Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Expedia Group Inc (EXPE, Financial) reported a 10% growth in room nights and a 6% increase in gross bookings and revenue, driven by improvements in Vrbo and strength in Brand Expedia.
- The company achieved a sequential acceleration in its B2C business, with gross bookings growing by 6% and EBITDA margins expanding by approximately 70 basis points in the first half.
- Brand Expedia showed strong performance with booked room nights up nearly 20%, and Vrbo improved significantly from its Q1 low point, exiting the quarter with modest growth.
- The One Key loyalty program has been successful, with nearly 30% of travelers redeeming OneKeyCash on Vrbo being new to the brand, indicating its effectiveness in attracting new customers.
- Expedia Group Inc (EXPE) maintained strong liquidity with $8.7 billion, driven by a robust cash balance and undrawn credit, and continued share repurchases, reflecting confidence in long-term performance.
Negative Points
- Expedia Group Inc (EXPE) experienced a slowdown in travel demand entering the third quarter, with a more challenging macro environment impacting growth expectations.
- The company faced pricing pressure in the air and car segments, and new pricing display regulations in California contributed to weaker-than-expected growth in July.
- There was a deceleration in the B2B segment, with growth slowing to 20%, partly due to normalization in global demand and specific challenges in the US market.
- The rollout of the One Key program has been paused internationally, which may limit its potential benefits in markets where only one brand operates at scale.
- Expedia Group Inc (EXPE) anticipates approximately 100 basis points of deleverage in third-quarter EBITDA and EBIT margins due to marketing investments in Vrbo and international markets.
Q & A Highlights
Q: Can you provide insights on Vrbo's recovery trajectory and advertising revenue expectations?
A: Vrbo showed substantial acceleration from the beginning of the year, exiting the quarter with modest growth. However, July trends make it hard to predict the business trajectory. Long-term, we aim to drive Vrbo back to growth. Our advertising business is performing strongly, consistently growing in the high 20s, and we expect this trend to continue.
Q: What are your key learnings as CEO, particularly regarding the turnaround of Vrbo and Hotels.com?
A: The platform work allows us to accelerate innovation, but we lost some unique features during migrations. For Vrbo, collaboration features were impacted, and for Hotels.com, the loyalty program was downplayed. We are working to restore these features and leverage our platform capabilities to enhance brand value. The B2B business is underappreciated; it combines great supply, technology, and partnerships to tap into the $2.3 trillion travel industry.
Q: How do you plan to drive margin expansion given marketing priorities and ADR pressures?
A: We are focusing on cost efficiencies in sales, operations, and overhead. While marketing investments in Vrbo and international markets are crucial, we aim for long-term margin leverage through direct traffic growth and cost management. Brand Expedia is already showing strong growth and marketing leverage, setting a benchmark for other brands.
Q: Can you elaborate on the growth cadence throughout the quarter and the impact of the tech platform migration?
A: We saw accelerating comps in Q2, driven by Vrbo's recovery. However, July presented challenges, particularly in the US. The tech platform migration has unlocked capabilities like increased test velocity and cross-brand features, enabling us to roll out innovations efficiently. We are now focusing on brand-specific enhancements.
Q: What is the outlook for B2B growth and the impact of macroeconomic factors on Q3 guidance?
A: B2B growth remains strong at 20%, though slightly decelerated due to global demand normalization. The July slowdown, particularly in the US, affects both B2B and B2C. Our Q3 guidance reflects these trends, with no assumed recovery in August or September. We continue to focus on leveraging existing partnerships and exploring new opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
