Expedia, the largest U.S. online travel agency, said its revenue rose 16 percent to $584.7 million, fueled largely by an increase in worldwide merchant hotel revenue.

Expedia, which was spun off from IAC/InteractiveCorp in August, said its net income amounted to $126.9 million, or 35 cents per share, compared with $110.2 million a year earlier.

"Our continued investments in improving our customer experience and supplier relationships have paid off this quarter in our fastest merchant hotel revenue growth since the third quarter of 2004," said Expedia Chief Executive Dara Khosrowshahi.

Expedia, which owns Expedia.com and Hotels.com, said its gross bookings increased 21 percent to $3.94 billion.

The company said its domestic bookings rose 16 percent and its international bookings rose 39 percent. Expedia noted a negative impact from hurricanes and terrorist activity during the third quarter.