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IAC/InterActiveCorp Message Board

  • JesseJackster JesseJackster Apr 8, 2003 4:25 PM Flag

    Diller thinks ROOM is too expensive now

    Even Diller thinks ROOM is overvalued. If he liked ROOM's current market cap, he would snatch it up at current prices. Obiously he is going to wait for ROOM shares to take a hit before he buys.
    ____________________________________________

    http://cbs.marketwatch.com/tools/quotes/newsarticle.asp?siteid=mktw&sid=&guid=%7
    BCE544D54%2D3BF7%2D450A%2D8B49%2DFF3FC4F131B3%7D


    The travel sites are richly valued, based on expectations that fast revenue and profit growth will continue. Expedia and Hotels.com charge consumers as much as 50 percent more than they pay for the hotel rooms, a profit margin smaller rivals envy.

    "Of course over time there is going to be some margin erosion on the hotels side. It is inevitable. I don't think it is going to be significant, and I think it will be more than made up for by share" of market, Diller said.

    However, he said he would definitely acquire the rest of Hotels.com. "I just know eventually we will. I can't give a timetable," he said.

    [BUT WE'RE WAITING UNTIL HOTELS.COM WON'T COST US AN ARM AND A LEG. ROOM SHARES GOT AHEAD OF THEMSELVES WHEN THEY SPIKED UP IN SYMPATHY WITH EXPE WHEN USAI ANNOUNCED IT WAS BUYING EXPE. A PRUDENT CORPORATE TAKEOVER WOULD INVOLVE WAITING UNTIL ROOM TRADES SIGNIFICANTLY LOWER SO USAI CAN HAVE THE APPEARANCE OF OFFERING AT LEAST SOME PREMIUM FOR ROOM IN A BUYOUT.]

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    • Good article. This is bad news for EXPE, yet, they only put out a pump.

    • Rooms and flights don�t just come out of the air and Expedia doesn�t manufacture them either. They come from airlines and hotel chains in which terms are negotiated. Suppliers are no longer allowing EXPE to dictate terms.

      It appears that there will be a substantial change in how Expedia obtains room from the hotels. With Six Continents, Expedia will have to deal with the hotels central reservation system, no longer with the individual hotels. This will cut in sales and profits of EXPE, as they will not simply buy rooms at deeply discounted fixed price and resell to consumers with a high markup.
      Hilton has reduced their commission and made other changes that will reduce Expedia's customer base and profit.

    • This will cut into Expedia�s commission (they agreed to a reduction) and Merchant Sales profits. Also Hilton will not award points if room not booked thru them directly.
      Six Continents also made changes that will reduce on third party sales to the public, click on reply link Msg 5698-

      4-14-03
      Title-Hilton Signs Deal With Expedia
      In Bid to Reduce Web Discounting

      By CHRISTINA BINKLEY
      Staff Reporter of THE WALL STREET JOURNAL

      Hilton Hotels Corp. is striking back at discount hotel Web sites with what the lodging company is calling its "Internet battle plan."

      The strategy, which includes a two-year partnership with Expedia Inc., is aimed at eliminating deeply discounted Hilton hotel rooms on the Web. In return for being named a preferred vendor, Expedia has pledged not to undercut Hilton's own prices and agreed to significantly cut its commissions to the hotelier.

      Loyal Hilton guests also will be steered away from all outside Web sites, including Expedia. Hilton plans to stop awarding points in its loyalty program to guests who don't book directly with Hilton, or its chains, such as Doubletree, Embassy Suites and Hampton Inn. Soon, 13 million HiltonHonors members will begin getting as many as two warnings when they book with an outside site before points will be curtailed.

      Hilton's plans are cinched by a promise that its Web sites, 800 numbers and properties will offer the same prices for a hotel room on any given day -- and that those prices will be the lowest available on any Web retail site. The company is quietly launching improvements to its own Web sites, such as better search functions. The Beverly Hills, Calif., hotelier is set to announce the details of its plan Monday.

      The tough economy has many hotels dumping discounted inventory on the Internet. The less-expensive rooms, though, aren't persuading enough people to travel more, according to a recent report from the Cornell Center for Hospitality Research in Ithaca, N.Y.

      While the whole industry is worried about this phenomenon, Hilton's new war on discounters is a radical step. The Hilton deal signals a gradual waning of the market power of these retail Web sites, said Lee Pillsbury, chairman and chief executive of Thayer Lodging Group Inc., which owns a number of hotels that are operated by Hilton.....///

    • Yes, you are absolutely correct. I do not have a "buy" or "strong buy" on either USAI or EXPE.

      That said, I do think their future business prospects are very bright.

      There is no question they will be much bigger than they are today several years from now. The only real question is just how much bigger.

      I did indeed sell the majority of my long position at $54, after buying it about two years ago for about 10% of that price. Cheers

    • I believe you might have meant 'sort' instead of short. But yes Jeff has posted that he sold most of his outright long position, I think it was around $54. Although he still has some warrents that will convert to USAI warrants after the deal. I don't recall him posting a position on USAI, as far as any current holdings.

      ro_singer

      disclosure: Holding APR Puts on both EXPE and USAI. Don't necessarily agree with Jeff's assesment, but appreciate his civil tone in all his posts.

    • >>When a stock is A GOOD INVESTMENT it is a stock in which the POTENTIAL is NOT YET REFLECTED IN THE PRICE<<

      This is so key here! kingpa saved me from having to take the time to type the message he posted.
      BTW, I don't think even jeff thinks EXPE is a buy at these prices. Correct me if I am wrong, but I thought he was short of on the hold track here with USAI and Expe.
      Good Luck to All,
      Nomad

    • jeff,
      I would use EXPE if they offered a better deal.
      As this bubble presently is making new lows, all I can say is that Expedia is not a $6 billion company. It may be a good company, but it is highly overvalued.

      There is little basis to justify this type of valuation on EXPE or any other stock. These types of valuations have ended, look what happened to stocks like EMC, CSCO ,EXTR, FRDY, SUNW, etc. These are good companies, great Financial Statements, and some were cut 95+% from their highs.

      EXPE's current and projected sales, and earning do not support the current price, yet alone a higher price, In reality investors are ANTICIPATING a certain FUTURE years away and are PAYING for this NOW, hoping and GAMBLING that CERTAIN EVENTS happen.

      There is no fundamental analysis that can show that this stock represents a good investment at this time. Has it been because of the "Greater Fool Theory", �short squeezes� or some other type of manipulation, that the stock reached its current valuation?

      When a stock is A GOOD INVESTMENT it is a stock in which the POTENTIAL is NOT YET REFLECTED IN THE PRICE- with EXPE, Longs are still buying a "Bubble Valuation", with more than a perfect future being priced into it. The stock is priced to "perfection" many years ahead of itself.

      LOW PROFIT -for a $6 billion company
      These profit figures are over stated, they ignore a large amount of Payroll Expense,Options.
      EXPE�s Quarterly profit (loss)
      12/31/02: $21.4ml...Incr of $1.3ml or 6%
      9/30/02: $20.1 ml..... Incr of $1ml or 5.3%
      6/30/02: $19.1 ml......Incr of $13.4ml or 235%
      3/31/02: $5.7 ......Incr of $ .5ml or 10%
      12/31/01: $5.2..... Incr of profit of $.4ml
      9/30/01: $(4.8)..... decr of loss $ .4ml
      6/30/01: $(4.4)

      Would any company buy EXPE for $6 bn in CASH? Not Stock? Or would they invest that $6 bn in bonds and received interest income of approximately $300 ml per year? That's what the Insiders are doing.

    • Thank you for the information. I do not put much faith on analysts and never follow their suggestions.

    • kcpa, I would never claim that YOU will use Expedia.

      But the facts are that more travelers use Expedia than any other online travel *booking* service, including the airlines and hotels direct, than any other source. Sure, some people book like you will continue to book directly with the airlines and hotels. But the data clearly shows that Expedia is the #1 way that people book travel online, and its lead has grown, not shrunk, over the past three years.

      Until that changes dramatically, I think you are talking about hope rather than reality...

    • "Analysts rate their industry relative to the primary market index appropriate to that global region (such as the S&P 500 in the U.S.). Analysts rate an industry as Overweight, Marketweight or Underweight depending on their projection of the industry's performance relative to the primary market index."

      http://www.smithbarney.com/research/rating_system.html

      If you can rely on any of it?

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