Corporate turnarounds aren't pretty, and require fortitude. Expedia expects big things in 2023, but Vrbo's tech migration will be part of the ongoing challenge.
To hear Expedia Group officials tell it, 2023 is shaping up as a year when lots — but not all — of the tough, behind-the-scenes tech work will have been completed, and the company will start to reap the benefits.
Officially, Expedia Group guided toward double-digit top and bottom line growth year over year in 2023.
But having now moved its major online travel agency brands, namely Expedia.com and Hotels.com, to a common tech platform, with vocational rent brand Vrbo up next in 2023, and with a new unified and cross-brand loyalty program in the works this year, then good things are in the offing, the company said.
“Of course, our confidence in our strategy is ultimately only possible because of the underlying technology that we have invested so much in over the last several years,” Expedia Group CEO Peter Kern told financial analysts Thursday as the company released its fourth quarter and full-year 2022 earnings. “This is what has enabled Expedia U.S. to go faster, and all of our brands and geographies, begin to ride on that same tech stack, we will expand our ability to compete and win in more places. Work that created a drag on our business in ’22 and like the migration of Hotels.com to our core platform, become big unlocks for us in ’23.”
Kern highlighted the performance of “Expedia U.S.,” a seldom-used category that was mentioned six times during the call, and that speaks volumes about 2022 because the Group downplayed some geographies and smaller brands because of the tech migration and other factors.
Expedia U.S. saw its loyalty numbers jump 300 percent in the fourth quarter compared with the same period in 2019, and it has nearly 60 percent more engaged app users, the company said.
“Of course, when you look at our all-up B2C (business to consumer) numbers, the accelerating performance of Expedia U.S. has been largely offset by our intentional de-emphasis of some smaller noncore brands or pull back in certain geographies where we did not have the right model, and of course, our much-discussed technical migration, which required significant work and like all migrations resulted in some short-term friction,” Kern said.
In addition to “severe weather” and foreign currency headwinds in 2022, the migration of the Hotels.com tech platform required engineers to focus on that transition and to sacrifice site testing and other front-end improvements.
“We expect our test velocity around optimizing our sites to grow roughly fourfold with the same resources this year as more engineers and product team members are freed up post migration, and our test can be run across our entire base of core OTA traffic,” Kern said. “In other words, we will have many more tests where the winners get deployed across a much larger base.”
With the exception of vacation rental brand Vrbo, which will still have to cope with the tech migration in 2023, Expedia Group expects its online travel agency testing of new site features to accelerate four-hold, and artificial intelligence (AI) will play a role.
“And a lot of our tests are now really more than what used to be a single test because they’re AI-driven with multi variables,” Kern said. “And so one test might be the equivalent of 10 tests.”
In the fourth quarter, Expedia Group’s net income fell 36 percent to $177 million on revenue of $2.6 billion, a 15 percent year over year jump. The company’s revenue in the quarter was negatively impact by severe weather, including Hurricane Ian, but “demand was otherwise strong and accelerating, and has been markedly stronger since the start of the year,” Kern said.
Fourth quarter booked room nights increased 19 percent to 70.8 million year over year.
Full year 2022 booked room rights jumped 26 percent to 312 million. The company notched $352 million in net income on a revenue jump of 36 percent to $11.6 billion.
Expedia Group’s fourth quarter results fell short of analysts’ expectations on gross bookings and net income.
The gross booking value of Expedia Group’s lodging business jumped 20 percent in January, officials said.
Although Expedia Group’s partnership with China’s Trip.com Group on outbound China travel is a small portion of Expedia’s overall business, China’s reopening is expecting to provide a boost in 2023, Kern said, in addition to the tech stack migration, and the expected launch of Expedia Group’s consolidated One Key loyalty program.
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Photo credit: Expedia Group CEO Peter Kern (left) discussed trends in online travel with Skift CEO Rafat Ali at Skift Global Forum on September 21, 2022 in Manhattan. Kern expects 2023 to be a turnaround year.