Expedia Looking to Invest More in HomeAway, Take on Airbnb

Shares of travel-planning company Expedia (EXPE) are lower on Friday, one day after reporting its 2016 fourth-quarter financial results. While revenue grew by 23% year over year, earnings per share fell short of analysts' expectations.

Expedia posted adjusted earnings of $1.17 per share, missing the $1.37 analysts had forecast. Revenue of $2.09 billion was just above the $2.07 billion that was predicted.

Company CFO Mark Okerstrom appeared on Friday's "Bloomberg Markets: Americas" to discuss Expedia's latest earnings results and what business units the company will be investing in further.

"We felt we had a great quarter that delivered broadly in line with expectations on a full-year basis," Okerstrom explained.

Bloomberg reporter Caroline Hyde asked him to discuss margins, particularly with HomeAway, and why the company believes margins will start to increase in the third quarter. HomeAway is a vacation rental marketplace owned by Expedia.

"As we look out into 2017, absolutely we are making some big investments in HomeAway," Okerstrom said. "HomeAway is making a pretty impressive transition from a traditional listings business to a real online booking e-commerce business, and we're going to invest behind that."

Expedia is driving towards a goal of $350 million in adjusted earnings before interest, taxes, depreciation and amortization for HomeAway in 2018. Also helping HomeAway revenue is the way the business is transitioning its monetization model, the CFO explained. This included a small fee for customers when booking. The company expects to see the full impact of this toward the back half of this year.

Hyde and Okerstrom also discussed HomeAway's competition with Airbnb and whether there is overlap between the two businesses. Airbnb is expanding further into the travel market.

"Absolutely there is more overlap, and I think there's going to be more overlap to come," Okerstrom said. "The alternative accommodation space itself is about a $100 billion market, and it's an attractive market. So HomeAway is absolutely going after it. We're having great traction."

What Expedia has found is that the travel industry, including alternative accommodations, is so big that there is room for a few strong players.

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