Expedia Still Has High Hopes for a Vrbo Bounce — Next Year

In some ways, the Expedia Group narrative about its struggling alternative accommodations unit, Vrbo, in the second quarter was fairly similar to the messaging three months ago: We’re working hard, and it won’t be until 2020 until our labors bear fruit.

Expedia Group Mark Okerstrom said Thursday, during the company’s second quarter earnings call, that the Vrbo team is working hard, and that if you take into account the Easter holiday and other adjustments, then the story was “broadly consistent.”

Expedia Group rebranded its HomeAway business to Vrbo in the first quarter and took a resulting hit in its organic search, or search engine optimization, efforts, officials said at the time.

Okerstrom said Thursday that the team is working hard to get volumes from that free search engine traffic back on track, and he’s “comfortable” with the effort. He added that the company is “expecting more of the same for the next few quarters,” and Vrbo should probably be in the clear at some point next year.

In the second quarter, Vrbo’s gross bookings grew just 2 percent year-over year to $2.86 billion, and compared with a faster pace of 5 percent growth in the first quarter. Vrbo’s adjusted earnings, however, grew 8 percent year-over year to $84 million, and that was a bright spot compared with the first quarter when Vrbo notched a $40 million loss. Vrbo revenue jumped 17 percent to $347 million.

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As of June 30, Expedia had placed 570,000 Vrbo properties on Expedia’s core online travel agency sites, which boasted 1.3 million lodging properties, including hotels, overall.

During the call, an analyst asked Okerstom if Expedia would consider investing in a property management company. Prominent venture capital-funded property management companies in the United States include rivals Vacasa, Turnkey Vacation Rentals, and Sonder, for example.

Okerstrom said he’s familiar with the various property management companies and has looked at them. However, he said property management is not Expedia Group’s core business so the company has shied away from getting more deeply involved although, “never say never.”

A Fairly New Strategy

Part of the playbook for Vrbo, and Expedia’s other brands, is to leverage opportunities through cross-selling, and brand cooperation, Okerstrom said.

For example, travelers who book a vacation rental now get presented with the opportunity to book an Expedia car rental on the Vrbo site, and a flight from Expedia.

“We have many other opportunities to drive customers and partners facing innovation and increase operating efficiency by better leveraging the scale of our platform across Expedia Group,” Okerstrom said during his prepared remarks. “To that end, we’ve recently begun a design process with the goal of realigning certain teams across the company to enable them to better execute on this platform approach. All of these efforts are squarely aimed at driving better customer and partner experiences as well as stronger long-term growth and value creation.”

A similar exercise — more brand collaboration — is unfolding over at rival Booking Holdings, where RentalCars.com has been folded into Booking.com, and Kayak has assumed overall responsibilities for dining platform Opentable.

Expedia Group saw its room nights grow 12 percent in the second quarter compared with the same period a year ago. Okerstrom said two dynamics in play are that as Expedia adds properties in international markets where its presence has been small it gets incremental bookings, but at the same time, “the metasearch channel is also pretty significant. You’ve got basically headwind on the room night growth, which is been driven what’s been happening with the big metasearch platforms slowing down.”

In the second quarter, Expedia Group posted net income of $183 million, up from $1 million in the second quarter of 2017, on a 9 percent revenue jump to $3.2 billion.

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Okerstrom said that part of the “playbook” for continued growth is cross-selling among its various brands, and that the early results from that effort have been “encouraging.”