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Expedia: You’ll Have to Wait Longer to See Hard Data on Our Rebuild Progress

An idealized vacation scene. Expedia Group said its Vrbo vacation rental unit is not seeing the trend toward long-term stays that others — namely Airbnb — are seeing.  Expedia Group
An idealized vacation scene. Expedia Group said its Vrbo vacation rental unit is not seeing the trend toward long-term stays that others — namely Airbnb — are seeing. Expedia Group

Expedia Group, in releasing its fourth quarter earnings Thursday, saw plenty of cause for optimism, but as far as quantifying its progress in terms of its two-year-old restructuring and rebuilding drive, the message was you’ll have to wait until the travel industry reverts to a semblance of normal to quantify the gains.

While rival Airbnb, which reports fourth quarter earnings next week, basks in its brand awareness and proclivity in attracting bookers directly, Expedia Group’s selling and marketing expense line in the fourth quarter was 45.8 percent of revenue. Selling and marketing expense climbed 106 percent to more than $1 billion.

Commenting on Expedia Group’s push to render its marketing efforts more efficient, CEO Peter Kern said during a call with analysts: “So the short answer is, we made a huge amount of progress, as I said, in terms of tools, in terms of data, in terms of insights, in terms of being able to test and learn across a much broader swath of our enterprise. But being able to quantify really how much better it is in basis points or something that would give you a projectable marketing efficiency is still very challenging.”

For the past two years, Expedia Group has been reorganizing the internal workings of the company, combining brand teams that previously may have worked at cross-purposes, shedding brands that weren’t core to the company, and trying to consolidate its tech stack. The company entered 2022 with 10,000 fewer employees than at the end of 2019.

The company is currently revamping all of its loyalty programs, and intends to unify them into one plan. Kern said he thought that work would take most of 2022, and that 2023 would be the year where the company sees the first financial benefit.

“So I think we feel good about the technical progress the teams are making about the way they’ve plotted out their course of learning and testing,” Kern said. “And there’s no question it will inure to our benefit. But being able to identify a single thing or a single win or how to quantify it is really hard to do at this moment. So I think you have to wait for the collective good to roll through our P&L (profit and loss statement), and hopefully, you’ll see it as things” develop.

In a Skift interview following the call with financial analysts, Kern pointed to a service platform, which includes “voice chat,” and enables people to “self-service” as an example of some of the behind the scenes progress the company is making. “We have been essentially training it with skills across the entire company to serve traveler problems, supplier problems, all kinds of things,” he said.

Kern said it while it makes the company more efficient, “more importantly travelers appreciate it and have a better experience.”

Expedia Group’s revenue in the fourth quarter still tracked considerably lower than in the comparable period in pre-pandemic 2019. Its revenue mark of around $2.3 billion in the fourth quarter of 2021, was 17 percent lower than the same period two years ago. However, that $2.3 billion stood 148 percent higher than the fourth quarter of 2020.

Expedia Group’s lodging revenue in the fourth quarter climbed 116 percent year over year to $1.7 billion.

Expedia Group recorded $276 million in net income in the fourth quarter of 2021, reversing a $412 million loss a year earlier. The company said that was driven by room night growth and, to a lesser degree an increase in average daily rates.

For full year 2021, Expedia Group narrowed its year over year loss by 90 percent to $269 million in the red. Revenue for the year grew 65 percent to $8.6 billion.

Selling and marketing expense climbed 106 percent to more than $1 billion. Selling and marketing expense was 45.8 percent of revenue.

“While we experienced yet another significant travel disruption from Covid this quarter, we were pleased to see that the impact was less severe and of shorter duration than previous waves,” Kern said in a statement as part of the fourth quarter earnings announcement. “Notably, the travel industry and traveling public prove more resilient with each passing wave, and we continue to expect a solid overall recovery in 2022, barring a change in the trajectory of the virus.”

Vrbo Not Seeing Long-Term Stays Trend

Expedia Group Chief Financial Officer Eric Hart said the company’s vacation rental brand Vrbo is showing strength compared with 2019 and 2021, and “it continues to win share, as well” without providing specifics. He said the hotel recovery has lagged Vrbo’s trajectory.

But Kern said Vrbo is not seeing a trend toward long-term stays that others — namely Airbnb — are seeing. He said if people have more flexibility and can spend more days on vacation, then that would be “terrific” and a “tailwind,” but that hasn’t benefited Vrbo to date.

In the Skift interview after the analyst call, Kern said Vrbo was never in the business of by and large of offering two-night stays. So its vacation rental brand, which is geared primarily toward families and other groups in resort areas, is indeed seeing stays getting elongated, but not to the extent that it is seeing a surge of bookings for 30-day stays or longer.

Mergers and Acquisitions

Kern said Expedia Group is committed to continuing the restructuring process, and making the company more efficient so it can better stimulate and capture demand, and won’t engage in mergers and acquisitions activity just because there are good deals out there.

“We’re going to buy things that fit our long-term strategy to drive where we’re trying to drive it if we buy it,” he said.

Full Video: Expedia CEO Peter Kern at Skift Global Forum 2021
Full Video: Expedia CEO Peter Kern at Skift Global Forum 2021

Full Video: Expedia CEO Peter Kern at Skift Global Forum 2021

Look for Expedia’s vacation rental unit, Vrbo, to keep gaining market share in geographies where it is already strong. But the brand hasn’t always been nimble, and it may be missing out opportunities.

Read More

Update: The story has been updated to add some information from CEO Kern about a new service platform for travelers and suppliers that Expedia is introducing across the company, and about trends at its Vrbo unit.

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