Dara Khosrowshahi - President & Chief Executive Officer Michael Adler - Chief Financial Officer

Michael Millman - Millman Research Associates Doug Anmuth - Barclays Capital Nat Schindler - Bank of America Jennifer Watson - Goldman Sachs Imran Khan - JP Morgan Scott Hamann - KeyBanc Capital Markets James Cakmak - Sidoti & Company Herman Leung - Deutsche Bank Securities Scott Kessler - Standard & Poor’s Equity

Welcome to the Expedia Incorporated second quarter 2009 conference call. (Operator Instructions) I would now like to turn the conference over to Stu Haas.

Thank you. Good morning and welcome to Expedia Inc.’s financial results conference call for the second quarter ended June 30, 2009. I’m pleased to be joined on the call today by Dara Khosrowshahi, Expedia’s CEO and President, and Michael Adler, our CFO. The following discussion including responses to your questions reflects management’s views as of today, July 30, 2009 only. As always, some of the statements made on today’s call are forward-looking, including our comments on financial performance and expectations, operational results, margins, planned investments and spending, FX and growth of business lines. Actual results may differ materially. We do not undertake any obligation to update or revise this information. Please refer to today’s press release and the company’s filings with the SEC, including our Form 10-K for the year ended December 31, 2008 for additional information about factors that could potentially affect our financial and operational results. During this call, we will discuss certain non-GAAP financial measures, including OIBA, costs and expenses excluding stock-based compensation, free cash flow, adjusted net income and adjusted EPS. In our press release, which is posted on the company’s IR website at www.expediainc.com/ir, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of the measures with the most comparable GAAP measures. Finally, unless otherwise, stated all references to cost of revenue, selling and marketing expense, general and administrative expense, and technology and content expense excludes stock-based compensation, and all comparisons in this call will be against our results for the comparable period of 2008. And with that, let me turn the call over to Dara.

Thanks, Stu. We’re very pleased with the continued broad acceleration of transactional volumes this quarter. 26% real net growth and 13% air ticket growth combined with appropriate cost controls resulted in 4% operating income before amortization growth. These are all evidence of our ability to put excellent deals in front of travelers and help our supply partners fill hotels and planes in the most challenging travel environment since 9/11. The team has been working hard and it’s good to see the positive results. Now Expedia’s strategy is simple, to continue improving our customer value proposition and removing barriers to purchase. The elimination of the air booking fees and lower hotel service fees contributed to our volume growth in Q2, but really represent initial steps in what is an ongoing process. In fact, since last quarter’s call, we’ve also eliminated many changes and cancel fees, thus providing our travelers flexibility even after booking their trip. Our focus on securing great inventory for travelers continues. In June, we launched our biggest summer sale ever with over 5000 participating hotels up substantially from 1800 last year. Participating hoteliers know that the sale will increase their room volumes and as a matter of fact, participating hotels have seen their room nights grow nearly 40% during the promotion. These sales are clearly a win-win for our travelers, as well as our supply partners, and are made possible through the efforts of our industry-leading partner services group. We’re also pleased by what we have seen so far in Hotels.com’s new Smart ad campaign, showcasing how smart it is to book on Hotels.com and the Welcome Rewards Loyalty Program. Traffic to our Hotels.com website has been increasing and we are getting more and more travelers to stick around with flexible and simple loyalty program. On the marketing front, we reduced our marketing spend per transaction by 23% in the second quarter driven by an improved customer value proposition, lower competitive spend, benefits from our technology investments and strong execution across our marketing channels. Now, we are not counting on these levels of improvements in the coming quarters, but we are confident that we can continue to drive better efficiency on a per transaction basis. Now before I close, I do want to touch on recent legal and occupancy tax matters as I know that they are top of mind for some investors. We’ve been fighting these occupancy tax matters for a long time and we feel strongly about our position. Five federal courts have already agreed that we are not subject to tax ordinances applicable to hotel operators. Only one state court proceeding in Georgia has gone the other way. Our positions on these matters have been clear and remain as strong as ever. In Q2, we accrued $55 million to be paid to the city of San Francisco for occupancy tax assessments made by the city, but to be clear these payments are required, so that we can pursue litigation and challenge whether or not San Francisco’s hotel occupancy tax ordinance even applies to us. If we prevail in the litigation, the city will be required to repay us plus interest. New York City recently amended its occupancy tax ordinance in an attempt to impose additional taxes on visitors, which is set to take effect on September 1, 2009. We continue to evaluate all of our options in this matter, but even if we end up having to collect and remit occupancy tax on our revenues, assuming that we don’t recoup any of these costs from travelers or suppliers. We estimate that the total annual impact in New York City will be less than $10 million and as an FYI, New York represents about 7% of our U.S. room nights. Now, we’ll navigate appropriately, but we don’t see the occupancy tax issue as a major game changer for our business or financial results over the long term. Lastly on litigation, as it relates to the consumer class action lawsuits, while we have denied and continue to deny the allegations and claims asserted in order to avoid costly and time consuming litigation, we’ve reached a proposed settlement on all claims in this matter, which is subject to court approval. A preliminary settlement hearing is scheduled for August 10, and in the second quarter as a result, we accrued a related reserve of $19 million. In closing, although the economic environment remains uncertain, the trends that we have seen in Q2 and into July are promising. Longer-term Expedia’s future growth will be fueled by our expanding international presence, scaling our advertising business to complement and leverage our transaction based businesses and building on our leadership in more established markets by improving our customer value proposition and conversion. We still have a lot of hard work to do, but we are well on our way. Mike.

Thanks, Dara. The 18% growth in transactions this quarter was quite broad across products and brands. Worldwide room nights grew 20% on an organic basis. Domestic growth was driven by growth of over 25% for Hotels.com, 15% for Expedia.com and roughly 35% for Hotwire. International room nights grew 37%, with the Venere volumes contributing nearly half of that. We also saw impressive growth of 35% for Hotels.com in Europe, and APAC room night growth across both Hotels.com and Expedia brands was 80%. Domestic ADRs were down 18% and international down 21%, including the negative impact of FX. Our ADR declines continue to outpace the market, as hotels make significantly more promotional inventory available to us. Remember that our ADRs started getting weaker in late Q3 and Q4 of last year. So, ADR comps should get easier for us in the back half. Trying to forecast this year has been a fool’s errand, so there is no telling what effect better ADR comps will have on our room night volumes. In air, the biggest change was the elimination of air booking fees on Expedia.com, which drove overall domestic ticket growth 14%. We’re pleased by the lift we have seen and we see continued strength in our air ticket volumes, so far in Q3. Advertising revenue growth did slow in the quarter, but our growth rates compare favorably with the Yahoo’s and the Google’s of the world, so we are certainly in good company. In sales and marketing, we saw an 11% decrease in direct spend and a 7% decrease in indirect spend during the quarter. While spend is down across many of our points of sale, traffic is up and conversion is generally holding steady. Some of our ability to spend less and reap more benefit, pertains to market dynamics, as the cost of online advertising is lower and each click in online marketing costs less than it did last year. We’ve also seen a pullback in search marketing spend by some of our competitors, which is giving us a leg-up on search results placement. Course conversion benefits when your products are priced more favorably, as we have witnessed after our fee actions and with lower ADRs and average ticket prices. In cost of revenue, the year-over-year decrease was driven by a significant reduction of credit card fees, as the result of investments and process improvements we have made. In customer operations, we continue to optimize our staffing levels and implemented a number of new tools to drive efficiency and effectiveness in our call centers. We are now seeing the benefits of having built the capabilities for bringing some of our air ticket fulfillment in-house. I would like to be clear that these efforts are intended to drive efficiency, while at the same time improving our customer support and customer experience. No easy task, but we think we can do it. Turning to financial expectations, clearly our results for the first half were better than we thought coming into the year and we are incrementally more positive about our full-year outlook. Based on what we know today and assuming that the economy doesn’t change materially in the back half of the year, we now expect to see modest full-year OIBA growth and excluding the amounts paid for the San Francisco occupancy tax issue, we would expect free cash flow to grow year-over-year as well. In total, sales and marketing decreased 14% for the first half of the year, leading to leverage of over 300 basis points. Note that we will soon lapse spending cuts that we began in the middle of 2008, so we expect only modest operating leverage from sales and marketing in the back half. We’ve driven 94 bips of leverage and cost of revenue in the first half of the year and we are positioned to see similar efficiencies in the second half. Technology and content spending has been up in the first half, primarily as a result of increased depreciation expense and we expect that to continue in the back half of the year. Cash spend will be down in our core transactional businesses. G&A expense should increase in the back half similar to the front half of the year with reductions in a number of areas being offset by higher legal and professional fees. We’re pleased with our free cash flow generation year-to-date; although everyone should be aware that the payments relating to the San Francisco occupancy tax assessments, while accrued for in Q2 will negatively impact free cash flow in Q3. With that, let’s turn to Q-and-A. Operator, would you please remind listeners how to ask a question.

(Operator Instructions) Your first question comes from Michael Millman - Millman Research Associates. Michael Millman - Millman Research Associates: You may have mentioned this. So, I apologize, but in the press release you talked about increasing your European agency hotel programs. Can you talk about whether that is changing from merchant hotels or whether that’s Venere or whether that’s going after non-customer hotels or some combination thereof?

I’d say, it’s a combination thereof and it’s very early. We officially launch what we call our Expedia Easy Manage program this quarter and it is essentially an agency hotel program, although, we don’t talk agency versus merchant with the hotels. It’s easy to manage. It is a lighter touch. The margins tend to be lower and as a result, the services to the hotel tend to be lower as well, but we launched it this quarter. It’s targeted to smaller hotels, secondary destinations, etcetera and we started the hotel sign-up process. I think we signed up around 1500 hotels or so to the Easy Manage program. We will see what kind of momentum we get as the year progresses. I think that signing up a hotel was only the first step. You’ve got to sign up the hotel and then you’ve got to properly merchandise the hotel within your site. You’ve got to bid on keywords in order to get the hotel exposure and to give them volume, so that they look at you as a great partner. So, I think we’re getting started. We are very, very happy to have agency model as a tool. We are very happy to have the Venere.com team aboard and hopefully in the next couple of quarters, we’ll have more to tell you about the performance, but this is just the beginning. Michael Millman - Millman Research Associates: I guess, this is obvious, but I will ask it anyway, is this continued battle with Booking.com’s success?

What’s the question, is it a continued battle with Booking.com, is that the question? Michael Millman - Millman Research Associates: Yes.

Yes, listen Booking.com I think is the best performing player in Europe. We’re really happy with how Hotels.com is performing in Europe as well and Expedia is starting to get some nice momentum there, but Booking.com, we think is a terrific competitor. They have a larger supply footprint than the competition to-date and our adding the agency hotel model and the Easy Manage program, we think enables us to match their supply footprint after some effort, because obviously they have got a larger footprint than we do today. I think they’ll continue to execute quite well and I think that hopefully we’ll give them a pretty good run for the money.

Your next question comes from Mark Mahaney - Citi. Mark Mahaney - Citi: I have a financial question for Mike. In terms of thinking through the dynamics of ADR changes on your business, ADRs now are very significantly negative, comps get easier and just in general across the industry as we cycle through an economic recovery, ADRs will revert back to normalized single-digit, high single-digit growth year over year. What does that do to Expedia’s model in terms of take rates, in terms of bookings and in terms of profitability? Why doesn’t that just flow aggressively down to the bottom line?

I think it’s been more than clear that the ADR environment has been at this point helpful to our business. We honestly don’t know where they’re going to go. The comp in the second half would appear to get easier, but there certainly remains uncertainty as to the ultimate direction of ADRs. When ADRs return eventually from whatever point they bought them out at, it does flow through to our revenue and to our revenue per room night, but an important factor that you have to take into account is what happens to our volume in the event of ADR increases and the level of promotional inventory that hotels are willing to give us and an ADR increasing environment generally is less than an environment like, we are seeing today. Also, when ADRs are higher, it does provide more ammunition for our competitors to spend on marketing. So, I do think that we would also expect to see more competitive marketing in that situation, probably see higher cost of offline advertising and cost per click, whereas right now, we are benefiting from seeing lower areas or lower spending in those areas. So, while there are some, business model benefits on paper. We think that we can be successful in both an ADR up and an ADR down environment; it’s just not quite as simple as flowing through to the bottom line. Mark Mahaney - Citi: Then Dara, one quick question on the hotels; there is just pretty significant ramp-up, 5000 hotels participating versus 1800 a year ago. Is that just purely countercyclical? Is there something else that makes you think that as we cycle back that a year from now and as the hotel environment improves; we will be back to 2000 hotels only that participate? Is there something different that you are doing that makes hotels more eager to work with Expedia?

I think that the cycle helps and when we speak to hotels about, how we can help them in their volume, they are listening this year. I think that the team is executing better than they have as well and I think the track record helps. The math is pretty simple here Mark and we show the math. We are a very quantitative group. We’ve got great data. The PSG Group has an incredible data group and they show data to hotels which says, here is the market share of hotels that participated in the sale and here is the market share of hotels that did not participate and for example, this year-to-date in our summer sale, hotels that participated their room nights were up 40%. If you did not participate, your room nights were up 11%. So, even if you did not participate, we’re growing volumes for you, but it’s significantly less volume than participation and, frankly, I think that those numbers speak for themselves.

Your next question comes from Doug Anmuth - Barclays Capital. Doug Anmuth - Barclays Capital: Two quick ones, first, Mike if you could just elaborate on the ability going forward to sustain low marketing expenses in the back half? I know you commented on it a little bit. Then secondly, can you just comment on the impact of the timing of the international air overrides and what they contributed? Thank you.

Sure. So, as I said in my prepared remarks, last year at around this time, we actually started pulling back on marketing spend, probably mid to towards the end of Q3, but by Q4 we had pulled back fairly dramatically in particular in Europe. So, I would say we are not planning marketing spend that different from our historical ‘06, ‘07 patterns, but when you compare it to what occurred last year, it will be difficult comps and so, we were minus 18% in direct sales and marketing or sales and marketing in Q1, 10% in Q2. So you’re going to see kind of a similar pressure as we head into the back half of the year. There we will still hopefully continue to be some of the market dynamics that continue to help us and we have our SEM and our SCO initiatives as well. So, it’s a lot more than about what the comps are and how hard or easy they are and we are working to become more efficient and lower our costs per transaction, which is the ultimate goal. On international air overrides, I think we had noted in Q1 that actually we were negatively impacted by the timing of international air overrides. Those were received in Q2, and you can see the difference in the international revenue margin. So, it adds 10 bips, 20 bips to the international revenue margins, so significant enough to call out but over a longer period of time, not that material.

Doug, just to add a little flavor on the marketing side; as Mike said, the comps get harder in the second half of the year and that will affect marketing spend on a relative basis. If you want to think about structural changes that happen, one is the SCO channel is quite strong for us on the Expedia side and that should continue going into the second year. The second factor that really is out of our hands is our competitive spend or our competitor spend on the search side, on the CPC side. It looks like they have pulled back a bit. You heard the CEO of Orbitz talk about, getting out of inefficient spend on the search side for them and we are seeing that on the search side as far as CPC easing up a little bit, which has helped our efficiency in Q1 and Q2. That could be a factor going into the third and fourth quarter and again, competitive spend is not something that we can really predict.

Your next question comes from Justin Post- Bank of America. Nat Schindler - Bank of America: This is Nat Schindler calling in for Justin. I just wanted to thank you for the metrics on the New York tax litigation and some of the more detail that you gave out this quarter. I was wondering if you could explain why the New York market is different from the rest of the country or could be different from the rest of the country and also how could you adjust fees to offset taxes, if they are passed across the country or in more locations?

Sure. What’s different about New York is that, it’s not really a court action, so to speak. It was an ordinance that was passed by New York to tax what I believe is called hotel re-marketers. So, in some ways, we think it’s an admission that back taxes don’t really affect us, because they actually had to attempt to pass the new law, which we believe goes into effect in September, which taxes re-marketers, which I think is aimed at us and other players like us. So, that’s the difference. It’s actually an action that New York took. We are obviously looking at what our choices could be and as far as those proposed taxes are and part of what we could do is pass on the costs to consumers. We could essentially take the occupancy taxes and raise ultimate taxes for consumers, which by the way we think would be a really bad thing. It’s a worst time in the world to raise taxes on tourism. Another choice could be to talk to our hotels and adjust margins in order to make up for those additional costs and another choice could be for us to take on the costs ourselves. So, we haven’t determined really what we’re going to do, but in general, we just think that the timing, we understand that I guess, all municipalities are pressured on the budget front, but we think the tourism companies taxing tourists and taxing hotels at this time is just a bad move. Nat Schindler - Bank of America: How would you keep parity in price with the hotels direct if they add a re-marketer tax?

Well, again, that’s a question for us. To the extent that we add a fee to for consumers, that would have hurt us on the competitive front. So, that would be a difficult step for us to take. We obviously negotiate margins with hotels all the time. So, that’s another choice and then another choice is for us to take it out of our own margins. So, we would all of these considerations, you do want to be competitive with hotel direct and obviously to the extent that we pass this on to consumers, we do think that our volumes would be hurt and we are at a level of volume in New York City, where if our volumes are hurt, those are significant kind of tourist dollars for the city.

Your next question comes from Jennifer Watson - Goldman Sachs. Jennifer Watson - Goldman Sachs: Can you help us think about the small variance between the ADR and revenue per room night declines that we saw in the second quarter? We would have expected that your revenue per room night probably would have seen greater deterioration given the removal of some of the change cancel fees, as well as reduced consumer booking fees. So, if there was a issue of just the mix of hotels or better raw margins that you are arranging with the hotels, that would be great.

Okay. Our ADRs as reported does include fees and so, there is parity between ADRs and revenue per room night. The reason that ADR and revenue per room night are so close this quarter and had been disparate, particularly in Q4 of ‘08 is because of FX and the book to stay FX impact that we experienced is in the revenue per room night, but it is not in the ADR. Also, some of the reductions or the change cancel fees etcetera also are pretty new, but are again flowing through both in ADRs and revenue per room night.

Jennifer, do you understand the book to stay issue? Jennifer Watson - Goldman Sachs: Yes, I think we are good there. One other question, more on the sales and marketing side, so I know you had indicated that the competitive environment within the keyword bidding seems to be reduced somewhat. Are you seeing that both internationally and domestically or is it more in one market versus the other?

We’re seeing it pretty broadly. I think that most of the players out there are acting rationally. Average ticket prices for air are down pretty significantly. ADRs are down for hotels. So, all of the players including ourselves are experiencing reduced revenue per room night and they are adjusting their marketing spend accordingly. We have just found that I guess our competition for various reasons and, who knows why, seems to have pulled back a little bit more than we have had to pull back. So, in general, we think that our share of the search market has increased on a year-on-year basis by some factor, but again, competitive intelligence here is pretty difficult.

Your next question comes from Imran Khan - JP Morgan. Imran Khan - JP Morgan: One housekeeping question for Mike and two questions for Dara; so Mike, I think your international revenue margins improved 168 basis points year-over-year. Is it primarily due to the mix shift, or there is anything else going on that we should be aware of? For Dara, I think the room night grew worldwide 26% on a year-over-year basis. I know it is very difficult, but could you maybe help us isolate what percentage of this growth rate is contribution of promotional activities of the hotels? Secondly, you talked about how large your supplier footprint is important for the growth in the international market. How long do you think it will take you to catch up with Booking.com in terms of the supplier base?

On the international revenue margin, the air override payments, absolutely contributed to the growth. We also had a positive FX benefit from book to stay, which helped on the international air margin. The reduction in average ticket prices also helps the margin as well on the international front. Then we also had a bit of a mix shift, which benefited us on the air side internationally, as well as higher agency margins as our Venere business generates higher agency hotels margins internationally than our more standard agency business. So again, a number of different factors, I’d point out that there can be a lot of noise and timing issues in rev margin, ADRs, ATPs moving around, etc. What we thing really counts are the margins that we have negotiated with our suppliers, and those are the real numbers and while there’s ups and downs there as well, those have been relatively stable.

Imran, on your other two questions, on the room night improvement, we ask that question of ourselves all the time. Honestly, it is a very difficult question to answer. I think that the improvement in room nights is a combination of really, really good activity on the marketing front, on the brand front, on execution from the point of sale and absolutely improved inventory on the point of supply side. There are markets that for example, in New York City where we merchandised very aggressively, where 40%, 50%, 60% of our volume that is sold in those markets is through promotional inventory. Now you also have to take into account overall ADRs are down as well. So if our promotional inventory was 20% versus 50% that drive a significant difference in room night volume, we don’t know. In general, we are driving the promotional activity, because it is good for our consumers, and it is good for our suppliers as well. We have not been able to draw a consistent correlation between markets, where we have more promotional inventory unless a room night volume in general in those markets we do have higher share. As far as the supply footprint internationally, “How long it will take to catch up?” I can answer that question if Booking.com was not a moving target, but they are a moving target. Intelligence tells us, that they are adding room night volume very, very aggressively. So the honest answer to that question is I don’t know. We’re going to be aggressive here. I think that we have got kind of the tools and the setup to expand our volume. Remember that as we expand our supply base, we also have to expand our demand footprint so to speak and that’s an important kind of modulator in how fast we expand our supplier footprint. Obviously, the good news is that the demand is coming in, and we’re growing room night volume 26%, and that is a pretty good number to expand your supplier base off of.

Your next question comes from Scott Hamann - KeyBanc Capital Markets. Scott Hamann - KeyBanc Capital Markets: Dara, last quarter you indicated that the consumer behavior really hadn’t changed, but the shift was more on the supplier side. I’m just curious if that dynamic has kind of changed and if you are seeing more of a consumer behavior shift?

I cannot say that we have. The behavior is pretty consistent, which as consumers are looking for deals. Consumers are looking for bargains. The good news is that right now with the fee cuts, with the promotional inventory that we have both on the standalone path and on the package path and with inventory, for example, that is showing up on Hotwire. We are a very strong value proposition on the consumer front. So we’re able to deliver value to consumers, and as a result, consumers are booking with us. I think right now we’re just trying to keep it pretty simple. Scott Hamann - KeyBanc Capital Markets: Secondly, can you talk a little bit about some of the early success you might have seen on some of the new platforms at TripAdvisor relative to your expectations?

Well, I think on the traffic front, Trip is doing extraordinarily well, so traffic in Europe and the Asia-Pacific regions is very, very strong. Obviously, we’re being hurt there on CPCs and foreign exchange. On the meta-front, we are very, very happy with Trip Meta. I think Fly.com announced that they have done, I don’t know, 2.5 million searches. We are in excess of that. We’re not announcing how many searches that we have done, but we are in excess of that. So we think we’re doing pretty well on that front. The team is a great team, and I think we have innovated on Trip Meta, and we’ll continue to innovate on Trip Meta. On the vacation rentals area, we’re just getting started. We are integrating that product into Trip, and the advantage that Trip brings is just the enormous traffic that we bring to the eyeball traffic to the vacation rentals area. The challenge now will be to build up a listings business in addition to the base business that we have. We just think it’s a great target market, but we have to measure our progress there in years, not in quarters.

Your next question comes from James Cakmak - Sidoti & Company. James Cakmak - Sidoti & Company: Just to drill down a little bit on the international room growth, are there particular countries out there in Europe that are driving that growth? The weakness that you had talked about in Germany and the U.K. on the last call, has that gotten sequentially better?

I would say that U.K. and Germany are the weaker countries in Europe to the extent that you compare it to the rest of Europe. Although I would say that in general the European markets for us look a bit stronger. I don’t think that is a macro issue. I just think the team has come together since the reorganization at the beginning of the year, and we’re executing better. I would say U.K. and Germany are probably trailing, and the rest of Europe is stronger on balance. The Asia-Pacific markets are doing great for us. Before swine flu, I’ll tell you Latin America was doing quite well, but the swine flu there kind of threw them for a loop, so to speak. We think once we are through with that, the Latin American markets are of great, great potential for us.

When you take a look at it from a point of supply basis or where the hotel stays are occurring, in Europe, London is actually growing very rapidly for us. There are some foreign currency impacts that we think are driving that as more folks in the U.K. are staying in the U.K., and there is more travel from Europe into the U.K., less from the U.K. into Europe and that’s also benefiting London, and the traffic is being driven through very much our international points of sale.

The pound’s weakness is really helping London as a destination. It is hurting U.K. travelers traveling around Europe, because it has become much more expensive for them to do so. So we do think that that is absolutely having an effect on the weakness of the U.K. that we talked about last quarter and this quarter.

Your next question comes from Herman Leung - Deutsche Bank Securities. Herman Leung - Deutsche Bank Securities: Two questions; first, I guess on your promotional activity that you had in June, I guess that helped lift a lot of your hotel room nights and you are seeing 40% growth. I guess could you talk about what you are seeing? I mean should we expect bookings to sequentially be down a lot less given the promotions that you have there? Then the second question I have is regarding your supplier relationships on the supplier behavior just kind of shifting a little bit more obviously with the 26% room night growth. Has that incrementally improved from last quarter, and I have a quick follow-up.

On the booking side, on a go forward basis, remember the 40% room night growth was for hotels that participate in the sale activity, and that is 5000 hotels out of 100,000 hotels. So it is a subset. Obviously, there are hotels that get an unfair share of our volume. I would say that the biggest factor in Q3 and Q4 gross bookings growth versus Q1 and Q2 is ADRs and comps. Last year Q3, Q4, the foreign exchange was really hurting us. We did start pulling back on some marketing activities, and the business definitely slowed down. So this year, if we see better ADRs in the back half of the year and if that does not have a significantly negative effect on our attractiveness of our supply, we should see a decent second half and an improved second half relative on the gross bookings level relative to what we saw in the first half. Those are some and I’m hesitant to kind of predict the future this year for obvious reasons. When you look at supplier behavior quarter on quarter, I cannot say that it has really changed. I think that suppliers are certainly happy about the volume that we’re bringing them. I think they are a little surprised with the volume that we are bringing them, and we think that is a good thing. So I think that the PSG Group and our market managers are feeling pretty good right now. They are very, very busy, and I think they deserve to feel good, and they are going to be pretty busy for the remainder of the year, but it is just a lot of blocking and tackling with individual hotels in each market to come up with the right product for them. Herman Leung - Deutsche Bank Securities: Then as a follow-up on the promotional side on the booking fee cuts, I think last quarter you had talked about how it coasted about $3 million for the airfare booking, as well as the hotel change fees. Can you give us an update on what cost you in terms of cost side promotions?

We believe that those cost figures or the impacts from the fee reductions remain valid. Obviously the further we get in time from when we actually made the reduction, the harder it gets to really tell what is happening as there’s a host of other changes puts and takes which occur in the marketplace. We are confident that overtime we will more than earn back the deficit from the fees through higher volume, higher customer loyalty, etc. So we’re pleased with the results so far and pretty much on expectation.

Mike, correct me if I’m wrong, but in the back half of last year, we increased the air fees from $5 to $7. Volumes were weaker. So I think from an expectation level, the volume comp gets easier but the revenue margin comp for air gets harder, because in the first half of the year, we were giving up five bucks of ticket. In the second half of the year, we’re giving up 7 bucks of ticket.

Correct.

Your final question comes from Scott Kessler - Standard & Poor’s Equity. Scott Kessler - Standard & Poor’s Equity: Two questions; the first is, if you look at the data that you provided, which I appreciate the granularity. It looks like the Egencia corporate travel business really has been around kind of that $20 million to $25 million in revenue for the last number of quarters. Even though it is obviously a small part of your business at this point, how do you think about that going forward? How strategically important is it to the company? I have another question, and I’ll wait on that one.

I think Egencia for us is incredibly important from a strategic standpoint. One is we just think that the corporate travel opportunity is huge. It’s up to a half of total travel spend is corporate spend. Managed travel is a subset of that. In general, there’s a lot of unmanaged corporate spend travel that we serve out at Expedia and Hotels.com as well. With Egencia, we’re targeting the managed corporate segment, which is just a huge, huge segment, and we don’t think that is a segment that has really taken advantage of the internet and all the possibilities of the internet and the great tools that we have. With Egencia you get all the great technology that you get with Expedia, but you add to that incredible technology as far as tracking, as far as management of your travel spend. You can have a CFO decide to change your travel policy, click a button, and your travel policy changes immediately on a worldwide basis the next minute, versus other companies that have systems that are broken up and they have got to call people and they have got to let agents know, and it is a process that takes two or three weeks. So we just think that it’s a great chance for us to do what we do best, which is great technology, great service and applied in the managed corporate space and expand it over years. Now, this is about as difficult an environment for corporate travel as we have ever seen. I think American Express, which is one of our biggest competitors. I think that on their call they said that their kind of corporate gross bookings were down around 40%. Ours were down 26% I think was the number. Obviously, we want to do better than that, but we’re gaining share in this marketplace. On the new business front, the signup fronts, we are signing up more business than we ever have before and kind of it’s we’re building a snowball, so to speak. So this is a long term commitment for us. It is a multiyear commitment. It is a war of attrition. But we think we’ve got a great team. We’ve got great technology, and we think it is a matter of time. We don’t think it is immediate, but we are completely, completely dedicated to building this business into a very large business over the next couple of years. Scott Kessler - Standard & Poor’s Equity: So if I could follow-up, given what the results over the last number of years indicate despite the fact that you’re signing up new customers and gaining share, it would seem to me that perhaps either this is taking longer than you might have anticipated or perhaps a change in approach or strategy might make sense. Can you give us a sense of, how you think about those things?

It has definitely taken longer than we’ve anticipated. It’s been a very hard business to get into. Honestly, we have had to learn it. We were a consumer internet company, and B2B businesses are very different from B2C businesses. We’ve really had to almost set up a separate company out there. Remember it’s a long lead time business. On the B2C side, you bid for a keyword you get instant action tomorrow. On the B2B side, with these large accounts, you go in and you’ve got to woo them, you’ve got to build up a sales force, you’ve got to train the sales force, you’ve got to attract the results, and then you go in with RFPs with pitches that you may win six months from now and then you have got to implement them three months to six months later. So it’s this a very long lead time business. It is harder than we thought. We have been working really, really hard at it. We’re just very confident that it something that we are going to succeed at and the way that we’re running the business is, it’s essentially been breakeven for the last couple of years. We have limited losses, so to speak. We could have been more aggressive, but we knew that it was going to take a long time. So we thought, we’re not going to lose a bunch of money on this and take huge amounts of risk. Let’s run it as essentially breakeven business, and let’s have it kind of grow on an organic basis. We do believe that we’re getting to the point of scaling the business where you are going to see some profitability from this business coming in next year. We’re not running it for profit immediately, but we do think that we’re getting to the scale point in this business. Next year it’s not showing profitability, I will tell you I would be disappointed. Scott Kessler - Standard & Poor’s Equity: One other question if I may about the balance sheet. It seems like you guys have been generating some nice cash flows of late, but you also obviously carry a pretty substantial amount of debt. A lot of that obviously will not come due for a number of years at this point, but they do carry some pretty high interest rates. I’m wondering with the credit crunch kind of decompressing to some extent. How you guys think about the balance sheet and the debt load and if refinancing perhaps is some kind of option that you’re considering at this point?

Right now we are pretty happy with the debt that we have. If you look at interest rates that we are paying on the debt compared to market rates, so to speak, for companies that are not investment grade, yes, we think the rates are pretty good. Now we do think that we are an investment grade credit as far as the credit statistics, as far as cash flow generation of the company, etc. We think that the reason why we are non-investment grade is because of certain actions that we took on the balance sheet side, buybacks, etc. We’re on a go forward basis kind of dedicated to more of an investment-grade policy. We think we are an investment-grade credit. We think we should be an investment-grade company, which means kind of the debt load that we are going to carries two to three times debt. We think that with this business, the relative unpredictability of the travel business, etc., it pays to run this business, call it fairly conservatively from a balance sheet standpoint. The fortunate truth is that the business throws off so much cash, that I don’t think we need to add a bunch of debt to the balance sheet to do what we want to do, whether that’s acquisitions or buybacks or at this point kind of building up the balance sheet. So I think going back to what you were saying, we are pretty happy with the bonds right now. We don’t see any real activity there as far as refinancing, etc. Maybe that is something that is two, three, four years down the road.

I would also point out that, we as a company, are not highly leveraged, and we believe that we could add some additional debt and still be consistent with an investment-grade strategy. With regard to the cash on the balance sheet, we obviously are happy with the first half cash flow for the year. I’d remind everyone also that there is some cyclicality to our cash flow during the year, and we build cash in the first half of the year based on our working capital cycle and then there are declines typically in the second half of the year. So please keep that in mind as well.

Stu has also told me to clarify my statement, which is two to three times gross debt.

I would now like to turn the conference back over to management, for any closing remarks. Please go ahead.

Great. Thanks operator and thank you all for participating on today’s call. We certainly appreciate your time. Dara, did you have any closing thoughts?

No. Thank you for joining on the call and a big thank you for Expedia employees, who are listening. You did great work this quarter and let’s keep it up.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.