Expedia sees "mixed bag" from economy

LOS ANGELES (Reuters) - A slowing U.S. economy presents "a mixed bag" for online travel agent Expedia Inc (EXPE.O: Quote, Profile, Research, Stock Buzz), the company's chief executive said at the Reuters Travel and Leisure Summit in Los Angeles on Tuesday.

Recent economic data have hinted at a slowing U.S. economy -- possibly even a recession. During an economic downturn discretionary spending on travel could decline, hurting bookings.

On the one hand, as airlines work to fill planes to capacity and charge higher fares, online travel agencies (OTAs) have a harder time selling seats, said Expedia CEO Dara Khosrowshahi.

"Higher prices are not good for consumer demand ... that is to some extent a headwind for OTAs," he said.

On the hotel side, however, there are signs of softer demand, which means more inventory is available to online travel sites, Khosrowshahi said.

"There are better (hotel) promotions than there have been in the past year. Our customers respond well to promotions," he said.

The Expedia CEO also said there have been some signs of group cancellations at hotels, which have turned to Expedia to fill the rooms.

Khosrowshahi said Expedia's Las Vegas inventory is improving over last year's levels. "Our business in Vegas is doing great," he said.

Expedia competes directly with travel companies like Priceline.com Inc (PCLN.O: Quote, Profile, Research, Stock Buzz) and Orbitz Worldwide (OWW.N: Quote, Profile, Research, Stock Buzz). It also faces threats from meta-search sites that allow users to hunt for travel bargains but direct consumers to other sites to make purchases.

Khosrowshahi said consolidation is inevitable among all these travel sites as the market matures.

He said Expedia expects to spend more on acquisitions in 2008 than it did in 2007 when it spent about $100 million.

"I would like to spend more than what we spent in '07 if the targets are out there," Khosrowshahi said.

Shares of Expedia, which have fallen about 20 percent this year, closed down 25 cents at $24.49 on Nasdaq.

(For summit blog: summitnotebook.reuters.com/)

(Reporting by Kyle Peterson and Deena Beasley, editing by Phil Berlowitz)