Expedia Group has kicked off its global lay-off of 3,000 staff this week in Asia, part of the plan by one of the world's largest online travel agencies to trim a workforce described by its chairman as "bloated," as a global coronavirus outbreak crimps travelling.
The first dismissals will take place in Hong Kong and Singapore, where staff will receive redundancy notices as early as this week, according to a person familiar with the matter. The Seattle-based company has 106 employees on staff in Hong Kong, with another 343 in Singapore, according to LinkedIn. Spokespeople did not respond to emails or answer phone calls placed to their Asian offices.
The lay-offs are part of the 3,000 redundancies unveiled on Tuesday, as the 18-year-old company stops certain projects, trims its headcount by 12 per cent and reduces its use of vendors following a disappointing business performance last year. The company, which ousted chief executive officer Mark Okerstrom and chief financial officer Alan Pickerill in December amid a boardroom clash, had 25,400 staff on payroll as of December 31.
Many companies in the travel industry "will be under pressure to start reducing headcount" to cut costs, said Guotai Junan's hotel and gaming analyst Noah Hudson, who expects the coronavirus outbreak to extend past the first quarter. "A large proportion of expenses are operating costs which are still ongoing; they can cut it to some extent, but they can't completely eliminate it."
Infographics: All you need to know about the global coronavirus outbreak
The coronavirus, which can be traced to the Hubei provincial capital of Wuhan in China, has now been reported in 48 regions and countries worldwide, including a cruise ship moored in Yokohama with almost 700 afflicted passengers. More than 95 per cent of the confirmed cases were confined to mainland China, but the virus' spread as far afield as Brazil, Sweden and the United States " the first coronavirus case of unknown origin was reported yesterday in California " has spooked business and leisure travellers.
Expedia operates a network of travel agents, including its flagship booking website Expedia.com, the global lodging website Hotels.com, and the US-focused travel website Orbitz. Revenue growth slowed last year to 7.5 per cent, while net income missed analysts' expectations by half.
The company's retrenchments would involve 500 people in Seattle, about 17 per cent of its lay-offs.
"We were a bloated organisation," said its chairman Barry Diller on a February 13 earnings conference call, according to Bloomberg. Over the last few years, Expedia has been chasing growth in the intensely competitive travel sector by adding employees and layers of complexity "until frankly very few people could figure out what the hell they were supposed to do during the day," he said.
The company "needed a fresh and forward look (at) clarifying our strategy and simplifying our operations," Diller said in a memo to staff seen by South China Morning Post. The global redundancies may cost between US$135 million and US$185 million in total pre-tax charges, Expedia said in its filing this week.
The company's stock fell 7 per cent in overnight trading to US$101.19, bringing the year's decline so far to 6.4 per cent. Goldman Sachs this month lowered its target price to US$120, from US$126, keeping a "neutral" recommendation on it.
"While Expedia likely has material cost efficiencies to leverage in its model, the underlying issues driving deteriorating returns across the online travel space and incremental competition from both traffic and hotel supply sources, is likely to continue to offset the benefit from those efforts," the investment bank said.
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