Expedia Group Inc (EXPE) 0 Q0 法說會逐字稿

Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the Expedia Inc.

first-quarter 2009 conference call.

During today's presentation, all parties will be in a listen-only mode.

(Operator Instructions).

This conference is being recorded today, Thursday, April 30, 2009.

I would now like to turn the conference over to Mr.

Stu Haas, Senior Vice President, Investor Relations, and Treasurer.

Good morning and welcome to Expedia Inc.'s financial results conference call for the first quarter ended March 31, 2009.

I'm pleased to be joined on the call today by Dara Khosrowshahi, Expedia's CEO and President, and Michael Adler, our CFO.

The following discussion, including responses to your questions, reflects management's views as of today, April 30, 2009, only.

As always, some of the statements made on today's call are forward-looking, including comments on financial performance and expectations, operational results, margins, planned investments and spending, foreign exchange, and growth of business lines.

Actual results may differ materially.

We do not undertake any obligation to update or revise this information.

Please refer to today's press release and the Company's filings with the SEC, including our Form 10-K for the year ended December 31, 2008, for additional information about factors that could potentially affect our financial and operational results.

During this call, we will discuss certain non-GAAP financial measures, including OIBA, operating expenses excluding stock-based compensation, free cash flow, adjusted net income, and adjusted EPS.

In our press release, which is posted on the Company's IR website at ExpediaInc.com/IR, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of the measures with the most comparable GAAP measure.

Unless otherwise stated, all references on the call to gross margin, selling and marketing expense, general and administrative expense, and technology and content expense, exclude stock-based compensation.

Finally, any forward-looking statements made on today's call exclude any impact from the swine flu pandemic.

And all comparisons in this call will be against our results for the comparable period of 2008.

With that, let me turn the call over to Dara.

Thanks for everyone for joining us on the call.

From our release this morning, you can see that, considering the challenges in the global economy and travel, Expedia had a solid Q1 on the strength of improved transaction growth, along with effective expense management.

Our transaction growth accelerated to 7%, fueled by 13% growth in hotel room nights and a lower rate of decline in air tickets sold, reflecting improved inventory and pricing availability, as well as our air booking fee promotion later in the quarter.

This positive response from leisure travelers to better value reinforces our belief that the Expedia model offers some countercyclical offsets in a weak demand environment.

We are particularly encouraged that our Q1 hotel and air growth exceeded overall industry volumes.

Specifically, our 11% growth in U.S.

room nights compares very favorably to Smith Travel's 8% decrease in Q1 hotel demand, in the U.S.

again.

And our 5% decline in U.S.

air ticket volumes outpaced U.S.

carriers' 13% traffic decline.

We, obviously, have little control over larger macro forces, but I am pleased that our teams have done a great job executing, given the hand that we have been dealt.

Our volume pickup in hotel was not enough to offset another leg down in ADRs, from negative 10% in Q4 to 18% in Q1.

While we are more than happy to continue putting great deals in front of travelers, and believe that we do this better than anyone else in travel, our unit and overall economics suffer as a result.

The rate of ADR decline does appear to be stabilizing at currently depressed levels, based on our limited forward-booking data.

Of course, this could change very quickly, and the recent outbreak of the swine flu is definitely a step in the wrong direction.

I mentioned our booking fee promotion as a positive catalyst in improved air ticket sales on Expedia.com.

January and February ticket sales were down 9% on a year-over-year basis, while March and April tickets are up in the double digits.

Looking at March and April together normalizes for year-on-year Easter seasonality.

Now, aggressive fare sales from air carriers were a contributing factor, but not enough to explain the step change in demand that we witnessed after the fee promotions.

Obviously, the question on everyone's mind is whether we continue with the booking fee promotion or return to some level of service fee.

And as you might imagine, that's not something we are prepared to give an indication on, one way or the other, on today's call.

What I can tell you is that we will consider the fee in the context of the entire customer value proposition and the competitive environment for that market.

We will compare the fee removal to alternate means of how we might otherwise deploy capital in attracting and servicing travelers.

While air booking fees certainly have grabbed headlines recently, it's important for investors to appreciate that this is just one of many actions we have taken or are planning to take to improve the experience across Expedia's portfolio of our various customers -- suppliers, travelers, and advertisers.

Hotels.com is one of our best examples when it comes to having meaningfully altered our traveler value proposition over the past few quarters.

From eliminating change cancel fees, to lowering hotel booking fees, to our successful welcome rewards program offering travelers one free hotel night for every 10 nights booked, to a consistent and maniacal focus on site conversion.

Put it all together, and Hotels.com grew Q1 room nights 14% while lapping a very strong Easter-aided 2008, all the while spending 31% less in direct marketing costs.

Growing and expanding hotel selection is another way that we are improving the experience for both travelers and suppliers.

Expedia's global hotel footprint now exceeds 100,000 properties, up over 30% on a year-over-year basis, including over 9,000 incremental merchant properties in the European and Asia-Pacific markets.

Our total also includes nearly 15,000 unique properties from Venere, and we now have included much of that selection on our worldwide hotels.com sites, as well as on many of our larger Expedia-branded sites.

Finally, Expedia grew advertising and media revenue by 15%, despite tough comps and a broader advertising market that shrank double digits offline, and was down slightly online.

Ad revenue now accounts for over 11% of Expedia's revenue base.

Q1 advertising on our transaction sites grew a healthy 32%, where we continue to innovate for advertisers with our travel ads and passport ads products.

Overall in advertising, we will still be hard-pressed to continue growing at recent rates, particularly as we lap our media acquisitions in the second half of the year.

But we continue to believe TripAdvisor and our other advertising offerings represent one of Expedia's best long-term growth drivers, and have successfully broadened our mindset beyond transactions to monetization.

In closing, I would like to say that, while I certainly expected the increased efficiency and focus from our global reorganization around our brands, what I didn't appreciate as much was how galvanizing the change would be.

Particularly when combined with our fee promotions.

I'm certainly seeing and hearing a more aggressive mindset with a renewed commitment to the customer experience in both my formal and informal meetings with employees.

While I consider this a very positive development, it certainly won't be without its challenges and costs.

But it's the right approach for Expedia and for our long-term shareholders.

Thanks, Dara.

I'm going to focus my comments on our expenses and efficiencies, cash flows and liquidity, and close with some thoughts on our broad expectations for Q2 and full-year '09.

On gross margin, you'll note that we saw 41 bps of deleverage in Q1.

This might be surprising to some, as I outlined a number of steps on the last call to reduce cost of sales, so I want to explain why this story is actually better than you might conclude from the numbers.

Specifically, merchant fees, customer service, and fulfillment account for roughly half of our total cost of sales.

The absolute dollar cost for these items was actually down $15 million, year on year, despite the 7% increase in transactions.

Revenue pressure is masking these productivity improvements from a gross margin perspective.

The good news is that, when these impacts moderate and we get back to a more normalized revenue environment, we will be well-positioned to participate on the upside from a margin perspective.

On OpEx, we saw leverage in our largest expense item, selling and marketing.

Despite the transaction uptick, total marketing costs decreased 18%, or over $50 million, with nearly all that savings coming on the direct spend side.

Indirect costs, primarily our various sales forces, decreased slightly year on year, which was the first decrease in these costs since our spinoff from IAC.

While we anticipate relatively flat indirect marketing expenses going forward, on the direct side we will likely see some upward year-on-year pressure as our re-organized brand teams launch more robust marketing efforts in Q2 and beyond.

Keep in mind that lower CPC and other marketing rates have been favorable of late, as have ADR declines.

Any rebound in those metrics would likely come at the expense of our efficiencies.

Finally, as a reminder, we started more aggressively pulling back direct marketing spend last year in Q3 as the economy weakened, so comps on marketing spend will get more difficult as we progress through the year.

Before I move to tech and content, you'll notice as part of our global reorganization.

We've moved some IT costs from G&A to tech and content where we think they're more appropriately classified.

This does not impact total expenses.

So in today's release, you'll find 2008 quarterly expenses under the new and old classifications.

Tech and content increased 8%, or $5 million, year on year.

Cash tech spend was essentially flat year on year, despite increases from several acquisitions.

And we expect to see fairly steady tech and content expense on the P&L as we move through '09.

On G&A, costs came in flat on the quarter at $59 million.

We've made a number of reductions in G&A, which have been largely offset by the increased G&A of the companies we acquired in '08, as well as some higher legal fees.

Note that we also meaningfully reduced our '08 bonus expense as the year wore on and business conditions worsened, which could make for a more difficult comp in the back half of the year.

All in all, we expect to see modest dollar growth in '09 G&A expense.

As with most companies, we did continue to see a meaningful year-on-year impact on our results from FX.

But the book-to-stay loss associated with merchant hotel was much smaller in Q1 at $5.6 million, compared to what we saw in Q4.

Also in Q1, we had some hedges in place that offset $0.5 million of this loss, which we have included in OIBA.

Note that gains and losses from revenue hedges are not included in revenue.

Given the recent ramp in our FX program, we should have better hedge coverage going forward, and assuming rates remain where they have been recently, the year-on-year negative impacts start to trail off as we move through the year.

Free cash flow was $479 million in the first quarter, a decrease of 10%.

Core operating earnings, or OIBA, were relatively flat year on year, so the bulk of the decline in cash flow is explained by higher interest and taxes, and a small decrease in cash due to net working capital.

On taxes, the difference is driven almost entirely by timing.

Higher interest reflects our high yield issue from last summer.

And the working capital detriment primarily arose from a decline in our merchant bookings of 13% year on year, which led to lower net cash benefit from working capital this year versus last.

In addition, Q1 '09 cash flows benefited from Easter timing due to late quarter cash inflows.

Lastly, we did spend $10 million less in CapEx, and Q1 '09's $23 million of CapEx is in keeping with our likely average quarterly level of spend in '09.

On the liquidity front, based on the strength of our operating results and cash flow, we fully repaid our $650 million draw on the revolver in Q1.

Absent some deterioration in our business or exogenous events, we don't currently anticipate having to draw on the line prior to its expiration in August 2010.

While we would ideally prefer to extend or renew the facility, Expedia generates enough internal cash flow that we don't anticipate needing to do so.

Turning to expectations, we continue to believe that bookings, revenue, OIBA, and free cash flow will decline year on year for full-year '09.

We managed modest OIBA growth in Q1, mostly due to marketing reductions.

We do not expect such severe drops in marketing as the year progresses.

For example, we have begun putting marketing muscle behind our recent air fee promotion and are ramping up marketing efforts in Europe, which bore the brunt of Q1 '09 reductions.

So in Q2, we'll have less of a decrease in year-on-year marketing spend than in Q1.

We'll also have at least an extra month of our booking fee promotion, as well as some impact from our recent hotel fee action.

On the plus side, we continue to see further acceleration in units here in early Q2, which will aid the topline.

With that, let's turn to Q&A.

Operator, would you please remind listeners how to ask a question?

(Operator Instructions).

Mark Mahaney, Citigroup.

I wanted to just ask about the hotel booking fee reduction elimination, and some of your thoughts into why you initiated that.

How do you think about balancing that versus the air fee reduction?

Which is more important to you, do you think, as a driver of overall business?

Thanks for the question.

As far as hotel fees, in general we have been working, I'd say, over the past year and a half, certainly, to reduce reasons why consumers come to our site and don't book.

Why they may search, and they might go to another site and book, and of the consumers who come to our site and don't book with us but book someplace else, around three-quarters book with supplier direct, and one-quarter book with -- call it other competitor OTAs.

In general, we've been trying to remove reasons why consumers don't book.

On the air booking fee side, that has always been -- it's consumers see it.

We have millions of consumers who have booked on our site despite the air booking fee, but we determined that, based on the economic conditions, etc., consumers were becoming more price-sensitive and we thought that a promotion on the air booking fee made a lot of sense.

On the hotel side, obviously hotel is the biggest part of our business.

And we have been, for example, Hotels.com had been decreasing its hotel fees over time, eliminating change cancel fees, so this was just kind of another action along a long-term path.

We have to be competitive on price, both as far as the base fees that we negotiate with hotels, and as far as other fees that we charge.

And in a competitive marketplace, you have to do what it takes in order to get consumers to come to your site and to book.

One of the -- I know that there's been some confusion on the financial ramifications of these actions, and while we are not going to talk about what we are going to do, I can certainly size it for you.

On the air booking fee, our best estimate suggests that, for the month plus that we didn't have the air booking fee -- that we had air booking fee at zero, that cost us on a net basis around $3 million for that month.

And for hotel fees, as well, to the extent we keep hotel fees at the levels that they are now, I'm not saying we are, but to the extent that we do, we don't have a lot of data on consumer response on that.

But we think it will cost us a similar amount on a monthly basis as the air fees do.

So that's kind of where we are.

And what we will do, obviously, we will let you know to the extent that we take any actions one way or the other.

A quick follow-up.

Market share -- sources of market-share gains.

Any comments on whether you think that's coming more from direct suppliers or from other online travel agencies?

Thank you very much.

We don't have enough data yet.

Obviously, the other OTAs have not reported, and so it's impossible for us to tell.

We can certainly tell that we are taking overall share in the overall travel market, which is more important to us.

Our room night share in the U.S.

is at record highs, etc.

But it's too early to see whether we've taken share from OTAs or supplier direct at this point.

Thank you.

Doug Anmuth, Barclays Capital.

Thanks for taking my question.

It looks like your revenue margin north of 12% in the quarter, I think, was the highest in a 1Q in about five years.

Obviously, advertising had some meaningful contribution here, but can you talk about what else drove the revenue margin higher in the quarter, on both the air and hotel side?

Advertising revenue is actually the biggest driver of the increase.

We actually are also getting a benefit from greater mix shift from air to hotel.

And that is a key driver as well.

There are a couple of offsets in the figures, in particular in Europe.

We are seeing a higher share of lower-margin strategic accounts, which is -- retarding that growth just a bit.

FX has almost no impact on the revenue margin, we get that question sometimes.

But it really isn't muted -- it really is muted in the figures.

I would think it's mostly -- if you look at our hotel room nights, they were up 13% versus air tickets that were down 4%.

I think that's the biggest story there.

It's our higher-margin products are growing faster, which is certainly a good thing.

I think that's the biggest lever that you see, in addition to advertising, which is our highest-margin product.

We like those trends.

We like the mix.

I would agree, in terms of what is different now, that -- we've had that shift in past quarters, but it's much more pronounced in this particular quarter.

So, definitely.

A quick follow-up, while we are on the topic of advertising there that you mentioned.

Any early returns on the TripAdvisor meta-search product?

I know it hasn't been out for long, but any color you can provide would be good.

It's very early.

The acceptance and the excitement that it's created has been terrific.

All of the industry press that you see on it has been praiseworthy, and it has not been just a me-too product.

I think the fee estimator that they have, where you can determine what your total cost is going to be on an apples-to-apples basis, based on how many bags you're going to check, etc., has been very well received.

And a terrific innovation.

And from a traveler perspective, it offers not only the choice to go to supplier direct, but also to go to three big OTAs, right?

Expedia, Hotwire, and Travelocity.

So, from an innovation standpoint, from a choice standpoint, it is -- it has been great.

And it's just part of some, I think, really great investments that we are making in TripAdvisor.

We opened up daodao.com in China, which we think is a terrific product, and also we're getting into the vacation rental space as well.

So the TripAdvisor folks are very, very busy, and I think doing quite well.

Thanks, guys.

Jennifer Watson, Goldman Sachs.

Michael, I think you discussed a little bit on the call about direct sales and marketing expenses obviously coming in.

Can you talk about what you are seeing in CPCs relative to a year ago, and even fourth quarter?

Is that just a matter of your competitors not in the marketplace?

And then, what kind of impact is that having on Trip, or do you think that Trip will continue to see, potentially, price increases and demand from suppliers as well as other OTAs for advertising?

Thanks for the question.

We definitely are seeing CPCs moderating in this environment.

We also are seeing offline rates that are really improving for us.

In particular, we are seeing a fair amount of distressed inventory that's actually increasing our optionality in terms of how we are looking to reach our consumers.

In terms of how this is affecting TripAdvisor, I think that there had been an impact on CPC rates that we had discussed last quarter.

And I think that we have seen that leveling off.

Okay, and then, if you could just comment on the display side of Trip.

On the display side of Trip, I would say the market for travel advertisers remains very, very strong for us.

There is some weakness in non-travel advertisers, as may not be a surprise, given what's going on in the economy.

On the display side, we are not really seeing pricing pressure to any great degree.

We are also getting hurt by FX rates as well.

So if you look at average CPMs adjusted for FX there, they come down, but if you don't adjust them for FX, in general, CPMs, especially for travel advertising, is holding up pretty well.

Great.

Thank you.

Justin Post, BAS-ML.

Thank you.

Dara, have you seen any big-picture changes in consumer behavior?

Maybe more traffic into the site as people look for deals online in a tougher environment.

Can you say why Q1 might have improved versus fourth quarter?

And then, if you think about summer being the heavy travel season, do you think the booking window might have been compressed, in that people were just delaying purchases that they might otherwise make, and you might even see a bigger uptick as we approach the heavy travel season?

I'd say, in general on consumer behavior, we haven't seen a significant shift in consumer behavior as much as, I'd say, more of a shift on our supplier behavior.

I think in the fourth quarter, some of our supply partners were caught offguard a bit as far as the severe depression in demand that started showing up, and really didn't know which way to move.

I think in Q1, we are seeing our supply partners working much more closely with our market managers on a daily basis.

What's going on under what market?

What is demand looking like?

How do the windows look three weeks out, four weeks out, five weeks out?

And really being much more focused on pricing and, frankly, being more aggressive on the pricing side, on the leisure front, which is helping demand and certainly helping demand in our marketplace.

So I think suppliers are more aggressive, acting appropriately, and I think that it is definitely stimulating the leisure market, which is why you see -- why you see the transaction growth on the hotel side, which is continuing into Q2.

We will see what happens with the swine flu.

But certainly, before this outbreak, the momentum was even stronger.

The opaque channels continue to be very strong.

Hotwire unique visitors are up very nicely.

Transactions were up 30% or so in Q1, so that's a continuing trend that hasn't changed.

I would say one other trend that has changed is that U.S.

consumers are starting -- we are seeing some increase in U.S.

demand going into Europe, because of the strength of the dollar.

In Q4, even though the dollar had gone a lot stronger, we didn't see really a response in demand, but we are seeing a response in demand in Q1.

On the other side of the equation, for example, London as a destination for us has been very, very strong.

So again, that's another response to FX rates as far as where consumers are going.

As far as the booking window goes, we do see some compression there, and as a result, unfortunately, our visibility is not what it used to be.

We don't think it's a major driver, but typically, as we are approaching a holiday period, things don't look that great.

And then, once we hit the holiday period, the bookings really pick up, which is exactly what we saw on Easter.

On the booking window, I would add we are seeing it pretty much the same on the air and the hotel side.

One quick follow-up.

How much does Venere add, maybe in room nights or revenues or bookings?

Can you give us any help with that?

We disclosed in the earnings release the impact of acquisitions, and we had a couple points of help on the topline.

We do have a couple of other acquisitions in there, most notably carrentals.com.

We did have a negative impact from acquisitions in Q1, due to the normal seasonality of the Venere business actually having negative earnings in Q1.

In terms of hotel room-night growth, Venere was in our Q4 figures for a full quarter.

And it's helping driving a couple points of the growth.

Thank you.

Imran Khan, JPMorgan.

Thank you so much for taking my questions.

Two questions.

Going back to sales and marketing, I think you talked about how sales and marketing growth rate -- decline rate will be lower than in Q1 and Q2.

Can you give us some sense how should we think about that for the year?

What kind of decline we will see in the sales and marketing on a year-over-year basis?

And secondly, looking at continental Europe, your overall international booking was roughly flat on a year-over-year basis on a local currency.

What kind of trends are you seeing?

You know, European economy is softening.

Are you seeing the transactions slowing down?

Any color would be helpful.

Thank you.

On the sales and marketing front, there's two pieces.

On the indirect side, we will see modest declines during the year.

On the direct side, we are going to react to the marketplace, and we have a lot of flexibility in our spend, and so we do want to get the word more out there about the great values that we are delivering to consumers.

But we think the drop -- we actually decreased the sales and marketing direct spend down 22 -- down 22%.

Also, we are not really sure whether or not we are going to continue to see the rates that we are seeing now.

So, even if we keep advertising levels the same, if the economy picks up a bit -- not that we are assuming that -- we would expect our advertising costs to go up in the second half of the year.

So I think the most we can say is that it's really ramping compared to Q1.

If you look at our past trends, we typically have a very large uptick from Q4 to Q1, and we really had a modest uptick this quarter.

So I do think that we will look to get a little bit closer to our normal seasonal spend trends.

What's important for you to know is that we are pretty confident that we've set up our ad spend to essentially follow the transactions and revenue that we are seeing.

So we'll scale it up or we'll scale it down, based on those trends.

We don't think, though, that we will get quite the efficiency that you saw in Q1 on a go-forward basis.

On Europe, we have seen some slowdown in transactions, in general.

International transactions were up 16% on a year-on-year basis.

As far as on a country-by-country basis, I'd say the two countries that are looking weaker than the rest for us are the UK, which shouldn't be a surprise, and Germany is looking a bit weak.

Part of that is because we did pull back on the ad spend coming into Q1, just because we didn't know what to expect.

Another driver in the international transactions and gross bookings is the loss of Ryanair on our private-label side.

So we lost Ryanair, I think it was Q3 of last year, so as we roll over the loss of Ryanair as a private-label partner, those comps should improve.

Thank you, very helpful.

Michael Millman, Millman Research Associates.

I wanted to follow-up on the last comment regarding marketing and measuring the effectiveness of that marketing.

Why wouldn't you try to keep the direct marketing spend down, if it seemed to not, at least, hurt in the first quarter?

Secondly, can you talk about -- talk more about the car rental business?

Your comment -- or at least you comment in the press release about the strength there.

What's driving that?

Is it the opaque end of the business?

Is it any of the acquisitions you made?

Thank you.

So on marketing, we don't mean to say that we think we're going to go back several years ago and put our foot down, like many companies did, on increasing marketing expense at that time.

We still do expect to have sales and marketing decline on a year-on-year basis.

I think the point we are trying to make is that Q1 was unusually sharp decline.

And there were a number of factors at play, in addition to uncertainty about the marketplace, particularly in Europe, and we just want to make sure that our investors understand not to expect that level of efficiency going forward.

Obviously, we want to spend the right amount, given the environment, and we want to be as effective and as efficient as possible, and really try and cull out anything that's not earning its way.

So we will continue to be vigilant we just want to make sure that people understand what to look for going forward.

Just to give you a little more context there, since Easter fell later this year than last year, we actually delayed some of the offline spend on the Expedia side in the U.S..

So, whereas we are hypervigilant about measuring our online spend and making sure that we get the right efficiencies and getting rid of spend that is not efficient, on the offline side that's harder to do.

We still think brand building is pretty important.

So you are going to see some more brand spend in Q2, on balance, relative to Q1, on the Expedia side.

We think that's a worthwhile long-term investment, but we are not sure whether it's going to translate into transactions.

You really can't measure brand spend the way that, let's say, you can measure offline spend, etc..

Another factor, certainly, in the increased efficiency on the marketing side was our SEO channel.

We talked about improving our search engine optimization, improving the algorithmic channel on search, and that's been working out very well and we expect that to continue for the balance of the year.

That's certainly a good guide that's not going to disappear.

On the car side of the business, I would say there are two factors.

The opaque side, that you mentioned, continues to be very strong.

Hotwire is performing very well on the car side, and also carrentals.com, which is an acquisition, is also performing quite well.

So those two together account for much of the strength that we have on the car rental side.

And also, one difference that you see on the car side, unlike air and hotel, is actually our gross booking per transaction on the car side is up on a year-on-year basis.

So gross bookings on the car side are actually higher than transactions, so that's another positive that we are seeing there.

The car rental companies keep telling us that they are cutting fleets, and would suggest that there would be less cars available, at least on the opaque side.

You are definitely seeing the effect of their cutting fees on pricing.

Right now, our availability on the opaque side is quite good, I think because we are performing quite well.

I'd say, once we get into the summer travel season, that's going to be the most challenging time for us as far as inventory goes, especially on the opaque side.

So, I think for Q1, we got the goodness of the fleets being down, and the pricing.

I think as we approach the summer, we are going to be very, very focused on inventory quality.

So you are right about that.

Thank you.

Scott Hamann, KeyBanc Capital Markets.

On the last call, I thought you had talked about seeing an improvement in the packaging business.

I just was wondering, relative to your expectations, it was down 18% for the quarter.

How did that end up shaking out and what trends were you seeing there?

Great question.

The transaction trends on packages are a lot better than the revenue trends.

So actually, the transactions are improving, the unit sales are improving, and certainly on a booked basis, packages look better.

Now, if you look at packages, remember that packages tend to have a longer booking window, so to the extent that you see booking trends improve, you're going to see them in our numbers later.

So I would expect that you should see package trends on a revenue basis, my guess is, as the year wears on, assuming that these trends stay, should improve.

But also be aware that the transaction -- on the transaction side, packages are performing a lot better than revenue.

One of the reasons why package sales were looking stronger for us is because pricing in packages is just excellent for consumers.

That does hurt revenue per transaction.

But we think it's a good thing for our consumers, and in general, the revenue that we recognize on a package transaction is much better than, let's say, revenue on air or hotel.

So overall, we think it's a good thing.

Does that answer your question?

Yes, thank you.

Justin Post, BAS-ML.

I just want to get back into the impact of the fee cuts from hotel and air.

I think you said $3 million per month for each.

Is there some offsets there on the marketing side, or are you seeing more volumes that are helping keep that cost down?

I think the estimates out there was definitely higher than that.

Thank you.

Sure.

It's -- these are best estimates, and obviously, we have not had these fee actions up for too long.

So I would stress that they are estimates.

In general, offsets are unit lift and -- especially on the air side, for example.

It is attach that we are getting and selling other product to our travelers who will come into the store, buy an air ticket.

Obviously, we have an opportunity to upsell them into packages, into hotels, etc..

So those are the two factors.

There is some marketing offset, but I'd say that's just one item in a mix of many items.

Thank you.

(Operator Instructions).

I'm showing no further questions.

I'll turn it back to management for any closing remarks.

Okay, great.

Thank you, everyone, for listening in on the call today.

We'll look forward to speaking with you again next quarter.

Dara, did you have any closing comments?

No, just thank you to the Expedia employees.

We've been through some -- a difficult quarter with the reorganization, and I think everyone executed very, very well.

And hopefully, we will have more of the same for the balance of the year.

Thanks.

Ladies and gentlemen, this concludes Expedia Inc.'s first-quarter 2009 conference call.

You may now disconnect.

Thank you for using AT&T executive teleconferencing.