Expedia Group Inc. shares hit their lowest level since November after the company posted disappointing first-quarter bookings and lowered its full-year revenue growth guidance. The online travel giant blamed a slower-than-expected recovery in its vacation rental business. Expedia shares have declined as much as 14 per cent to $116.50 in New York so far on Friday, May 3.
Also Read: Expedia to cut about 1,500 jobs as travel demand moderates
Vrbo was seeing a slower rebound than the company’s expectations following a restructuring aimed at allowing customers to book across brands under one platform. The company, which also owns Hotels.com, projected full-year revenue growth in the mid-to-high-single digit percentage range, down from a prior forecast of double-digit growth, according to a report by Bloomberg.
Expedia Q1 numbers – Key Metrics
The Seattle-based posted first-quarter gross bookings of $30.2 billion, missing analysts’ average estimate of $30.5 billion. The company cited a “slower than anticipated” recovery in its vacation rental business Vrbo. That, combined with slower-than-expected growth in the rest of its consumer business, led the company to lower its full-year sales guidance with margins relatively in line versus last year, according to the report.
Vrbo’s recovery has been slower than expected and has put pressure on gross bookings, Expedia Chief Executive Officer Peter Kern said on Thursday, adding in an earnings call with analysts that Vrbo has lost share to Airbnb Inc. and Booking Holdings Inc., the parent company to brands like Kayak and Priceline. Kern also pointed to a years-long and resource-intensive back-end update that was completed around late last year, which served to unify Expedia’s two other main brands, Expedia.com and Hotels.com, onto a single technical platform.
Outlook
The company has vowed to spend a record amount on marketing this year to narrow the gap in vacation rentals with Airbnb as it emerges from its costly technical update. However, the broader environment has seen headwinds as the lifting of pandemic-induced travel restrictions has led to more travelers seeking out urban adventures, as opposed to the sort of rural destinations and resorts where most Vrbos are located.
Also Read: Booking beats expectations as travel demand remains strong
Vrbo also does not offer the sort of home sharing that rival Airbnb is known for. In contrast, Expedia saw share gains in its hotel lodging business, since most of its hotels are concentrated in urban areas. At least seven brokerages cut their price targets on Expedia, with Piper Sandler downgrading the stock to “neutral” from “overweight”. Piper Sandler analysts said ‘bookings growth is deteriorating’ while increases in margins from tech improvements ‘remain elusive’
“We’ve got to spend on brand and build it, and that’s taking some time to lean back into,” Kern said on the call. “But we feel very good about the progress. It’s just a question of how far, how fast, and what’s the timing, and the seasonality differences, etc. That’s what we’re spending into this year to get it back on a growth trajectory,” according to the report.
The recovery of the global travel market has also been uneven. Growth in the US has stagnated while demand in Europe and Asia Pacific markets has been more enduring, according to analysts at Jefferies. This has hurt Expedia more than peers such as Booking as most of its business is based in the US, while Booking is more exposed to Europe, according to Bloomberg.
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Published: 03 May 2024, 10:12 PM IST
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