Expedia Revenue and Macroeconomic Correlation Analysis
This paper examines the relationship between Expedia's financial performance and four macroeconomic variables: GDP growth, unemployment rate, personal savings rate, and the Federal Reserve discount rate. Because travel is largely a discretionary consumer expenditure, the firm's revenues are expected to move in step with broad economic conditions. Using data from the BEA, BLS, St. Louis Fed, and Federal Reserve, the paper constructs four correlations and interprets each in turn. Results show a moderate correlation with GDP growth, a stronger inverse relationship with unemployment, a general inverse relationship with the savings rate, and a surprisingly weak link between the discount rate and Expedia's research and development spending.
- Introduction and Economic Context: Overview of Expedia and key macroeconomic variables
- GDP Growth and Revenue Correlation: Moderate correlation with notable 2007 anomaly
- Unemployment Rate and Revenue Correlation: Inverse relationship emerges in recent years
- Personal Savings Rate and Revenue Correlation: General inverse trend with some distortions
- Discount Rate and R&D Expenditure Correlation: Weak link between cheap capital and R&D spending
- Macroeconomic Outlook and Implications for Expedia: Slow-growth environment limits near-term opportunity
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What makes this paper effective
- The paper clearly states its hypothesis for each correlation before presenting results, giving the analysis a logical, hypothesis-driven structure.
- It acknowledges anomalies — such as the 2007 revenue spike during slowing GDP growth — rather than forcing the data to fit expectations, which strengthens credibility.
- The conclusion ties all four correlations back to a unified macroeconomic outlook, demonstrating synthesis rather than simple summary.
Key academic technique demonstrated
The paper demonstrates applied correlation analysis in a business context: for each variable pair, the author states the expected directional relationship (positive or inverse), identifies where the data support or deviate from that expectation, and explains the deviation with economic reasoning. This predict-observe-explain loop is a useful model for undergraduate applied economics or business writing.
Structure breakdown
The paper opens with an industry and firm overview, then introduces the four macroeconomic variables and their theoretical relevance to Expedia's financials. Four body sections follow in parallel structure, each covering one variable pair. A final section synthesizes the findings into a forward-looking assessment of Expedia's operating environment. The Works Cited section uses MLA-style formatting. Total length is concise, suited to a short applied-economics assignment at the undergraduate level.
Introduction and Economic Context
Expedia operates in the travel industry. The company's core site functions as a travel consolidator, and the company also operates a range of complementary sites within the same sector. Several key macroeconomic variables affect the travel industry broadly. The most important is the overall state of the economy (WTO, 2010), which can be measured as a combination of GDP growth and the unemployment rate. These two variables matter because travel is largely a discretionary expenditure for consumers. During difficult economic times, consumers are more likely to save than to spend on non-essential items. As a result, the personal savings rate is another variable that correlates with travel industry demand, and changes in that demand are ultimately reflected in firm revenues.
In addition, because firms like Expedia operate in an environment characterized by rapidly changing technology, they must constantly invest in research and development to keep their platforms current and competitive. This investment often requires debt financing, making prevailing interest rates — specifically the Federal Reserve discount rate — a relevant factor in the company's economic performance. This paper analyzes four sets of variable pairs to determine the degree of correlation between macroeconomic conditions and Expedia's financial results.
All financial data on Expedia are sourced from MSN Moneycentral (2010). GDP growth figures were derived from the BEA. Personal savings rate figures came from the St. Louis Fed. Unemployment figures come from the BLS, and discount rate figures come from the Federal Reserve.
Works Cited
BEA.gov. (2010). Gross domestic product. Retrieved December 8, 2010 from http://www.bea.gov/national/index.htm#gdp
BLS.gov. (2010). Unemployment rates. Retrieved December 8, 2010 from http://www.bls.gov/cps/cpsaat1.pdf
Federal Reserve Discount Window. (2010). Retrieved December 8, 2010 from http://www.frbdiscountwindow.org/historicalrates.cfm?hdrID=20&dtlID
MSN Moneycentral: Expedia. (2010). Retrieved December 8, 2010 from
St. Louis Fed. (2010). Personal savings rates. Retrieved December 8, 2010 from http://research.stlouisfed.org/fred2/data/PSAVERT.txt
WTO. (2010). International tourism on track for a rebound after an exceptionally challenging 2009. World Travel Organization. Retrieved December 8, 2010 from
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