Publication Summary

Concern over the macroeconomic backdrop notwithstanding, we continue to see strong topline growth in the online travel industry. Operating performance was somewhat mixed in 4Q11 relative to Wall Street expectations: Gross bookings and revenue exceeded expectations, but profit margins generally lagged. We point to three key themes emerging from quarterly operating results:

1. 1) Bookings and revenue growth remains robust, with no evidence of any macro-related slowdown.
2. 2) Profit margins missed Wall Street expectations, as several companies opted to step up investment spending. However, margins were still up in the quarter.
3. 3) There were no real surprises on the competitive landscape; Priceline continued to accrue market share.

Looking ahead, we expect the same main themes to shape 1Q12: ongoing healthy topline growth, investments weighing on margins, and Priceline building share.