Fasten your seat belts, travel-site watchers. With Expedia (Nasdaq: EXPE) and Travelzoo (Nasdaq: TZOO) already posting their quarterly results this week -- and Priceline (Nasdaq: PCLN) and Orbitz Worldwide (NYSE: OWW) set to follow next week -- you'll get the perfect snapshot of the nascent industry.
If you prefer a broader picture of the sector's health, China's Ctrip.com (Nasdaq: CTRP) and eLong (Nasdaq: LONG) will step into the viewfinder later this month for a true global portrait.
This morning's report from Expedia set a comforting tone. Revenue climbed 25% to $687.8 million. Adjusted earnings rose by 19%, but thanks to Expedia's aggressive share-repurchase efforts, adjusted profits on a per-share basis soared 33% to $0.24 a share. Wall Street was looking for an adjusted profit of $0.23 a share, on just $657.6 million in revenue.
Expedia's report continues the trend that we've seen from it, Priceline, and Orbitz in recent quarters, in which international bookings outpace domestic gains. Expedia is certainly doing fine stateside -- with North American gross bookings clocking in 15% higher during the quarter -- but its international business has now grown to account for nearly one-third of its revenue mix.
International results may have buoyed the travel portals, but travel publisher Travelzoo faces an entirely different story. The company has been busy growing its presence abroad, but its losses there can't offset the tax bite of domestic profitability. In short, Travelzoo's $2.6 million tax bill ate up more than its $1.6 million in pre-tax profits. If you think your taxes are high, imagine paying an effective tax rate of 164%!
This doesn't mean that we can let Travelzoo off the hook on a technicality. Monday's report was horrible. Despite its overseas push, revenue climbed just 6%. How can a company justify doubling its G&A costs when its top line is barely budging? Weren't its popular Top 20 emails of sponsored travel deals supposed to be the core of a scalable model? How can operating profits fall by 83%? Even if slowing business closer to home practically mandates an overseas push, Travelzoo should be more prudent about controlling costs, especially with so little to show in return.
As a travel publisher, Travelzoo isn't supposed to march to the same beat as the conventional travel portals, which engage in the actual bookings. In that sense, travel portal investors can rest easy, knowing that Expedia has run an admirable first leg of the relay race. Now let's see what the other players do with the baton.
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