Expedia CEO Peter Kern said that sharing economy brand Vrbo was “having a moment” as he reported the group’s third-quarter results.
The company said that it was seeing travel trends “stabilising” although Europe was coming under pressure.
Kern told analysts: “You've seen alternative get an outsized share relative to where it was and we've been beneficiaries of some of that.
“With Vrbo, we believe it's really good for the brand and people are getting a lot of exposure to that use case seeing how nice that vacation can be. The question longer term is, we’ve historically had deficit in cities …where Airbnb has made great hay, although it hasn't helped them during Covid. Likewise Booking has done a nice job with city-based inventory.”
Commenting on the future of demand for the homesharing product, Kern said: “I don't think it means that people will never go back to hotels, but I think it helps us relative to Airbnb. And we think it bodes well both because we brought in a lot of new customers and we believe those customers will have long-term value for us.”
The company reported room night growth down by 58% on the year, with adjusted Ebitda down 67% to $302m.
Lodging revenue decreased 52% on a 58% drop in room nights stayed, partly offset by a 14% increase in revenue per room night. Revenue per room night benefited from an increase in the percentage of room nights contributed by Vrbo, which had a higher revenue per room night than the rest of the lodging business. ADRs across the lodging business increased by 8%.
Looking ahead, the group said that it expected fourth-quarter adjusted Ebitda to be negative, with CFO Eric Hart describing the period as one which, historically, had lower revenue and profit, but also commenting that bookings had “essentially plateaued relative to the recovery over the summer months”.
Hart added: “This recovery is going to be a series of many stories. Hotel [has] been flat for the last couple of months. But if you de-average that number, what you end up seeing is that there are areas that are flat to declining, and there are areas that are gradually improving.
“Europe has been more challenged and they've got even more challenged over the last week or two, just given the increasing lockdowns that are reoccurring, whereas the US is had a more steady increase over time on the hotel side.
“We've got international versus domestic. And we wait in some regions of the world in one versus the other. And that's the series of many stories that will make up how we see overall the business is performing.”
Commenting on the traditional hotel business, Kern said that the company had been building its B2B business with Expedia Partner Services and had expanded its wholesale distribution partnership with Marriott International.
He added: “There's much discovery going on and price shopping and there seems to be more direct booking in the smaller market independent hotels as people are calling to make sure they're open, make sure that safety protocols are happening.
“Mix-wise, we've mixed towards a lot more direct traffic. Bookings are up considerably. Direct is up considerably.
“Conversely, the places where we typically have the most share is things like big urban markets, international travel, international packaged travel have obviously been among the most impacted.”
When asked about discounting, Kern said: “On the hotel supply side, we have obviously among the most competitive hotel supply in the world. There's not a lot of discounting that is unique to them. The hotels are discounting, but I don't think their discounting is unique to us.”
As of the end the third quarter, the company had unrestricted cash and short-term investments totalling $4.4bn.
Insight: Expedia Group has fallen onto its feet with Vrbo, which, as Kern noted, doesn’t have the city supply of Airbnb. The question for it now is can it make the hay that its rival has and move into the cities. Kern was in no hurry to, although the suspicion amongst observers is that, should the pandemic lead to recession, there will be an awful lot of city homeowners looking for help with their mortgages, giving both Vrbo and its rivals the chance for more supply.
Elsewhere in the business Expedia benefitted from its focus on North America, which has so far avoided the kind of lockdowns which have blighted Europe and continue to do so - we await Booking Holdings’ results to see how things have fared on the flip.
Kern was gracious enough to talk about working with the hotel sector, rather than rubbing the market’s nose in their increased demand for the OTAs over the summer months as some have done. Hilton’s Chris Nassetta told analysts that the company was moving back to building direct bookings, despite the mix shift to lower-priced leisure travel and was “learning new skills”. Expedia is hoping that he won’t be learning too many and still needs its help.The Vrbo spike may have been a case of right place, right time. The business of hotels is still a core concern.