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No 2001-2 - Wednesday,february 13, 2001

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  Last results for the fourth quarter of 2000: Expedia way behind travelocity and still no sign of profitability  

There might not be much difference between Travelocity and Expedia as far as gross travel bookings for the fourth quarter of 2000 are concerned ($696 million for Travelocity and $475 million for Expedia), but this is far from being the case when total revenue itself is concerned.

First of all, please be aware that the figures for Travelocity also include those of Preview Travel and that the figures for Expedia include those of and

Total revenue for Travelocity was $65.4 million for the fourth quarter of 2000 when it was only $44 million for Expedia.

This is a first important gap between those two sites and it gets even bigger when gross profit is concerned since it was $44.8 million for Travelocity and $15.7 million for Expedia…

As we can see, the breakdown of these figures reveals striking differences.

Among the simplest explanations, let's say that Travelocity is much more successful as far as advertising revenues are concerned, since they were $18.5 million for the fourth quarter of 2000 for Travelocity and only $5.5 million for Expedia.


And yet operating expenses appear to have been much lighter for Expedia than they have been for Travelocity for the same quarter: $17.6 million for Expedia and $39.3 million for Travelocity.

In total, the operating loss for Travelocity reached $27.4 million when it was $43.5 million for Expedia.

Apart from those purely financial figures, it also proves interesting to compare the Internet "weight" of these two leading eTourism sites.

The number of cumulative unique bookers rose to 6 million at year-end for Travelocity compared to 2.9 million for Expedia.

Would those figures mean that the gap between Travelocity and Expedia has so dramatically increased that it can no longer be filled?

Things are a bit more complex since the number of unique bookers for these two sites for the last quarter of 2000 appears rather conflicting, depending which site supplies the figures.

Expedia claims having 790.000 monthly unique bookers, compared to 1.575.000 for Travelocity (525.000 per month).

I might say I was rather surprised by the figures announced by these two sites. Whether these figures are false, whether the typical Travelocity customer differs dramatically from the typical Expedia customer. Indeed, given these results, one could expect Travelocity's turnover should be twice as big as Expedia's for the same period of 2000 but it is only 46% bigger. And yet, Travelocity adds that its turnover for the 4th quarter reached $302 per transaction, which seems rather normal.

Given these rather striking differences, I will not comment on the looker-to-booker conversion rates announced by these two sites. This is how Travelocity's conversion rate would have increased to 8.1% in the fourth quarter.

I only want to make something clear: you get these conversion rates by dividing by three the number of consumers who made a booking in the fourth quarter of 2000, and then by dividing the number you get by the average monthly traffic measured by Media Metrix.

As I already mentioned it, these figures are not representative of the true number of Internet users. Indeed, these figures tend to undervalue the number of consumers who access the Internet from work, since their sample is too small.

Knowing that over 66% of the Internet users visit web agencies from 9 a.m. to 6.00 p.m. (please refer to our eTourism newsletter 2001-1), one can only wonder why Travelocity and Expedia did not manage to find more secure figures to work out their conversion rate.

In my opinion, the figures used to calculate the looker-to-buyer conversion rate are not reliable and, as a result, tend to overestimate dramatically the actual conversion rate of these two sites.

As for the overall figures of these two sites (still pro forma), one cannot fail to notice that the investments that have been granted are beginning to bear fruit at last.

But we should remain cautious as far as Travelocity's statements are concerned since it declares that it will reach break-even-point as soon as the second quarter of this year ends.

As we can see as far as the number of customers and the looker-to-buyer conversion rate are concerned, you can easily make figures say what best suits you. To this effect, the break-even-point mentioned by Travelocity is no more than a relative notion…Gross profits for the year might reach $125.46 million but its operating loss still reaches …$138.01 when its gross travel bookings were $2.5 billion.

Let's keep the results for the fourth quarter to perspective when compared to the whole year 2000 and we also need to observe that the eTourism sector still only grants small margins despite the efforts that have to be made to promote the brand.

Indeed, for the year 2000 alone, Travelocity spent a total amount of $127.7 million in marketing to be compared with its $138 million operating loss.

Even though break-even point might still be reached, as Travelocity claims, a few more years will still be needed before the initial investments are paid back, unless the stock exchange goes crazy again…

Source : Expedia - Travelocity


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