Deutsche Bank Reports New Asia Online Travel Agency Coming To Expedia in 3Q11

According to Deutsche Bank, Expedia EXPE will see a new Asia online travel agency coming in 3Q11. Deutsche Bank reported that Expedia announced that it plans to form a new 50/50 joint venture with AirAsia (covered by DB analyst Michelle Foong), an low-cost airline servicing 76 destinations in the Asia. “The deal will combine five of Expedia's international sites (Japan,Singapore,India,Malaysia,Thailand) and websites of AirAsia (Airasiago, gorooms.com) to create the new OTA venture, expected to launch in 3Q. Revenues from the combine assets are at a $65mn-$70mn revenue runrate currently, with $40mn coming from Expedia APAC assets and $25mn-$30mn from AirAsia online assets. This puts the property in the comparable size to Priceline's SE Asia asset Agoda ($72mn in '10 revs on $452mn in bookings - DB estimates). Maintain HOLD and $25 Price Target: While Expedia is still positioned to benefit from secular online travel trends and remain a strong distribution channel for suppliers, we are still concerned on the higher near-term investment spend in both its core and media businesses and traffic pressure on TripAdvisor by Google. Additionally, there could be a higher near-term ramp in marketing spend to maintain traffic demand, given the removal of AMR inventory.” Expedia closed yesterday at $21.99.