Q3 2024 Earnings Summary
- Strong Growth in B2B Business: Expedia's B2B segment reported a 19% increase in bookings this quarter, demonstrating robust performance across various partner segments and regions. The company believes this segment will continue to grow at healthy double-digit rates, tapping into a massive market opportunity with corporate travel agencies, offline and online travel agencies, and financial institutions.
- Positive Momentum in Vrbo and Alternative Accommodations: After overcoming migration challenges, Vrbo has returned to growth, driven by product improvements, supply expansion—including adding 1 million units from Expedia to Vrbo—and effective marketing campaigns. The addition of urban inventory and focus on underpenetrated international markets position Vrbo to capture more market share in the growing alternative accommodations sector. ,
- Advancements in Loyalty Program and Cross-Brand Synergies: The One Key loyalty program is yielding positive results, with tiered members (silver, gold, platinum) representing 30% of travelers but 50% of room nights. The program is effectively driving cross-brand engagement, with 30% of travelers redeeming One Key cash on Vrbo being new to the platform. These advancements enhance customer loyalty and can lead to increased direct bookings and marketing efficiencies.
- Vrbo had a slow start to the year due to migration issues, and despite efforts to improve product features and supply, it remains underpenetrated in international markets and is undergoing leadership changes with a new General Manager appointed.
- The integration of 1 million units from Expedia to Vrbo is still in early stages, requiring the company to figure out the right UX and design, which could pose challenges and uncertainty in returns from this move.
- The effectiveness of the One Key loyalty program is still being assessed, with the company interrogating the spend on loyalty to ensure it delivers desired returns, indicating potential issues with its impact on traveler behavior.
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue YoY Growth | Q3 2024 vs Q3 2023 | 3% to 5% year-over-year | 3.3% YoY growth (4,060Vs 3,929) | Met |
EBIT Margin YoY | Q3 2024 vs Q3 2023 | ~100 bps of deleverage compared to last year | Increased from 15.4% to 18.8% (607Of 3,929Vs 762Of 4,060) | Beat |
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Marketing Leverage and Margins
Q: When can you deliver aggregate marketing leverage?
A: We expect to see marketing leverage going forward as Vrbo and international markets return to desired levels. Excluding investments in Vrbo and international markets, we have seen leverage in our B2C business. As these businesses improve, we anticipate more marketing efficiencies. -
Vrbo Growth Acceleration
Q: What is required to accelerate Vrbo's growth?
A: Vrbo's growth can be accelerated by continuing to improve the product, expanding supply, and effective marketing. This year, we've added new features, made the app faster, and launched a successful marketing campaign with Nick Saban that drove conversions. We're focusing on underpenetrated urban destinations and international markets. A new General Manager is developing long-term growth plans to capitalize on these opportunities. -
B2B Growth and Outlook
Q: What drives strong B2B growth and how sustainable is it?
A: Our B2B business grew by 19% this quarter, only 1 point down from last quarter, driven by a massive market including corporate travel agencies, offline and online travel agencies, and financial institutions with loyalty programs. While recent elevated growth was partly due to Asia's recovery, we believe the business will continue to grow at healthy double-digit rates, even if not at the elevated levels we've seen. -
Selling and Marketing Efficiencies
Q: Can you improve selling and marketing efficiencies versus competitors?
A: Yes, we see opportunities to improve efficiencies. Excluding investments in Vrbo and international markets, we are already seeing efficiencies, particularly in Brand Expedia. We're focused on optimizing our products and supply to deliver value to travelers, encouraging repeat and direct bookings, which will drive further marketing efficiencies. We're laser-focused on this going forward. -
One Key Loyalty Program Impact
Q: How is the One Key program performing and how can it improve?
A: Since launching in summer 2023, we've been pleased with One Key's results. Tiered member deals attract 30% of travelers but account for 50% of room nights. Cross-brand redemption is strong, with 30% of travelers redeeming One Key Cash on Vrbo being new to Vrbo. We're tuning the value proposition by brand and geography, and the technology allows us to adjust the program to optimize loyalty spend. -
October Trends and Hurricane Impact
Q: How did hurricanes affect October trends?
A: We saw an impact from Hurricane Milton in October, but it was less severe than initially expected. Excluding the hurricane and other events like elections, the underlying health of the business is strong as we enter the fourth quarter. -
Integration of Vrbo Supply with Expedia
Q: Why did you add 1 million rooms from Expedia to Vrbo?
A: We moved about 1 million units from Expedia to Vrbo to expand into more urban and shorter-stay markets. This supply differs from our traditional inventory, so we're refining the user experience. This move allows customers to find whole homes and apartments in a broader range of destinations, supporting our growth strategy. -
International Market Share Regain
Q: How are you regaining share in international markets?
A: We are being surgical, analyzing each market to determine which of our brands has strong recognition, and implementing full-funnel marketing plans to regain share. This focused approach allows us to be effective where it counts. -
Alternative Accommodation Regulations
Q: Are regulatory updates in places like California affecting your alternative accommodations?
A: We work closely with local governments to stay compliant with regulations. While acknowledging a balance between local economic contributions and regulations, we believe there's still a significant market for alternative accommodations. Recent regulatory changes haven't impacted our growth potential. -
Hotels.com Performance
Q: How is Hotels.com performing post-loyalty program changes?
A: Hotels.com performance in Q3 was stable but hasn't returned to growth. The brand was significantly impacted by our migration, loyalty program changes, and international pullback. As we re-enter international markets, Hotels.com is benefiting. A new General Manager is bringing fresh perspective, and we're excited about future developments. -
CEO's Positives and Challenges
Q: What surprises and challenges have you found in your new role?
A: Positively, I've seen immense passion and brand love for Expedia, Hotels.com, and Vrbo. A challenge has been connecting our technological advancements directly to brand value propositions, especially for Hotels.com and Vrbo. However, the organization is responding quickly, and we're seeing acceleration in the consumer business, giving me confidence in the future.