Orbitz profit tops forecasts, hotel booking revenues up

Reuters News
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Posted: Aug 08, 2013 12:03 PM

By Karen Jacobs

(Reuters) - Online travel agency Orbitz Worldwide Inc posted quarterly earnings that beat forecasts on Thursday and raised its 2013 revenue view, and its shares jumped 35 percent, surpassing their high for the year.

In the second quarter, hotel and vacations accounted for 48 percent of total Orbitz revenue in the year ended in June, up from 44 percent in the year earlier, the company said.

Orbitz, which operates its namesake and CheapTickets brands in the United States, ebookers in Europe and HotelClub primarily in the Asia-Pacific region, is moving to boost revenue from hotels as opposed to airline tickets, which tend to be less profitable.

"Hotels is the big growth opportunity, and that's what Orbitz is doing well," said Edward Woo, a research analyst with Ascendiant Capital Markets.

The company also has been investing heavily on mobile capabilities that enable consumers to search and book on smartphones and tablets.

Many U.S. online travel companies have reported solid results for the second quarter, which tends to see a pickup in travel as consumers take vacations in warm weather. But the segment is becoming more competitive as companies push to expand their geographical reach.

Priceline.com, which has the biggest market capitalization among pure-play online travel companies, is in the midst of a U.S. advertising campaign to boost awareness of its Booking.com website, which has brought it success in Europe.

Woo said the Orbitz results suggested the company was not being affected by competitive concerns that weighed on Expedia Inc, which two weeks ago posted profit that fell short of estimates because of competition and poor performance with its Hotwire.

Priceline is expected to post higher quarterly results after the bell on Thursday. TripAdvisor, which was spun off from Expedia in 2011, turned in a 26 percent rise in quarterly profit in late July [ID:nL4N0FU4O1].

"It's likely that the travel market is healthy for most players right now ... and Priceline has tremendous momentum," Woo said.

At Orbitz, gross bookings, or the dollar value of all travel services purchased, rose 4 percent to about $3.1 billion in the second quarter, aided by increased hotel and vacation package sales. The amount of stayed hotel room nights rose 20 percent in the second quarter.

Orbitz said the strength in its hotel business was continuing into the current quarter, with hotel room-night bookings for July up 22 percent.

Second-quarter earnings fell at Orbitz as it wrote off financing fees. Net income was $561,000, or nil per share, compared with $4.6 million, or 4 cents a share, a year earlier.

Excluding an $18.1 million write-off of deferred financing fees and other refinancing costs, Orbitz earnings came to 17 cents a share. Analysts on average were expecting 9 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 12 percent to $225.8 million, compared with analysts' estimates of $218.9 million. While revenue from airline tickets was flat, standalone hotel revenue rose 40 percent. Vacation package revenue rose 6 percent in the quarter.

Orbitz said it expected revenue of $840 million to $850 million for the full year, which would represent growth of nearly 8 percent to 9 percent over 2012. In May, the company forecast net revenue growth of 4 percent to 7 percent for the year. The analysts' average estimate is $831.4 million.

For the third quarter, Orbitz said it expected revenue of $214 million to $220 million. Analysts have forecast $213.8 million.

Shares of Orbitz jumped 35 percent, or $3.20, to $12.46 in morning trading, above their year high of $11.08. Priceline was off 0.4 percent to $923.49, and Expedia was up 0.4 percent to $50.99.

So far this year, Orbitz shares have risen more than fourfold, compared with a 49 percent rise in Priceline and a 17 percent drop in Expedia shares.

(Reporting by Karen Jacobs in Atlanta; Editing by John Wallace and Lisa Von Ahn)