Ebookers could miss profitability target in 2009

With Germany, Switzerland and Spain the latest ebookers sites to step up to Orbitz Worldwide’s global platform, and with the final four country sites slated to make the transition by the end of the year, ebookers continues its surging pace of growth.

But, Orbitz officials said the moribund economy has caused them to diminish their hopes that ebookers would record its first profit in years in 2009.

Orbitz Worldwide President and chief executive Steve Barnhart said earlier this week that the global platform has given ebookers’ consumers broader choices in hotel inventory and more agile dynamic packaging capabilities while making the sites’ back-end operations more efficient.

“These benefits bode well for continuing financial improvement in 2009,” Barnhart said. “However, given the difficult markets, it will be more challenging for ebookers to meet their goal of becoming profitable at some point in 2009.”

However, there is still a chance that the online agency might get into the black next year, he said. “Now, with the unsettled conditions in the marketplace, it becomes less difficult to be as confident we will get to break-even at some point in 2009, but that is still our goal for the business,” Barnhart said.

For Orbitz Worldwide‘s third quarter, which ended Sept. 30, ebookers’ gross bookings increased 26 percent to $327 million, and that makes eight consecutive quarters that ebookers’ gross bookings climbed at least 20 percent.

“Financial progress at ebookers has been solid, as both revenue growth and operating-expense reductions have resulted in shrinking losses,” Barnhart said.

While the financial metrics at ebookers have been trending upward, HotelClub, Orbitz’s membership-based global hotel site, has been heading in the other direction. HotelClub’s gross bookings decreased 9 percent to $94 million during the third quarter, with officials pointing to a restructuring of its business model from third-party relationships with hotel suppliers to direct relationships as part of the cause.

“While transitioning these contracts has consumed significant resources, this process was necessary to establish the right long-term economic-end relationships,” Barnhart said. “We will be largely through this transition by the end of this year, at which point our hotel sourcing resources will be able to focus on working with our hotel partners to actively manage pricing, promotions and availability across our portfolio brand.”

Parent company Orbitz Worldwide lost a substantial sum of money in the third quarter — $287 million largely because it had to downgrade the value of its U.S. and global businesses. The “impairment charge” was $297 million. A year earlier, Orbitz Worldwide lost $32 million.

Overall, Orbitz Worldwide’s growth in gross bookings in the US was tepid, at 2 percent, while international gross bookings, propelled by higher volume and prices, increased 16 percent to $421 million.

“We still see the UK market as being more challenged than Continental Europe, but part of the additional slowdown in October was Western Europe, as well as Asia beginning to slow down, as well,” Barnhart said.

“So, that additional deceleration we saw was probably more focused on those markets than it was in the UK, where we had seen slowdowns earlier in the year.”

In a related matter, ebookers – the string of European and Asian leisure travel sites that Cendant acquired for more than $400 million in 2005 which had been projected to be on the cusp of making its first profit in years in 2009 – but isn’t projected to get there because of the down economy, officials said.

The new platform is still to be introduced to ebookers sites in Denmark, Finland and France. The Swedish and Norwegian sites are currently in beta.

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