Expedia didn't have Airbnb's blockbuster third quarter, but Expedia seems to have built the foundation for solid improvements.
Based on its Vrbo unit’s “superior performance” and the strength of domestic travel, Expedia Group saw its adjusted profits in the third quarter approach the levels of the same period in pre-Covid 2019.
“We’ve seen improvement across all segments,” Expedia Group CEO Peter Kern told investors in discussing the company’s third quarter results Thursday. “Really, well, leisure and domestic have led even those segments, which have been harder hit like corporate and international travel have been coming back. Cities have been returning as well. And so all in all, it’s been a broad-based recovery.”
Kern said Vrbo, the company’s vacation rental umbrella brand, made market share gains in its focus markets, particularly in the United States. Vrbo competes against Airbnb, although Vrbo is a much smaller brand.
Expedia Group adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) rose 181 percent to $855 million in the quarter compared with last year’s third quarter. Net income was in positive territory, $362 million in the third quarter of 2021 compared with red ink of $221 million a year earlier. Revenue rose 97 percent to $2.96 billion.
“But for Delta (the Covid variant), this would have been our most profitable quarter ever,” Kern said.
Expedia Group’s strategy is to build on the efficiencies it has been trying to wrangle over the last 18 months, improve its products and customer service, and to bolster its Expedia Partner Solutions business-to-business effort.
Kern argued that the changes the company has been making over the last year and a half, including consolidating technology stacks, improving performance marketing tools, and integrating the teams of its far-flung brands, are poised to propel improved performance.
“We spent the better part of the last six quarters, building out the organization and in particular, in the last few months, building our creative organization,” Kern said.
The company got more aggressive in marketing at the beginning of the third quarter but had to withdraw somewhat when the Delta variant hit.
“And now again, that we are seeing things growing and the recovery building again, we are leaning back in we intend to go on the offense with all the new tools we have in our arsenal and our marketing group, and we expect to go on offense and expand share across the world,” Kern said.
Expedia Group spent $1.3 billion on sales and marketing in the third quarter, a 150 percent leap over the same period in the prior year. But that $1.3 billion was still 19 percent lower than the third quarter of pre-pandemic 2019.
Kern pointed to Expedia Group’s sale of its corporate travel business, Egencia, to American Express Global Business Travel, as a reflection of its moves to bolster its business-to-business activities. In the deal, which closed this week, Expedia gets a stake in Amex as well as a long-term contract to power part of its hotel business.
Kern said Expedia Group hopes “to power more of the industry,” and the company’s relationship with American Express Global Business Travel is “emblematic” of that.
In addition to the signs that a recovery is beginning to take shape in urban areas, Kern said he also believes that business travel will come “roaring back.”
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Photo credit: Expedia Group Peter Kern (right) at Skift Global Forum in NYC in September 2021. The company said its Vrbo unit made market share gains.