Expedia Misses Profit Estimates as HomeAway Spending Grows

Updated on
  • Company is spending to compete with home rental leader Airbnb
  • CEO says Trump immigration order has not affected business

Expedia CFO Sees Tourism Risks From Trump Travel Ban

Expedia Inc. reported fourth-quarter profit that missed analysts’ estimates due to increased spending on marketing and investment in its HomeAway residential-rental unit.

Earnings, excluding certain items, were $1.17 a share, the Bellevue, Washington-based company said in a statement Thursday. The average analyst estimate was $1.37 a share. Revenue increased 23 percent to $2.09 billion, beating the average projection of $2.07 billion. The shares fell as much as 4.8 percent in after-market trading before recovering. They were trading at $123.49 at 5.10 p.m. in New York after closing at $123.25.

Technology and content costs jumped 29 percent compared to the same quarter last year as Expedia hired more people to work on building out its technology and integrating HomeAway. Earlier in the year, revenue took a hit when integration of another acquisition, Orbitz, caused some network downtime.

Expedia is now investing to upgrade HomeAway, which it bought in late 2015 to compete with Airbnb Inc. The company is trying to make more of the site’s properties instantly bookable, and is spending on marketing to reach new users. Expedia, along with Priceline Group Inc., is also navigating a complicated international travel environment, following terrorist attacks in Europe and President Donald Trump’s immigration order limiting travel to the U.S. from seven Muslim-majority countries.

Trump’s election and the order have had no real effect on Expedia’s business yet, Chief Executive Officer Dara Khosrowshahi said on a conference call. The executive was among many tech industry leaders who criticized the order, saying it was a step backward for the U.S. economy and the country’s position in the world.

"We were frankly worried about the chaos and all the volatility and uncertainty and effect it would have on general business trends and especially travel," he said. "We haven’t seen any meaningful effect."

"Hopefully we will all be alive to see the end of next year,” he added. 

Key Points

  • Gross bookings increased 8 percent to $16.1 billion.
  • Trivago, a travel search engine Expedia partly owns and which recently went public, generated revenue of $183 million in the fourth quarter, an increase of 65 percent from the same period last year.
  • The investment in HomeAway is paying off so far. Revenue at the unit was $166 million.
(Updates with comments from CEO in fifth paragraph.)
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