Stu Haas - Investor Relations Dara Khosrowshahi - Chief Executive Officer Michael B. Adler - Executive Vice President and Chief Financial Officer

Imran Khan - JP Morgan Doughlas Anmuth - Barclays Capital Aaron Kessler - Kaufman Bros. Justin Post - BAS-ML Mark Mahaney - Citi Michael Olsen - Piper Jaffray Michael Millman - Millman Research Associates Herman Leung - Deutsche Bank James Cakmak - Sidoti and Company

Ladies and gentlemen, welcome to Expedia's Third Quarter 2009 Conference Call on the 29th of October 2009. Throughout today's recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instructions). I will hand now the conference over to Stu Hass. Please go ahead sir.

Good morning. And welcome to Expedia Inc. financial results conference call for the third quarter ended September 30th, 2009. I'm pleased to be joined in 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 views as of today October 29th, 2009 only. And we do not undertake any obligation to update or revive this information. As always, some of the statements made on today's call are forward-looking, typically proceeded by words, such as we expect, we believe, we anticipate or similar statement. Please refer to today's press release and the companies filing with SEC for information about factors that could cause our actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our press release which is posted on the companies IR website at www.expediainc.com/IR. I encourage you to periodically visit the IR site for important content including our updated investor presentation reflecting today's results. Finally, unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense and technology and content expense exclude stock based compensation. And all comparisons in this call will be again fair results for the comparable period of 2008. And with that, let me turn the call to Dara.

Thanks Stu and good morning everyone. Expedia's global employees delivered another quarter of accelerating transaction volumes with 27% growth in both air tickets and hotel nights. The biggest difference from last quarter is been in Q3. Our volume growth are strong enough to drive positive growth in both bookings and revenue which combined with continued expense leverage drove 11% growth in OIBA and 23% growth in adjusted earnings per share. Expedia's overall strategy remained simple. We focused on improving our traveler value proposition and we are moving barriers to purchase. We made further progress here during Q3 by broadening our fee reductions to many international points-of-sale and eliminating most of our worldwide change and cancel fees. We've continued improving our industry leading supply footprint which at quarter end, included over 110,000 global hotels with a record pricing and discounting comparing favorably versus our OTA competition. And we continued investing and building travel, traveler royalty with hotel.com's welcome rewards, program generating nice repeat and share of wallet momentum. Expedia also continues to generate meaningful cash flows. In fact, in today's release, you'll see year-to-date free cash flow grew over $100 million despite 14% debt in ADRs, data play, occupancy tax payments and other challenges. So, natural question for investors to ask is what does the company intend to do with its substantial cash flows? Well, our answer to that question really hasn't changed much. We'll continue to judiciously deploy capital back into our business for growth in high return areas like hotel and media. And we use capital opportunistically for talk in acquisitions such as a recent agreement to acquire a leading Chinese metaplayer Kuxun. Lastly, what we have excess capital cash flows and we do expect to generate extra cash, we tend to return that capital to shareholders through repurchases or perhaps dividends in amounts consistent with our investment grade financial policy and liquidity. In closing, Expedia had a good quarter. It didn't come easy as there was a ton of hard work behind the scenes in delivering these results today. But I know, I speak for everyone on the team when I say we're more focused on what lies ahead for Expedia than behind. On that score, we know 2010 will present much tougher comps on both revenue and expense fronts particularly in the back half of the year. It’s unlikely we'll benefit elasticity lines from another year double digit AVR, ATP declines. Meaning monthly, we'll have to carry much more of the demand burden. And beginning in the second quarter will last to aggressive fee actions that we've taken. These clearly altered our transaction trajectory. But we know of the next wave of travel first advances will be hard yards by comparison, delivering more incremental progress than the sea change that we saw our fleets. But as I always say, we're more than up for the challenge and we look forward to sharing our progress in quarter to come. With that, I'll turn things over to Mike. Michael B. Adler: Thanks Dara. Once again, unit growth this quarter was fairly strong across our brands. hotel.com room night in Europe, APAC in Latin America grew roughly 40 % for the second straight quarter, surpassing the 2 million mark for the first time. Hotwire continues to do well in this economy with room nights up over 45%. And Egencia facing perhaps the weakest corporate travel market in history had it's first quarter, a positive transaction growth in four quarters, a testament to their progress on the new account front. Well, I think our results were generally positive, investors may be curious as to the decline in revenue margin after several quarters of increase. Drivers of the Q3 decline include a full quarter of hotel fee reductions, the elimination of many changed cancelled fees, the contra revenue impact of our welcome rewards loyalty program, a shift towards lower margin chain hotels and the inclusion of lower margin agency bookings from cruise ship centers which we began consolidating in late Q2. Obviously, based on these drivers, we would expect to see continued pressure on rev margins until we lap some of these impacts. But I would also emphasize we're not optimizing for margin but rather OIBA and free cash flows. And we believe all such factors I mentioned are accretive to both. It should benefit shareholders over the longer term. Before turning to expectations, I want to cover one area we're getting a lot of questions on. And that relates to wholesale inventory availability and how Expedia might fair in a more favorable ADR environment. Its no secret that Expedia and online travel agencies more broadly have benefited from increased inventory and promotions during this downturn. Our domestic room night growth of 24% in Q3 compares very favorably to Smith travels 5% decline in rooms sold. We certainly expect to work hard to keep that share but realistically and on the margin, we expect to eventually enjoy less overall promotional inventory. But here are some things that will work in our favor. First, Expedia has dramatically improved the share volume of hotel inventory on our sides since the last time we emerged from a recession. In fact, in late 2001, on the heels of 9/11, expedia.com had just 5000 Merchant hotel properties. Today, we have many multiples of that count. That means we have a much wider selection of partners across geographies and star classes. Second, we are in very early stages of our agency hotel strategy, with focus on Europe and select APAC markets. It will take us a while to recruit and probably merchandise these hotels. Frankly, probably longer than most investors currently expect but once we begin gaining traction in these markets, we believe this will be mostly incremental business for Expedia, positively impacting hotel volumes. Third, I would encourage investors not to underestimate the differentiating value, our PSG market managers provide to Merchant hotels in our portfolio. We know these hotels relay heavily on the market insight and revenue management services that are end destination teams offer. And we certainly don't expect that value to diminish in an up turn. And keep in mind, even in good times, average hotel occupancy rates run around 65%. That leaves a lot of supply to be matched with the industries leading online demand channel. And lastly, we would say the same thing related to an upswing that we set ahead of the downturn which is why we feel that counter cyclical elements to our model, having a positive demand environment -- demand environment is a good thing for Expedia which combined with our improved value proposition, search engine marketing and search engine optimization efforts and better side experience should help drive transaction growth at a time when AVR growth is likely to improve. Putting all together on hotel inventory, the fact is we really haven't been through enough cycles to provide investors with a lot of conclusive quantitative guidance. What we do know is that they're going to be puts and takes in every economic environment and we're focused on building a company to execute as well as possible in all of them. Turning to financial expectations, results through Q3 are certainly better than we had anticipated coming into the year. So, borrowing any meaningful change in the economic environment in Q4, severe H1N1 outbreaks where a sharp reversal in FX rate trends. We expect to deliver high single digit, growth in full year OIBA and even including approximately $50 million in pay-to-play payments to San Francisco, we expect to grow full year free cash flow, well ahead of our OIBA growth rate. We do expect OIBA margin expansion again in Q4 but it will mostly come from year-on-year benefit and cost of sales. With little if any leverage on the marketing client, as we lap a Q4 08 where we dramatically pulled back on spend in light of the weakening and uncertain demand environment. Check in content and G&A spend will grow again in Q4. And likely at higher rates than what we've seen here today. And part due to a tougher bonus comp in light of our improved results and higher legal fees. With that let's turn to Q&A. Operator would you please remind listeners how to ask a question?

Thank you sir. (Operator Instructions). Your first question comes from Imran Khan. Please state your company followed by your question. Imran Khan - JP Morgan: Yes. Hi, it's Imran Khan from JP Morgan. Thank you for taking my questions. Dara, two questions. First starting with. But there's some press report about your discussions with Choice hotel and how best Western might do the same thing regarding the last room availability and that three year term with no exit cost? Could you give us some color what kind of discussions you are having with those hotels? And how comfortable you are having those inventories? And secondly, with regards to booking sale elimination, I think in the past, you talked about that air bookings elimination will cost you $3 million or so, monthly. Can you give us some update on that number? Thank you.

Thanks Imran. As far as the discussions that we've had with Choice, we are not doing business with Choice right now on a chain basis. We don't have a vast majority of Choice hotels on our side. I don't want to get into the particulars of let say negotiations and discussions that we've had for Choice other than to say. First of all, our primary goal is to have the broadest, deepest set and highest quality set of inventory for the benefit of our customers. And this doesn't signal any kind of change in our overall philosophy as far as how we work with our hotel partners and what we're looking at. It's not really an issue of economics; it's more than issue of our wanting rate parity and inventory parity for our customers. When our customers come to Expedia, we want them to know them to know that they're getting the best prices and certainly, we are insistent on that. And to the extent that Choice doesn't want to work under those terms. We won't be doing business with each other. Those are the terms that we work with our others strategic partners, they're comfortable where they were comfortable with it. So, its nothing usual from what I would say is typical practice for us in most of our other OTA competitors so to speak. The good news for us and kind of for Expedia shareholders is that when we look at the recapture analysis, when we look at our bookings in Choice, markets versus or markets where we have Choice presence versus markets where Choice doesn't have much of a presence, it looks like we're recapturing the vast majority of the bookings. So, as far as the financial impact for us, it is minimum to none. And hopefully, we can get to a place where we can or put Choice on go forward basis. But right now, really is not a big deal. As far as Best Westerns goes, we don't have a chain deal with Best Westerns. We work with Best Westerns on a independent basis and everything that I know and talking to our market managers, their relationship with those hotel are great. And hopefully, we'll continue to do, walk the business with them as we continued to do through out the business with our other strategic partners. As far as booking fee elimination Imran, I think no real change -- the volume impact of the booking fees has probably been above our expectations. So if you look at the 3 million a month maybe, it's a bit, touch better than that. We have essentially taken any benefit there and rolled it into call it funding, booking fees around the world. So, we've taken booking fees out of Canada, Italy, Germany, New Zealand and Australia and we are rolling the factor where that wasn't necessarily an assumption that we had made in the second quarter. So that will continue to effect margins on a go forward basis but we think it will also add to more transactions, a better customer experience and we think long-term, it's a worthwhile investment. Imran Khan - JP Morgan: Got it. Thank you Dara. I appreciate that.

Your welcome.

Thank you. The next question comes from Dough Anmuth. Please state your company name, followed by your question. Doughlas Anmuth - Barclays Capital: Barclays Capital. And thanks for taking the question. Two things, first, can you talk about your progress with Easy Manage in Europe, in terms of your signing up hotels in the agency model. And how some of them are moving over potentially from the Merchant side. And then, secondly, Mike, maybe you can talk about the revenue margin going forward. Is this an appropriate level to think about? It feels like some of the factors that you mentioned or more things that are sort of sustainable, probably more than one time things. Your comment on that. Thanks.

Thanks Dough. As far as the Easy Manage programs goes we're quite satisfied with the sign of process right now with Easy Manage properties. The hotels that we're going to like the product, it's pretty simple. And for the year-to-date, we have signed approximately 6500 hotels in the European region to sign up for Easy Manage terms. The hard work now it's kind of after the sign up's loading them on to the site, making sure that content is correct, making sure content is in multiple languages and then starting to push demand out to those hotels. So I think we are kind of in stage 1 as far as sign ups and getting them on to the site. And we think their production or significant production will be delayed by couple of quarters. I won't expect to call it material production from Easy Manage, from an Expedia standpoint although, there'll be material production in smaller markets etcetera until kind of next year. And I think the production will increase as we roll along. Keep in mind that most of the Easy Manage properties are in smaller market secondary, tertiary markets or their smaller hotels by nature. So, signing up one Easy Manage property is probably not equal to signing up one Merchant property. So, the property counts are going to have to go quite high in order for this to have a significant effect on the kind of the revenues coming in. And I think Mike, you were going to talk about --

Yeah. So, on revenue margin, there is always a lot going on there. I would say that the largest factor in the reduction of revenue margin of the quarter is the reduction in service and booking fees which we've done on most of our larger sites. So, we will anniversary that, going forward. So that will stabilize. And then we have a year-on-year change. Really, last year, our royalty program at hotels.com was much smaller and that is recorded as contra revenue as opposed to sales and marketing expense. So we will lap that as well. I might also know, Cruise Ship Center is now in our figures, on consolidated basis and previously they've not been in. And that is somewhat of a lower margin business and actually accounted for about 20-25% of the degradation. So again, we expect most of these things to lap. One of the things that did drive it down a bit this quarter is the higher mix impact of strategic and chain hotels. And that will bounce around a bit but in closing, I'd say that the supplier, the supplier margin themselves are stable, are stable to improving. And the reductions in the revenue margin after the most from actions that we've taken and understood their impact in advance and have as Dara said, with respect to the fee reductions that we feel good about for the long-term of the business. Doughlas Anmuth - Barclays Capital: Okay, great. Thank you.

Thanks Dough.

Thank you. The next question comes from Aaron Kessler. Please state company name, followed by your question. Aaron Kessler - Kaufman Bros.: Great. Kaufman Brothers and couple of questions. First, I know you gave us the hotel idea, I expect you can give us an update on that. And then in terms of your strong booking's growth, it just sense that a share shift may be came more from the supplier or you think you took some OTA shares well. And then, one follow up question.

You want to talk about -- Michael talked about hotel ADRs and I'll talk about share.

Yeah, on hotel ADRs, we saw a decline I believe of 14% in the quarter. And that is down from what we have seen in the last couple of quarters, split between domestic and international and not really much to say, very similar in trend. I will say that as we advanced through the quarter, the ADR year-on-year difference began to improve because our comp gets easier. And ADR is really started to drop sharply in the latter half of the quarter last year. And so, the comp still get easier, doesn't necessarily mean that our ADR is actually changed and we pretty much saw somewhat steady ADRs throughout the quarter. But again, with the comp getting easier, it looks better at the end of the quarter and that actually helps us on the revenue line as well.

Go ahead Aaron. Why don't you ask the follow-up and I want to... Aaron Kessler - Kaufman Bros.: Yeah. On the acquisitions, it's looks like you anniversary most of your acquisitions in Q3 of January. Is there -- can you give a sense for how much acquisitions would be in the Q4 numbers? On a percent basis?

I think it'll be pretty minor. Correct me if I'm wrong, I think that there's cruise ships standard which was a kind of cruise based company that we consolidated starting, I think the very end of Q2. So the fact that you will see with Cruise Ship Centers is that their revenue margins are significantly less than the revenue margins of the whole company. And for example, just for Q3, we saw 100 million of gross bookings coming in with 2 million of revenue, just to give you a sense of that size. So, that will change kind of the revenue margin mix and I would again stress on what Mike said which I think was important issue on revenue margin is that as we're renegotiating with our suppliers, most of the margins are stable to improving. So from a fundamental basis, most of the shift that you see in revenue margins are actions that we're taking on the consumer side for the mix shifts. They're not anything having to do with the fundamental kind of business model so to speak. Aaron Kessler - Kaufman Bros.: Great, thank you.

And then, Aaron as far as your other question on share, gross booking on where we taking it, I think that in listening to some of the Airline calls, it doesn't -- it looks like Air traffic to direct sites and their booking from Airline web directs site continue to be quiet strong. And OTA category I think is strong as a category. So, I think that my instinct is that most of the share that we're taking on the Air side is from offline travel agencies, traditional travel agencies etcetera that don't have call it the balance sheets that we do and the flexibility that we do as far as being able to charge less fees and improving the consumer value proposition. On the hotel side, my guess is that we're gaining share, both from offline and some of the online players but data there is more difficult to pass through. Occupancies were down in the U.S. and our room nights were up very, very significantly. So, I think it's a broad share gain, it doesn't but in terms of whom we're taking share from specifically, we just don't know. Aaron Kessler - Kaufman Bros.: Great. Thank you.

Sure.

Your next question comes from Ingrid Chang. Please state your come followed by your question.

Hi. It's actually Jordan on for Ingrid, from Goldman Sachs. Just two quick questions, one on Air volumes. Just wandering why your volumes accelerated so sharply relative to hotel in 2Q versus 3Q? Was that -- it looks like that was partly comps but was there anything else going on there? And then, to what extent was that international versus domestic?

Okay. So on Air volumes, Air is continuing to benefit from the fee cuts that we have implemented. And there were additional cuts introduced in Q3. And as Dara noted, we extended the fee reductions on Air to Canada, Germany, Italy, Australia and New Zealand. And so that helped accelerate the international growth. But most of the volume growth nonetheless is driven by e.com which is our largest Air point of sale.

Okay, Great. Thank you.

Thank you. The next question comes from Justin Post. Please state your company name followed by your question. Justin Post - BAS-ML: Thank you. Banc of America/Merrill Lynch. Could you talk a little bit about how the revenue per unit pressure. We know all the things that are going on. As you look out to next year, you issued sometime more cautious statements on your unit growth. May be you could go through those again. And then, way we think revenues per unit can become kind of more flattish as you get out to the second half of next year, on potential AVDR stabilizing and some of your fee things. I mean is something that could happen by the second half of next year?

Think Justin, right now, we're it's very difficult to have, call it real visibility into 2010. This is a pretty darn volatile market and that has not changed. When we talk to our hotel partners in particular, I think most think that overall, ADRs will be down slightly going into next year. But in general, think that the leisure segment will be stronger than the business segment which is something that we've seen pretty consistently from kind of call it the Smith Travel result on that come out of the industry. Weekday occupancies and ADRs in general have been pretty consistently stronger than, I'm sorry. Weekend has been stronger than week days. It is very difficult to find out visibility going into next year. My guess is that we're basically planning for ADR's being flat to down slightly but I think it's anyone best guess after what happens. And in general, I think our unit volume in ADR's are do kind of move against each other. I would expect that to the extent that we get strength in ADR's. That'll put some pressure on our unit volume to the extent that ADR's are lying weak, we think your unit volume will be stronger. So, to some extent, we're hedged as an entity. And I think if we keep focusing or what we're focusing on which is to increase the traveler proposition, value proposition becoming better product, we're going to do fine either in the weak ADR market or strong ADR markets. For Mike statements, ADR comps do get easier in Q4 and certainly, I would expect ADR comps in next year to be a lot easier than they happen this year. So, I say we're cautiously optimistic but more cautious than anything else. Justin Post - BAS-ML: Okay. And then, two quick follow-ups. Can you give us any visibility on Air as a percentage of your total revenues or bookings? Anything you can breakout there versus hotel? And then you said Hotwire was up 45% this quarter. Can you remind when it was up last quarter? Thank you.

Yes. So, on Air side, Air represented 12% of our total revenue in the quarter. Justin Post - BAS-ML: Right. Thank you.

And on Hotwire, we're grabbing the number.

I think in general, on the hotel side, I'd say it's probably similar to last quarter's number maybe up, slightly. But that's a guess. We'll get back to you later on that. I would add on Air. My guess is that Air is going continue turning down. Justin Post - BAS-ML: Is that

That percentage of revenue

That is down for

But we're looking forward. It going to, should keep going down unless something unexpected happens. And we'll get back to you on Hotwire.. Justin Post - BAS-ML: Thanks.

Sure. Next question.

Thank you. The next question is from Mark Mahaney. Please go ahead sir. Mark Mahaney - Citi: Thanks. If I could quickly throw out a couple of questions. In terms of the revenue margin, it was that revenue margin decline kind of a full quarter impact or would there have been some of the steps like Cruise Ship Centers that would have occurred later in the quarter? That mean that normalized year-over-year decline in the rev margins could be a little greater in Q4? Secondly, just to clarify on a Cruise Ship Centers impact, is that -- did you say 20 to 25 bits of the degradation was due to that? Third, could you talk about little bit about optimal capital structure. Since are you and this company has been very consistent about what is done with cash pass when it's been in excess. You've done a lot of share buybacks. And I think you've had certain optimal capital structures in the pass. Any changes in your thought? On your thought on this? Thank you.

Well Mark. Mike, you want to talk about..

I'll talk rev margin but I'll go back to the Hotwire question. And in Hotwire, the increase was 36% in Q2. So on revenue margin, I would say it represents substantially the full quarter impacts, the e.com and ace.com fee changes for the most part impacts at the full quarter. Some of the international points of sale actions were not made with a full quarters worth of impacts. So there will be a little bit of that rolling into Q4. CSC, I did say that of the 98 debt drop in Q3, 20 bits of that approximately was due to CSC. And that represents a full quarter.

And Mark, as far as capital structure goes, we do place a higher premium on liquidity obviously, based on the events that we've all been through. I don't think we need to explain why. A significant portion of our liquidity is not only cash but it's a bank revolver that we have in place now, a billion dollars bank revolver which expires Mike, correct me if I'm wrong in August of next year.

Correct.

Now, I don't think we're going for a billion dollars again cause I don't think we need a billion dollars based on the cash flow generation and the balance sheet that we have now. We got a billion when we spun off from IC and our balance sheet is substantially stronger now then, then it was at the time of the spin off, due to the good work of a lot of people here. So, one of the issues that we're going to look at is the revolver and the renewal there. And until we're confident that we're going to renew -- and I've got to tell you, we're pretty confident that we're going to renew. But until the renewal happens, I think we'll be fairly conservative from having, from a cash standpoint having a nice big cash cushion. Generally, we want to make sure we got plenty of liquidity in the range of 750 million to over $1 billion of capital available at anytime, just in case. We would like to have some capital available for opportunistic acquisitions and excess capital above that is capital that we will look to return to share holders, kind of in due time. And we've done in past through buybacks, we'll look at dividends because we got very good and stable cash flows. But over time, I think you can expect us to return that capital and we're having the luxury know of thinking about that frankly, for the first time and we'll be responsible with the cash. Mark Mahaney - Citi: And if I could ask one final quick question to Mike. You made a comment earlier about the international agency hotel properties building out may be a little slower than investors had expected. Are there structural issues there? Is it just the execution in terms of feed on the street or getting more hotels just takes longer or do you see something bigger, there is an obstacle.

No. I'd say there's nothing big as an obstacle. It really is the hard work of the execution behind bringing those properties, bringing properties up and into the system. And I would say that also, the size of our preexisting base is so big that also, it will take sometime before you start to see a meaningful impact in the figures as well.

And Mark, just add a little color to that, that the sign up process is great. The deal team is going out telling it, it's a terrific product. We have to keep in mind is that we built a machine or we have built a machine for adding a certain number of hotels on to our sites. The volume of hotels added to our site is going to increase substantially because of Easy Manage. And when we build these system and process these, you have to built them for very significant scale. When you add one hotel, you don't add just one hotel, you add descriptions, you add pictures. They got be in multiple languages typically, over 20 languages. You have to bid on them in many languages etcetera. And we have just added a very significant input into the machine and now, we got to adjust the machine. And we want to make sure that we do in the scaleable way. So, we're not always playing catch up. So that takes a little bit more time upfront but we think spending that time upfront is worthwhile so that we're basically building a very scalable lodging machine for the next 5-10 years of growth for this company. Mark Mahaney - Citi: Thank you Dara, thank you Mike.

Our next question comes from Michael Olsen. Please state your company followed by your question. Michael Olsen - Piper Jaffray: Hey thanks. it's Piper Jaffray. And question is with the acquisition on sales. Wondering if you could talk about your strategy in China between the eLong investment and this metasearch deal? How much of a priority China and I guess how aggressively you're going to be continuing to invest in China? And then lastly, how do you kind of feel about the competitor environment in China compared to other geographies? Thanks.

You're right. China is a incredible promise for us. And it's an incredible challenge. Our strategy there is pretty simple in that, eLong is our transactional play there. eLong is our Expedia in China and will continue to be our only transactional play. And obviously, they're competing as a very tough competitor in Sea Trip who is has incredible scale, has great kind of brand recognition etcetera. And so, I think eLong is, has a tough battle ahead of it. I will say that I really do think that the eLong management after investing in the infrastructure and making sure that the customer service that we have is excellent in shifting the effort of the business, not only in building the offline business but in accelerating the online business. I think it's starting to see some results and we're hopeful that eLong's kind of go forward results are going to be better than the result that we've seen let's say, over the past two years. But that said, Sea Trip is a very significant competitor and is quite a challenge. We are kind of fighting the battle on two fronts though. We have gone in, we've trip advisor on the media side and with DowDow. And with Kuxun, we're adding size, scale, eyeballs, its around 6 million unique users that we add to DowDow. That is already a top 10 site in China I believe and will have the most reviews and user reviews in China by about the end of the year. So, we're kind of building a very big media play with TripAdvisor, DowDow Kuxun and investing pretty aggressively there. And hopefully, we'll have Sea Trip as a partner just like we have lots of our competitors in the U.S. as a partner. That media play in China is going to be friendly to all, is going to be built on a standalone basis and we think based on the profitability that we've seen in TripAdvisor to all around the world. In 10 years, it could be the most profitable set of TripAdvisor site around, who knows? The China leisure market now is really started to grow in incredible rates. And some of the industry numbers that we see is that it's going to grow 24% a year to 13 billion in spend in 2011. So, we want to be there as a Chinese leisure market grows, leisure being kind of, call it our core expertise. So, we think between eLong and efforts of TripAdvisor, while Sea Trip is a very tough competitor and there plenty of other local competitors out there. I think as far as the global online travel companies, we think we have by far, the best position and while we're in investment mode for now, we think that 5-10 years from now, it will pay off in a big way. Michael Olsen - Piper Jaffray: All right. Thanks very much.

Sure.

The next question comes from the Michael Millman. Please state your company name followed by your question. Michael Millman - Millman Research Associates: Thank you. Michael Mailman at Millman Research Associates. I have two questions. The first is can you give us the numbers for Merchant and agency hotels. And our most of the agency hotels that you have international, I don't know if its above that 6500 that you quoted. And secondly is on rental car companies, can you talk about what the margin is for you, for rental car companies? And also, the trends and availability of pricing and the availability of Opaque cars for, in the rental car business. Thank you.

Thank you Michael. Might as well talk about Merchant and agency hotels.

Yeah. We, as we've indicated at the end of the quarter, we had it expediahotels.com over 110,000 book-able properties. And that was made up of 63,000 Merchant properties and about 48,000 agency properties.

And Michael, we signed up more Easy Manage properties year-to-date I believe than Merchant properties. So Easy Manage is really accelerating quite nicely. Michael Millman - Millman Research Associates: Our Easy Manage agency.

Yeah. For clarification. And then, as far as rental car goes, we don't disclose specific revenue margins for rental cars. It's higher than our air margins as well within our Merchant hotel margins but we don't specifically disclose those numbers. As far as pricing availability etcetera, the pricing on the rental car business actually looks pretty strong. I think fleet sizes are fairly narrow based on the rental car company is not increasing their fleets. And as a result actually, pricing is up on year-on-year basis. And we are seeing some shortage of availability in cars in certain markets at certain times. That shortage has, is true for a retail product as well for Opaque product and going in to next year to the extent that the rental car company increased their fleet. We think that will be good new. We certainly see consumer demand out there for increased fleet sizes. And we will see how aggressive the rental car companies are. Michael Millman - Millman Research Associates: Thank you.

Sure.

Thank you. The next question comes from Herman Leung. Please state your company name, followed by your question. Herman Leung - Deutsche Bank: Hi, Deutsche Bank. A couple of questions. First I think, the cost model. I mean the expenses were pretty well managed during the third quarter. Was wondering and data center cost was down about 18%. Was wondering how far along are we in the cost reduction process? I know there is also some call centers in Tacoma as well, Dow was sort of consolidating. So, can you talk about how far along the way are you in terms of pulling some of these cost levers on that side? I have a two quick follow ups?

Okay so, on cost, I've answered this question several times in the three plus years I've been in Expedia. And I would say it's never cost reduction in looking for efficiency is never over for us. And with that said, each year, there are relatives put and takes and there are some items this year that are going to be more difficult to duplicate next year. We've had a lot of reductions in our Merchant credit card fees this year due to some technology investments. Those will be difficult to duplicate as we go forward. However, there are other reductions that we are expecting, we have taken you've all probably noticed, number of restructuring charges during the year. And those will result in savings going forward. We eliminated some duplicative functions and shut down few offices and call centers. And a lot of that has a fairly rapid paybacks, some of it stretches out a bit longer. And then, keep in mind that we also redirect some of those savings back into the business. So, we will keep a very firm focus on the cost, on data center, we've done a lot of good work and really better rationalizing our I.T. cost across the business. And we feel good about that. On some of the other categories, on sales and marketing yeah, we will be facing tougher comps as we move out into next year. We will keep our focus on driving out our proprietary platform for search engine marketing, we'll keep our focus on FCO etcetera. But a lot of it comes down on sales and marketing to be the competitive environment as well on what pricing ultimately turns out to be. So, we'll continue to work hard to manage cost there. On R&D and G&A, I'd expect to continued discipline, we will see depreciation continue to roll in from prior cash investments that we've made. And on the G&A front, legal fees have been a bit of wild card for us. And we actually would have probably leveraged expenses in '09 absent there. So depending upon where that ends up next year as well, will kind of tell the story on cost. Herman Leung - Deutsche Bank: Is there -- just on the legal, just a very quick follow up on your comment here, where there any one-time charges on the legal fees that you took this quarter? As well as you talked about marketing sort of coming back maybe a little bit in 2010, what are you seeing in the pricing environment in terms of competitions with just a bidding velocity across the travel segment?

So, I'll take the legal question and then, throw the second question back to Dara. On the legal fees, we have no special one-time charges, just the ordinary course cost of the various legal actions that were involved in it.

And then, and Herman. Just going back to something that Mike said that which is very important is in general, what we are trying to build is scaleable systems everywhere. So there is real discipline across the company in automating big scaleable systems that hopefully on a long-term basis can provide us leverage on cost of sale, on G&A, on technology and content, the R&D line. The marketing one is a bit more unpredictable as far as what competition is. So we want to make sure that we're building the kind of systems that can leverage in the other part of the P&L that we can control so to speak. And it's a -- I think everyone is behind it and it's a good work from Mike and his team to every one around the company to try and get religion there. As far as the CPC's marketing cost etcetera go, our CPCs on Google and the other sites out there, in general continue to be down on a year-on-year basis. We do think that comps are going to get harder but we are seeing kind of more discipline out of ourselves and the other OLTA's to pull back on unprofitable spend. And I think, we'll continue to see that in Q4. But in 2010, to the extent that the various players have taken out unprofitable spend, you should see spend then kind of rolling up with transaction volumes etcetera. We are seeing some benefits, we are taking a fair amount of our CPC activity in-house, into kind of in-house build system. That has allowed us to get better visibility behind our profitability and our bidding and in marketing, in general are all around the world. And step one that we're moving on right now is getting rid of unprofitable activity and hopefully, next year, what you will see is our finding more profitable avenues and corners where we had not been bidding on. And hopefully starting to be more offensive in growing our CTC clicks and volumes. So that will be stage two, stage one is going quite well. Herman Leung - Deutsche Bank: Got it. And thanks. That was very helpful. Last question regarding the contracts you talked about. There's Choice hotel and Best Westerns, how the key kind of variability's on the rate parity and inventory parity. I mean, could you talk about how some of these new term contract negotiations have changed over the past six months to a year? And how this kind of impacts the long term viability of these contracts that you have with suppliers. Thanks.

Yeah. Herman, I'll make sure people understand that we don't have any issue whatsoever with Best Western. We've done business with the independence for sometime, we continue to do business with them. And there's absolutely no change there. In general, as far as our hotel contract and relationships, they have actually been quiet stable, the last five, six, seven renewals. Obviously, there are discussions that take place but there hasn't been significant change in how we do business with our hotel partners really, over the past one or two years. I think there is a good understanding, there is a great partnership, we worked very hard for them. And we want to be their especially in this environment for them to help them as much we can and our chain volumes are very, very healthy. I take choices and outlier and obviously, they're making choices as to whether they want to participate in the market place. And if they do, terrific. If they don't, we're recapturing the vast majority of the bookings. So, we'll be fine. And hopefully, we'll come to terms with that. Herman Leung - Deutsche Bank: Great. Thank you.

Sure.

Thank you. The next question from James Cakmak. If you could please state your company name, followed by your question. James Cakmak - Sidoti and Company: Hi. From Sidoti and Company. Good morning.

Good morning. James Cakmak - Sidoti and Company: Yeah. We haven't seen some improvement on the online advertising front. Obviously, you guys are doing pretty well there, still at about 10% of revenue. Can you just discuss how you're thinking about growing that business? It is a high margin and how you feel TripAdvisor and that your overall online media platform is fairing versus the Border travel ad market? And how should be thinking about any margin benefit we could see from growth in that, in the coming quarters?

Hi James, I'll say our -- I feel as good about TripAdvisor as I ever have to be honest with you. We are feeling the same CPC pressures that our transactional sites are kind of enjoying, TripAdvisor is feeling along with FX pressures in the last three quarters. Although that should ease up in Q4, next year. So, unit volume or click growth and TripAdvisor is growing substantially in excess of the revenue growth that you see with some CPC pressure which should ease as the year goes on and into next year. So, we think that is a tough trend that TripAdvisor has overcome through good work. And if CPC ease up next year or CPC pressure eases up next year, it should be a really good year for TripAdvisor, both domestically and internationally. The base TripAdvisor business grows very -- the growth is strong, domestically in Europe and obviously, Asia is a new area that we're investing in. And in addition to the base business which is growing nicely, we are also investing at three areas. One is getting into air metasearch with TripAdvisor flights which is an award winning product, the terrific product, we're in investment mode right now, one is China which is DowDow Kuxun now. Again, we're going to be in net investment mode in China, I'm guessing for the next two years. And then, the third is the vacation rental business through flickE which is a huge, huge category, potential category for us as a terrific competitor of Home Away. And we're getting into that market and we think that will be a substantially profitable market for us as well. Again, some investment spend both this year and going into next. So, the model that I say as you've got an enormously profitable growing base trip advisor business and then we're investing in these three areas. The TripAdvisor is able to fund those investments and grow. And then hopefully years, two, three, four, five, we're going to reap the awards of these investments in this totally new areas that we're making. So, Steve Kaufer and our team are executing really well. And we think that this is a unique asset and will continue to set itself apart from the other players. James Cakmak - Sidoti and Company: Okay. Thank you.

Thank you. (Operator Instructions) There appear to be no further questions.

Okay. Well, thank you for joining us on the call today and for the great questions. A replay will be available on the IR website after the completion of the call. I certainly appreciate interest in Expedia and look forward to chatting with you again next quarter. Dara, did you have any final thought?

Just a real thank you to the employees of Expedia on a worldwide basis. They delivered a terrific quarter. And hopefully, we'll continue to do the same going forward. Thanks.

Thank you. This concludes the Expedia first quarter 2009 conference call. Thank you for participating, you may now disconnect.