Expedia Posts Record Growth

FRAMINGHAM (05/02/2000) - Online travel agency Expedia Inc. in Bellevue, Washington, posted strong numbers in the first quarter of the year, increasing its gross travel bookings 60% from the previous quarter and 178% from the first quarter of 1999 to a record $401 million.

The Microsoft spin-off expanded in March, acquiring Travelscape.com and VacationSpot.com, two leading Internet lodging sites, and expects to see continued expansion in the Web marketplace.

"The exceptional growth we've seen this quarter is a testament to our continued focus on delivering a complete, fully integrated travel planning experience for our customers," said Richard Barton, president and CEO of Expedia.

The results mirror similarly strong numbers by Expedia's chief online rival Travelocity.com of Fort Worth, Texas, which posted $504 million in travel bookings for the quarter, a 146% increase from the first quarter of 1999.

"Both are showing that they have established themselves as permanent brands on the Internet," said Henry Harteveldt, senior analyst at Forrester Research Inc. in Cambridge, Massachusetts.

Harteveldt said he was most impressed by the fact that the majority of Expedia's revenue - $34 million, or 58% of total revenue - comes from merchant sales rather than travel agency commissions.

"They're showing how travel will have to be sold if it is to survive online," Harteveldt said.

As is common among online businesses, Expedia lost money on operations for the quarter - in this case, $22 million, or a net loss of 40 cents per share.

Travelocity lost $41 million on operations and had a net loss of 38 cents per share.

Despite those losses, Harteveldt said Expedia and Travelocity are building the brand names they need to ultimately succeed in the marketplace. The nation's major airlines, including United Air Lines Inc., Delta Air Lines Inc. and American Airlines, plan to launch a travel Web site this summer, currently known by the working title T2.

Harteveldt predicted that T2, Expedia and Travelocity will emerge as the three top players in the expanding online travel business, leaving other competitors in their wake.

"The big potential loser in all of this is Priceline," he said. "But they've diversified to other products like mortgages so they're more than just the airline ticket operation they started out as."

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