Khosrowshahi sat down with Travel Weekly for a no-holds-barred interview that touched on all the hot-button issues -- distribution, the merchant model, the competition, working with Barry Diller, the spin-off, Wall Street's reaction and operational challenges. He confidently laid out a blueprint for how Expedia Inc. would conquer the world.

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Of course, Dara, as everyone seems to call him, certainly wouldn't describe his strategy that way. But, Expedia Inc., with $100 million in cash and a $1 billion credit line, is thinking Europe, then Asia-Pacific. Internationally, the up-side is enormous long-term, while the stateside market dynamics are tough.

The new and expanded Expedia Inc. estimates that it accounts for 4% to 5% of all gross travel bookings -- online and offline -- in North America. And some analysts say it has a better than 50% share of online travel in the U.S. and Canada.

But if that kind of market position seems like cause for celebration here, consider how the company portrayed market conditions in its second-quarter financial results: "Expedia Inc.'s domestic air and merchant hotel businesses operate in a challenging competitive environment, due primarily to increased competition from third-party distributors, increased promotion by suppliers of their own Web sites and higher overall occupancy rates and load factors. This environment is generally expected to continue."

For the quarter, revenue per airline ticket dipped 11% and hotel "raw margins" were down as well.

Even so, Expedia Inc.'s domestic business grew 6% in the quarter, and that result was eclipsed by the company's international business, which saw revenue increases of 58%.

Not surprisingly, Expedia Inc. -- like Cendant with its eBookers and Gullivers Travel Associates acquisitions and Sabre with its Lastminute.com purchase -- is focusing on international expansion.

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Source - Travel Weekly