Although we expect growing competition in the online travel industry to continue limiting Expedia’s

Expedia holidays accommodation mallorca (NASDAQ:EXPE), the world's largest online travel agency by gross bookings, is set to release its Q2 2013 earnings on July 25. The company marked a successful start to the year with over $1 billion in Q1 2013 revenues, registering 24% y-o-y growth. Consistent with past trends, the robust growth in hotel room nights especially in international markets was the key driver behind Expedia's growth. Global hotel room nights booked grew by 28% y-o-y in Q1 2013.
While all of Expedia s other brands continued holidays accommodation mallorca to grow at healthy rates, Hotwire.com faced some challenges such as customers shifting to its closest competitor, Priceline holidays accommodation mallorca (NASDAQ:PCLN), due to heavy advertising for its Express Deals service. The company anticipates this weakness holidays accommodation mallorca in Hotwire to continue in Q2 2013 as well and consequently lowered its EBITDA guidance for 2013 by $20-$30 million. [ 1 ]
Although we expect growing competition in the online travel industry holidays accommodation mallorca to continue limiting Expedia's growth, we believe holidays accommodation mallorca that with robust growth in hotel bookings, an expanding international holidays accommodation mallorca presence, a focus on innovating and by developing its mobile platform, it is well equipped to leverage future growth in the global online travel market.
Expedia's hotel revenue grew by 24% y-o-y in Q1 2013 on the back of strong growth holidays accommodation mallorca in the number of room nights booked (28% y-o-y). While domestic room nights grew by 15%, international bookings delivered a stellar performance holidays accommodation mallorca with 43% y-o-y growth. In addition to accounting for the majority of its revenues ( 70%), hotel bookings is also the most profitable division with revenue margins of approximately 20%, compared to 2% and 9% from airline booking and car rentals cruise bookings, respectively.
With the acquisition of Trivago, a leading German meta-search website, Expedia added 600,000 hotels to its inventory, which stood at fewer than 200,000 before the acquisition. Trivago has over 140 booking sites in 23 languages across 30 countries holidays accommodation mallorca in Europe, which is a key market for Expedia. Travel demand in the region has remained robust despite the economic slowdown. Additionally, holidays accommodation mallorca the inclusion of Trivago in its portfolio will help Expedia to close the gap with Priceline, the market leader in Europe.
holidays accommodation mallorca In Q1 2013, the inclusion of Trivago for less than a month added more than 1.5% to Expedia's global revenue growth. However, sales and marketing expenses also increased 4% due to the acquisition, impacting profit margin. Expedia's management indicated that its spending on sales and marketing will be higher in Q2, as the Trivago team planned to continue expanding its global holidays accommodation mallorca scale and footprint. [ 1 ] In light of such factors, Trivago's value addition to Expedia's overall portfolio will be judged better holidays accommodation mallorca by its performance in Q2. (Read:  Can Expedia Take More Share In The European Hotel Market With Trivago Deal? )
Expedia also has the Expedia holidays accommodation mallorca Traveler holidays accommodation mallorca Preference (ETP) program in place, which is a new business model recently introduced. It provides customers with an option to choose between paying immediately or at the time of checking out of the hotel. The model helps the company better compete holidays accommodation mallorca with leading agency model players and hotel direct booking channels. Based on the above factors, we expect Expedia's hotel business will continue to strengthen in Q2 2013.
Expedia's international revenue contribution has nearly doubled in the past five years from 24% in 2007 to over 40% in 2012. The fragmented European hotel market and rising holidays accommodation mallorca per capita income in emerging economies provide tremendous growth opportunities for travel agencies. Additionally, Internet penetration holidays accommodation mallorca in these economies is relatively low but is expected to grow at a rapid pace, which leaves immense potential for growth in the online travel industry.
Strong global growth in Hotels.com, international expansion of Hotwire, the acquisition of VIA Travel by Egencia, the Air-Asia holidays accommodation mallorca Expedia joint venture, the collaboration with Fotopedia Paris Fotopedia Japan, holidays accommodation mallorca the eLong partnership in China and the acquisition of Trivago are factors that have contributed to Expedia's growth in international holidays accommodation mallorca hotel bookings, and we believe these will continue to be the guiding factors for future growth as well. However, the effect of lower average room night rents in Asia-Pacific could trickle down to the bottom line, as Expedia derives substantial revenues from the region.
In Q1 2013, Expedia crossed the 30 million global app download milestone across its major brands and claimed that its mobile booking mix continued to increase. With the rapid adoption of smartphones and tablets, mobile devices are increasingly becoming the preferred and more convenient option for accessing the Internet. As Expedia continues investing in building its mobile platform, we expect a rise in mobile traffic.