revenue per airline ticket
was due to a shift in supplier mix towards airlines from which we earn higher commissions, including those with variable
commission structures, and also reflects an increase in the incentive revenue earned per segment processed through Travelport
GDSs through June 1, 2011 (see “Letter Agreement” section of Note 16 - Related Party Transactions of the Notes to
Consolidated Financial Statements). Internationally, air net revenue increased $10.9 million for the year ended December 31,
2011 compared with the same period in 2010, an increase of $5.6 million excluding the impact of foreign currency fluctuations.
This increase was primarily due to higher transaction volume, which was driven in part by marketing efforts at ebookers.
For the year ended December 31, 2010 compared with the year ended December 31, 2009, net revenue from air
bookings increased $4.9 million, or 2%. In 2010, foreign currency fluctuations had a nominal impact on the increase in air net
revenue. Domestically, air net revenue decreased $9.2 million for the year ended December 31, 2010 compared with the same
period in 2009, driven by a $17.3 million decrease due to lower average net revenue per airline ticket, which was partially
offset by an $8.1 million increase in domestic air net revenue due to higher transaction volume. The lower average net revenue
per airline ticket was primarily driven by the elimination of most air booking fees on our domestic leisure websites in April
2009. Higher net revenue per airline ticket from merchant air transactions and higher commissions from those airlines with
variable commission structures, both of which were the result of higher average air fares, and the reduction to the unfavorable
contract liability as a result of the termination of the Charter Associate Agreement between American Airlines and us effective
December 2010 (see discussion above) partially offset the lower net revenue per airline ticket. Internationally, air net revenue
increased $14.1 million for the year ended December 31, 2010 compared with the same period in 2009 (excluding the impact of
foreign currency fluctuations) primarily due to higher transaction volume, partially offset by lower average net revenue per
airline ticket. The lower average net revenue per airline ticket was primarily driven by lower air override revenue, which
represents incentive-based commissions received from certain suppliers when volume thresholds are met, and a shift in air
bookings towards markets where average booking values are lower and where we earn lower margins, partially offset by higher
credit card fee revenue.
Hotel. Net revenue from hotel bookings increased $5.8 million, or 3%, for the year ended December 31, 2011,
compared with same period in 2010. Excluding the impact of foreign currency fluctuations, net revenue from hotel bookings
decreased $1.4 million. Domestic hotel net revenue increased $1.7 million primarily due to higher ADRs, partially offset by
lower transaction volume. International hotel net revenue decreased by $3.1 million (excluding the impact of foreign currency
fluctuations) due primarily to lower transaction volume for HotelClub and lower breakage at ebookers. These decreases were
partially offset by higher transaction volume for ebookers, which was driven by the benefits of the global platform, including
user-interface improvements and mobile capabilities, as well as a return on its strategic marketing investments, and by an
increase in ADRs.
Net revenue from hotel bookings increased $20.2 million, or 11%, for the year ended December 31, 2010 compared with
the same period in 2009. Foreign currency fluctuations drove $6.8 million of this increase. Domestic hotel net revenue
increased $15.3 million, $14.0 million of which was due to higher transaction volume and $1.3 million of which was due to
higher average net revenue per transaction. The higher average net revenue per hotel transaction was driven by higher hotel
ADRs, fewer promotional coupons issued by us, more timely receipt of customer refund reimbursements from hotels and
higher payment vendor rebates, partially offset by a significant reduction in hotel booking fees charged on our domestic leisure
websites and a lower average length of stay. International hotel net revenue declined $1.9 million (excluding the impact of