Travelport on Wednesday reported continued progress in diversifying revenue streams during a loss-making second quarter beset by declining GDS transactions and the financial hit from the loss of United Airlines' reservations business.
But for the second consecutive quarter, Travelport grew its revenue per segment by 2% year over year. The metric has become increasingly important to executives as the company moves to "widen its revenue beyond standard air bookings," according to president and CEO Gordon Wilson.
Travelport upgraded its full-year 2012 growth projection for revenue per segment to 2% from the previous 1% forecast, "with upward potential in subsequent years, as even more new content comes online and our new selling systems continue their deployment," Wilson said.
Discussing the growth drivers for revenue per segment, Wilson in a conversation with The Beat pointed to strength in the hospitality sector, including increased traction of its Rooms and More program, as well as more deals with airlines "that involve getting paid for the sale of ancillary services."
Also helping to grow revenue per segment are technology fees from subscribers, though Wilson said that component is "not huge."
Travelport has focused on growing revenues from such agency technologies as Universal Desktop, Universal API and the Travelport Smartpoint application.
The company attempted to hasten such growth in the U.S. through the Agility program, though Wilson acknowledged better traction outside the U.S.
At the same time, agency incentives during the quarter grew by a modest 1%, mirroring first-quarter growth.
"That's the lowest that it's been in living memory," said Wilson, and indicative "of our desire to change the dialogue from incentives — which is important and not going away — to focus more on improved products, better productivity and more revenues for our agency customers."
Transactions take a tumble
While Travelport noted that the global GDS industry grew global air segments by 1% during the quarter, its own volume declined by 4%.
Wilson said there were no major client defections that impacted Travelport's total booking share during the quarter.
Instead, he chalked up Travelport's disproportional decline to United's cutover away from the Apollo reservations system and challenging market conditions in regions where Travelport is traditionally strong.
Amadeus last week claimed a 1-point marketshare gain against competitors on travel agency air bookings during the first half of the year, to 38.3%. "Share-wise, we're globally about 26, 27 percent of GDS bookings," said Wilson.
Travelport reported that second-quarter transactions in the Americas dropped by nearly 6% to 43 million segments. Excluding the impact of United's cutover, the number would have been roughly flat.
"When we hosted United, when United made a booking on another airline, they used our GDS to make that booking," Wilson explained. "When they moved away, we lost the hosting revenue but we also lost the segment revenue."
Meanwhile, Travelport segments fell 3.3% in Europe and 4.2% in Asia/Pacific, while Middle East and Africa segments grew 2.2%. Third-quarter regional volumes thus far have not deviated from the second-quarter trend, Wilson said.
Corporate volumes during quarter experienced "some softness," growing by a modest 1% year over year, Wilson said.
Revenue, earnings fall
Net revenue for the quarter totaled $506 million, down 5% from the same period last year. Travelport during the quarter took a $22 million hit on the loss of United's res business.
The company reported a net loss of $20 million, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 12% to $120 million.
Excluding the impact of United's cutover, Travelport's second-quarter operating income and EBITDA increased by $13 million and $12 million, respectively.
Source: The Beat