A deceleration in gross bookings in Expedia Group’s alternative accommodations business captured much of the attention on the company’s call with analysts to discuss its first-quarter earnings report.
Vrbo’s gross bookings were up 5% in the first quarter of 2019 compared to the first quarter of 2018, while revenue was up 14%.
In comparison in the first quarter of 2018, bookings for Expedia Group’s vacation rentals brands (including Vrbo and HomeAway) increased 46% compared to 2017.
Expedia Group CEO Mark Okerstrom says the consolidation of the company’s alternative accommodations under the Vrbo brand, announced in March, has caused a slowdown that will likely persist for a few quarters but that, in the long term, will position the company as a global leader in the vacation rental space.
“Our streamlining of brands and platforms has put increased near-term pressure on SEO trends, which has contributed to the deceleration we have seen in Vrbo’s gross booking growth,” Okerstrom says.
“Despite this near-term slowdown, consolidating the bulk of our efforts behind the Vrbo brand globally and its offering a unified, world-class e-commerce platform will allow us to maximize our potential in alternative accommodations in the coming years.”Get a daily dose of travel tech
While Expedia Group says HomeAway is now known as Vrbo, Okerstrom told analysts, “Our intention right now is not to shut down HomeAway, but rather just to focus a lot of our marketing and other innovative efforts on Vrbo. The expectation is that the loyal customers of HomeAway brand – of which there are many – will continue to enjoy that brand, but on margin we’ll take the bulk of the new customers against the Vrbo brand here in the U.S. and globally.”
Okerstrom says he is optimistic about the vacation rental category overall and specifically its potential as a driver of growth for Expedia Group.
“This is a highly popular category – definitely growing faster than the overall industry,” he says.
“We think this is a growth category not only on Vrbo, but as we move more of the inventory onto our core OTA brands, we think this remains a very attractive category, a very attractive opportunity for us for a long time to come.”
When asked his thoughts on Marriott’s announcement that it will create a home-sharing business in 100 destinations, Okerstrom says he thinks it will be good for the alternative accommodation sector.
“If you look at the big hotel operating companies and chains, boy, they are really good at this stuff and really providing a great guest experience,” he says.
“So I think generally it could be a really good thing for the industry to add this type of professionalization to the space, and we’re very hopeful that we can help our partners as they develop these new inventory types, help them to get to markets and get them in front of the right consumers at the right time.”
Vrbo now offers more than 1.2 million online bookable listings, with 460,000 of those integrated on Expedia Group’s core lodging platform.
Overall, Expedia Group reported gross bookings up 8% in the first quarter of 2019 compared to the same period a year earlier, and revenue was up 4%. The company attributes the increase in gross bookings primarily to growth in Expedia Partner Solutions and Brand Expedia.
Adjusted EBITDA was up 42% year-over-year.
Total stayed lodging room nights increased 9% year-over-year. Lodging accounted for 66% of total worldwide revenue, advertising/media and air were each 10% and all other revenue 14%.
Selling and marketing costs increased just 1% in the first quarter compared to 2018 and represented a smaller portion of total revenue – 58.8% in the first quarter of 2019 versus 60.4% in 2018.
Also in the first quarter, Expedia Group agreed to acquire Liberty Expedia Holdings in an all-stock transaction. As a result of that deal, Expedia Group expects to retire approximately 3.1 million shares.
Okerstrom also fielded a question about Expedia Group’s ongoing contract dispute with United Airlines.
The airline’s contract with Expedia expires this fall, and the carrier has said its fares will not be listed on Expedia sites in the United States and Canada after October 1.
“At the end of the day this is a platform, it has market-level economics, and to the extent that United, for whatever reason, decides to go in another direction, no one of our carriers represents more than 1% of our revenue. We’ve got very strong relationships with our lead carriers in the U.S.,” Okerstrom says.
“When I look at the value that can be created by expanding the pie as opposed to focusing on dividing it, I think for both strategic and economic reasons, I would find it completely bewildering if United decided not to engage in that discussion.
“But at the end of the day, they’ve got to make their choice, and we will just move on. And I think United’s competitors would be very happy if we broke up, but I think it would be value-destructive to both of us, and that’s not a place where we particularly want to end up, and I suspect that they really in their heart of hearts probably don’t want to end up there either.”
Credit: PhocusWire
