Online Travel Falls Short
Mary is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Priceline (NASDAQ: PCLN) recently reported a disappointing third quarter profit outlook, expecting earnings per share of between $11.10 and $12.10. An earlier forecast had the estimate set at $12.82 per share. The company stated that economic conditions in Europe were the main reason for its forecast. Stifel Nicolaus analyst George Askew cut his rating on Priceline to a hold from a buy, stating the company “is transitioning from a momentum stock to a growth stock.” The results for Priceline are certainly not good, but this company is not being singled out. It seems the larger online travel industry is slowing down, not only losing momentum, but losing a bit of their growth as well.
Orbitz (NYSE: OWW) recently reported that its second quarter earnings fell 48% as revenue unexpectedly fell while the company increased marketing costs. The company cited worsening economic conditions in the quarter as a major contributing factor, but also stated that weakness in U.S. Online air travel and a stronger U.S. Dollar played a role. Orbitz also lowered its outlook for the year. The company now expects third quarter revenue between $197 and $203 million, well below the Wall Street of consensus of $216 million. Upon announcement of their results, timed well with Priceline’s earnings release, the share price saw a drastic drop. In fact, other online travel companies also saw a steep price decline on the day of the release.
TripAdvisor (NASDAQ: TRIP) is the world’s largest online travel site. The poor performances and outlook of Priceline and Orbitz have seemingly brought this company down with them. Upon announcement of the companies’ earnings reports and lowered outlooks, TripAdvisor’s share price dropped beside them. However, even before that TripAdvisor had reported the previous month revenues that fell short of analysts’ expectations. TripAdvisor, like Priceline and Orbitz, stated that the economic conditions in Europe also played a large role in their revenue decline.
Expedia (NASDAQ: EXPE) is not in the clear either. The company reported the previous month that second quarter profit declined 25%. It did, however, beat analyst expectations. The company reported a revenue increase of 16% in hotel bookings and a decrease of 8% in airline ticket revenue. This shows truth in Orbitz’ statement that online air travel bookings had decreased. Expedia took a hit in share price along with all of the others, showing that these companies are more closely tied than one would think.
Europe’s economic condition might play a large role in the companies’ current state, but online air travel bookings are down globally. It leads one to wonder if online travel agencies are going the way of brick-and-mortar travel agencies. Or if others, like me, only use the sites for price comparison and do not actually book through them. Guiltily, I admit to using the sites to find out which airlines or hotels offer the best deal. Then I go straight to that airline or hotel’s website to make my reservations. I find that leaving out the middle man leaves my trip more hassle-free. Reservations are not lost and details are not forgotten. And I find that the price is the same, if not lower, through the company itself. Perhaps it is time for these sites to change their strategies and focus on the real value of the service they offer, which is aggregation and price comparison.
MaryPosey has no positions in the stocks mentioned above. The Motley Fool owns shares of Priceline.com and TripAdvisor. Motley Fool newsletter services recommend Priceline.com and TripAdvisor . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.