On Friday, British Airways penned the agreement with Expedia's wholly owned subsidiary, Worldwide Travel Exchange, which provides companies with private-label online booking tools, the companies said. Expedia allows corporate customers, such as an airline or travel agency, to use Expedia's technology and offer it to customers under their own name.
Like a lot of Web merchants, Expedia is trying to cash in on its technology. Some e-tailers, such as Amazon.com, eBay and E*Trade, have all spent fortunes developing complex e-commerce software to service customers or automate operations. Now that the software is up and running, others want to pay for that expertise.
Take Amazon, which for more than a year has set up e-commerce stores for other retailers, including Toys "R" Us, Borders, Target and Circuit City, usually in exchange for fees and a share of the sales. Wall Street applauds these deals; in addition to providing an additional source of revenue, they keep costs low and profit margins high. In midday trading Monday, Expedia was up 5 percent to $49.80.
The British Airways deal is also a sign that Expedia is growing its reputation as a wheeler and dealer in the hotel reservation business. The company has forged partnerships with more than 4,000 hotels in recent years and often negotiates discounted prices. In the fourth quarter of 2001, Expedia saw this area of its business jump 185 percent to $34 million from the same period last year.
Success at booking hotel rooms is one of the reasons Expedia reported a fourth-quarter net income of $5.2 million, or 8 cents per diluted share, compared with a loss of $25.3 million, or 53 cents a share, in the same quarter last year. With the breakthrough quarter, Expedia also overtook rival Travelocity.com in gross bookings. Bellevue, Wash.-based Expedia reported gross bookings of $704 million, compared with Travelocity's $630 million over the past quarter.