IAC: Merchant hotel revenue up 40% for 4Q

February 11, 2004 |

Expedia, Hotels.com and Hotwire report merchant hotel revenue up 40% with 6.8 million merchant room nights in Q4 - mainly due to strong international growth.

IAC/InterActiveCorp, parent company of Epedia, Hotels.com and Hotwire reported Q4 2003 results today.

Revenue grew 36% over the prior year to $1.8 billion and operating income grew 142% to $179 million. GAAP net income was $153 million versus $145 million in the prior year and GAAP EPS was $0.20 versus $0.30 in the prior year. The decrease in GAAP EPS was principally due to higher amortization of intangibles and non-cash compensation and higher shares outstanding in Q4 of 2003. For the full year 2003, GAAP EPS was $0.23 versus $4.54 in the prior year, which included a gain of $5.58 per share related to the Vivendi transaction.

IAC’s operating businesses delivered strong results for the quarter. IAC Travel ("IACT") increased revenues by 41% to $677 million, operating income by 119% to $108 million and OIBA by 111% to $150 million, driven by growth in its merchant hotel, packages and international businesses. Electronic Retailing also had solid results domestically and internationally, with total revenues up 14%, operating income up 21% and OIBA up 35%. Ticketing grew revenues, operating income and OIBA by 11%, 41% and 47%, respectively.

Results at IACT (IAC Travel) were driven by continued strong growth in the U.S. and internationally, with IACT international gross bookings up 104%. Merchant hotel revenue was up 40% with 6.8 million merchant room nights in Q4, up 42%, driven by strong international growth. The merchant hotel business reported strong growth in spite of being affected by, as expected, the termination in September of the Hotels.com agreement with Travelocity (which accounted for 9.2% of IACT’s revenue in Q4 2002), intensified competition from third party distributors and increased marketing from hotel chains promoting their direct sites. Packages revenue rose 58% to $82 million, from $52 million. Interval also contributed to this quarter’s results, with higher revenue from deferred membership fees and continued cost efficiencies and online migration.

During Q4, IACT performed an analysis related to estimated supplier liabilities, resulting in an adjustment (and a corresponding increase to revenue, OIBA and operating income) of $22.4 million, which corresponds to $0.02 per diluted share. Excluding the liabilities adjustment, IACT’s revenue, operating income, and OIBA would have grown 37%, 74%, and 80%, respectively, in Q4.

Effective Q1 2004, IAC will begin reporting revenue for Hotels.com business on a net basis rather than on a gross basis due to changes in business practices at Hotels.com that were implemented around the beginning of 2004. The change in business practices conforms Hotels.com with other IACT businesses in regards to its merchant hotel business and thus requires a change in its revenue presentation on a prospective basis. There will be no impact on operating income or OIBA from the change in reporting. The Company will supplement its GAAP disclosures with supplemental information that reflects merchant hotel revenue for Hotels.com on a net basis for all comparable prior periods presented.