VRBO LEADS ‘BOUNCY’ EXPEDIA

2 August 2020

Expedia struck decidedly upbeat notes about recent and current trading alongside second quarter earnings figures posted on 30 July. Its assessment of its Vrbo home-rental booking service was particularly bullish.

Overall revenue fell 82% to $566m in the three months to the end of June, compared to $3.2bn in the same period of 2019. The company fell to a net operating loss of $849m for the quarter against profit of $265m last year.

Peter Kern, Expedia vice chairman and CEO, said: “April was very tough for everybody. It was the bottom of the trough. We have seen consistent growth coming out of that.

“All of that is a very good trend but still obviously well below anything we’d like to see in the business. As for July, I would say it’s roughly in line with June, slightly off those numbers.”

But he said: “Vrbo had a ton of business and has been a great leader for us in the recovery. As we got into summer, people obviously have a real interest in the whole home model and being able to have their families alone and not in shared space. And so Vrbo really led the way for us.”

Kern said that large volumes of Vrbo business were coming direct rather than via advertising on Google and elsewhere. “Vrbo has been the beneficiary of a huge amount of direct traffic and essentially organic traffic.”

“I don’t want to say it’s a structural shift. We’ll see what the world is like when everything normalises. But we have seen that the brand is quite strong, that people can find us and that we’re important as an organic option and a great option for travellers.”

Kern said it was likely to do “much better” than its previously-stated target on cost savings. “We feel strongly that we’ll do better than the $500m. And I would point out that there is much more to it than just the $500m of cost savings that we scoped to you before because that doesn’t really take into account the variable side of our business.”

He added: “We are not worried about the nickels right now in a market where there isn’t a lot of volume. We are much more focused on the long-term foundational work to drive the long-term benefits when the volumes really are back at full scale. We are doing that work right now as fast as we can.”

Among other measures, Expedia folded its HomeAway brand in the US into Vrbo – a move that the company had expected would take another year to do. “That will allow us to go much faster and do more around Vrbo,” said Kern.

Insight:

“Bouncy” is hardly a word many would use to describe the hospitality industry at present. It is, however, one of the words used by Peter Kern, CEO of Expedia, on 30 July. Kern also applied the terms “bumpy” and “non-linear” as near synonyms.

The underlying impression is one of unpredictability and variation. Market demand changes month by month. Vrbo, Expedia’s increasingly powerful challenger to Airbnb, scored well but air travel bookings, unsurprisingly, were awful.

The US, says Expedia, is bearing up under the strain while Europe is faring less well. As reported elsewhere – notably by Wyndham Hotels & Resorts – domestic, cheap, leisure and/or ‘drive to’ travel is doing better than upscale jet-setting.

By and large, Kern’s comments around the company’s second quarter earnings release are honeyed with a fair amount of optimism – especially as far as Expedia’s own prospects are concerned. It has taken advantage of the slowdown to improve tech capability, simplify branding and save at least $500m in operating costs.

Readers of the Pooh Bear stories will recall that Tigger is irrepressibly “bouncy”.  Kern said Expedia numbers were “noisy” which, apart from being another of Tigger’s character traits, is a warning that it is hard to see clear messages in figures emanating from Covid-confusion.

Those familiar with chronicles from Hundred Acre Wood will also know one of Pooh’s other friends, Eeyore. Where Tigger’s proverbial glass is always at least half full, Eeyore’s is invariably half empty, at best. Pessimism is the predominant reality across the hospitality industry just now. And while it is heartening to hear Expedia sounding optimistic, one suspects it is still perfectly conscious of its inner Eeyore.

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