Skift Take

Booking Holdings and Expedia are changing their marketing strategies, a healthy development. Meanwhile, Airbnb widened its marketing edge.

If one hadn’t become so accustomed to it over the last few years, then Airbnb’s sales and marketing advantage over its major rivals would be stunning. Then again, Airbnb widened that gap in the second quarter.

In the accompanying chart, Skift examined online travel and short-term rental players sales and marketing spend as a percentage of revenue in the second quarter, and Airbnb’s brand advantage was blinding.

Airbnb shelled out just 18 percent of revenue in the June quarter on sales and marketing while Booking Holdings allocated 51.3 percent and Expedia Group 53.9 percent.

Executives at Airbnb routinely point out that, for the public, “Airbnb” has become a noun and a verb, and that’s apparent when one sees how relatively little Airbnb spends on sales and marketing. Executives at Expedia and Booking Holdings readily acknowledge that Airbnb has created a great brand, and they labor to get a semblance of the direct traffic to their websites and apps that Airbnb generates.

Online Travel Q2 Marketing Spend as Percentage of Revenue

Company Q2 2022 Sales and Marketing Spend Percent of Revenue
Sonder $12.4 million 10.2 percent
Airbnb $379.8 million 18 percent
Vacasa $62.3 million 20 percent
Booking $2.2 billion 51.3 percent
Expedia $1.7 billion 53.9 percent
Tripadvisor $217 million 52 percent
Trivago $92.4 million 63.8 percent

Source: Financial filings

Airbnb Versus Booking Holdings and Expedia

Airbnb bested its rivals in spending a sleek 18 percent of revenue on sales and marketing in the second quarter while maintaining a substantial EBITDA (earnings before interest, taxes depreciation and amortization) margin gap when compared to Booking Holdings and Expedia. Airbnb’s margin was 33.8 percent, Booking Holdings was 25.3, and Expedia Group’s stood at 20.4 percent, according to BTIG statistics.

One shouldn’t put too much importance on statistics from a couple of quarters; Airbnb Chief Financial Officer David Stephenson said August 2 that the company’s marketing spend as a percent of revenue would likely increase in the second half of 2022, bringing it to a level similar to last year when it was nearly 20 percent.

But in the second quarter of 2022, Airbnb widened the differential in marketing spend as a percent of revenue that it notched against Booking and Expedia a year earlier although there are a multitude of factors at play, including divergent levels of travel demand based on geographies and product mix.

So Airbnb’s sales and marketing spend as a percentage of revenue was 32.8 percentage points lower than that of Booking Holdings in the second quarter of 2021, and that widened to 33.3 percentage points in the second quarter of 2022. Airbnb’s sales and marketing expense was 31.2 percentage points lower than Expedia’s in the second quarter of 2021, and that advantage expanded to 35.9 percentage points in the second quarter of 2022.

All of these marks are subject to change and are complex. Booking Holdings, for example, said it has started to lean into merchandising, or discounting, relative to performance marketing (on Google and other search engines), and it’s tough to say at this juncture how much that might impact sales and marketing spend.

And some of Expedia’s sales and marketing expense increased in the second quarter as it paid out more in commissions to business to business partners, a revenue stream that is a priority for expansion. Expedia Group CEO Peter Kern said August 4 that the company’s new strategy is not just to spend endless amounts of money on search engines and metasearch to acquire customers who might book something one day and never come back.

“This means that we have not chased all traffic available in performance marketing, no matter the cost, and instead have focused on the pockets of consumers we think will derive the highest long-term value and the best future shape of our business,” Kern said of Expedia’s marketing strategy in the second quarter.

Trivago Had the Highest Percentage Spend on Marketing

Another takeaway from the chart on marketing spend is the wide disparity among online travel companies based on business models, and priorities.

Germany-based metasearch company Trivago in recent years has spent a huge percentage of its revenue on sales and marketing. In the second quarter of 2022, Trivago, which is majority-owned by Expedia, allocated 63.8 percent of its revenue on sales and marketing.

Trivago stated that 92 percent of its sales and marketing spend in the second quarter of 2022 was on advertising.

But having a large marketing spend as a percentage of revenue — whether it is from Booking Holdings, Expedia Group or Trivago — isn’t necessarily a bad thing in itself.

Trivago, which ran summer TV and other brand campaigns in its major markets in the second quarter, and also increased its search engine marketing, recorded its highest-ever adjusted earnings mark in its history.

Tripadvisor Seeks Delayed Benefits

Tripadvisor’s core business is hotel price comparison, tours and activities through its Viator brand, and dining reservations flowing through its subsidiary TheFork. In response to increased travel demand in the second quarter, Tripadvisor spent 52 percent of revenue on sales and marketing, which was in the Expedia and Booking Holdings range.

For Tripadvisor, its marketing spend, which increased 76 percent year over year in the second quarter, came with delayed benefits in mind.

“So what you see in 2021 and 2022 is that these marketing investments have a negative impact on EBITDA in the year itself, but have a very important tailwind,” Tripadvisor Chief Financial Officer Ernst Tuenissen said August 5. “And we’ve seen that tailwind really come through this year in our repeat revenue, and in our free revenue very, very clearly.”

Vacasa Upped Its Headcount and Distribution Fees

Property manager Vacasa said its sales and marketing spend jumped 59 percent year over year in the second quarter, and it was 20 percent of revenue. The company tied the increase to a jump in sales employees (a $10.7 million rise), distribution fees paid to online travel agencies (up $6.8 million), and advertising to attract homeowners (a $5.4 million hop).

Sonder Focused on Getting to Cash Flow Positive in 2023

Sonder, which spent only 10.2 percent of its revenue on sales and marketing, the lowest among the companies we tracked, saw its sales and marketing spend rise 154 percent year over year in the second quarter. The primary reason was a $6.5 million jump in distribution fees it paid to online travel agencies to list its properties. It also notched a $1.1 million sales and marketing spend increase tied to hiring additional employees.

Sonder said the increase in fees it paid to online travel agencies was in line with revenue growth.

“While we don’t spend much on performance marketing [paid marketing on search engines like Google], we reduced our spend by approximately 70 percent month-over-month in June as we focused on the cash flow positive plan,” said Sonder Chief Financial Officer Sanjay Banker August 10.

Several online travel companies, including MakeMyTrip, Trip.com Group, Despegar, Flight Centre, and Lastminute.com Group, haven’t yet reported their June quarters.

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Tags: advertising, airbnb, booking holdings, earnings, expedia, future of lodging, marketing, metasearch, online travel newsletter, otas, performance marketing, sales and marketing, short-term rentals, sonder, tripadvisor, trivago, vacasa

Photo credit: Airbnb spent just 18 percent of revenue on sales and marketing in the second quarter of 2022. Pictured are guests in a Mexico City Airbnb.