Q4 2023 Earnings Summary
- Conversion improvements and growth expected at Vrbo: Expedia has completed the migration of Vrbo to the new platform , with conversion rates returning to previous levels and expected to improve further. With the product improving rapidly and marketing efforts ramping up, Vrbo is poised to drive growth in 2024.
- Cost savings and margin expansion through streamlining expenses: Expedia is focusing on streamlining expenses by deprecating redundant systems and finding cost savings across the board. This is expected to drive operating efficiencies, reduce overhead expenses, and improve margins in 2024.
- Leveraging AI and ML for personalized customer experience and efficiency: With One key launched and replatforming complete, Expedia is poised to drive efficient growth by utilizing AI and machine learning to personalize the customer experience. This is expected to enhance customer retention, increase direct traffic, and contribute to overall growth.
- Vrbo's performance has faced challenges, including conversion degradation during the migration and weakness in January. The recovery is taking time, with a lag in ramping back up marketing efforts, potentially impacting short-term revenue.
- Competition in alternative accommodations is intensifying, especially in urban markets where Vrbo is not heavily weighted, while competitors like Airbnb and Booking.com are gaining share. Expedia has not pivoted to urban vacation rentals, potentially losing ground to competitors.
- Leadership transition may introduce uncertainty, as CEO Peter Kern is stepping down in May, acknowledging that the transformation was bigger than expected and he had doubts a year ago. The success of the new CEO in executing the company's strategy remains to be seen.
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Vrbo Performance Outlook
Q: Why is Vrbo still weak, and when will it recover?
A: The migration to the new platform caused expected conversion declines, but we've regained much of that, and conversion is basically back to prior levels. We pulled back on marketing during the migration but are now investing again. We expect Vrbo to grow throughout the year, with each quarter better than the last. The product improvements and increased marketing should drive growth. -
One Key Loyalty Program
Q: Is One Key driving retention and cross-shopping?
A: Yes, we're satisfied with early indicators. Cross-shopping is good, and repeat rates are improving, especially among customers who hadn't earned rewards before. However, it's still early days, and benefits will build over time due to travel cycles. We're seeing members earn One Key Cash on Vrbo and beginning to redeem it across brands. -
CEO Transition
Q: Why is Peter Kern stepping down now?
A: Peter came in to right the ship and set the company on a good path. The transformation became a bigger job than expected, but significant progress has been made, and the company is ready for new leadership. There's never a right time, but this is a good time to transition. -
Growth and Margin Guidance
Q: Can you clarify growth and margin expectations for 2024?
A: We're planning to grow relatively in line with this year's growth rates, about 9.5%-10% in GBV and 10% on revenue, with margin expansion of approximately 75 basis points. This applies to both GBV and revenue. -
Marketing Strategy
Q: Are you pivoting brands towards One Key in marketing?
A: In the U.S., we're still advertising our core three brands—Expedia, Hotels.com, and Vrbo. We're exploring whether to advertise them as one or separately for optimal penetration. Internationally, we're focusing on maintaining one brand where possible. Our unified platform allows us to add services across brands, enhancing our marketing efficiency. -
Streamlining Expenses
Q: What's the strategy behind streamlining expenses?
A: As we exit the transformation phase, we're deprecating legacy systems and redeploying resources, leading to cost savings across the P&L. This includes reductions in cost of sales and overhead as we move through the year. -
Alternative Accommodations Market
Q: How is the health of the alternative accommodations industry?
A: The industry remains healthy post-pandemic, though urban areas have performed better, which isn't our focus. We're confident in our core markets and see opportunities to share inventory across brands. We haven't lost ground to competitors and are poised to accelerate with our improved product. -
Product Innovation and AI
Q: How will product innovation and AI drive growth?
A: With One Key and replatforming behind us, we're excited about leveraging machine learning and AI across the product experience. This allows for personalized experiences and faster innovation. We're focused on enhancing customer experience without significant new investments. -
Impact of Replatforming
Q: Have replatforming and One Key shown impact yet?
A: We're beginning to see positive indicators like increased cross-shopping and repeat rates. The Vrbo migration lets us accelerate improvements, benefiting from shared testing across brands. While early, these initiatives are building towards greater customer stickiness and revenue over time. -
Vrbo Business Disclosure
Q: Can you provide details on Vrbo's contribution to bookings?
A: We haven't recently disclosed Vrbo's percentage of our business. Though at acquisition, numbers were provided, and you might extrapolate from growth rates. There's nothing additional to share on that front today.