Expedia Group embraces AI, banks on loyalty program

Consumers have so far shaken off economic uncertainty and continued to travel, Expedia Group CEO Peter Kern said Thursday during the company’s quarterly earnings call. Expedia Group had its highest-ever first quarter revenue of $2.7 billion, an 18% increase from the same period last year.

“Overall, we are pleased to see broad travel demand remains strong in what appears to be a more structural post-pandemic environment of people prioritizing travel above most other categories of spend,” Kern said. “This has held up despite inflation and recession worries and even more recently, bank system concerns.”

Expedia Group is continuing to invest in its strategy of acquiring and retaining “high-value loyalty members and app users” across its three leading brands: Expedia, Hotels.com and Vrbo.

The Seattle-based company saw its active loyalty member base for its core online travel agency brands grow more than 25% year-over-year, and the percentage of gross bookings coming through the app roughly doubled from what it was in 2019, Kern said.

“This continued growth in our base of valuable [customers] obviously bodes very well for our future,” he said.

Expedia Group plans to launch One Key, its customer loyalty program, across its “big three brands” in July in the United States. The company will eventually roll out the program globally.

“We are going to envelope … millions of customers in Vrbo that used to live outside our loyalty plan that will all of a sudden be able to spend into our loyalty plan,” Kern said. “And likewise, all of our existing loyalty members in Expedia and Hotels.com will be able to use their points against a vacation rental.”

As part of the company’s long-term strategy to put its weight behind its big three brands, Expedia Group has “somewhat de-emphasized” its smaller brands, Kern said.

“We will finally be in position for all of our business to accelerate their velocity of innovation and deploy more traveler features as widely as possible,” he said. “In particular, I’m excited about the power to deploy AI and machine learning to all corners of our product to enhance the customer experience and move towards our north star of true personalization.”

The company launched the Expedia plugin for ChatGPT and integrated ChatGPT in its iOS app. Some ways the company uses AI include: to customize sorting and filtering options for customers; deliver price predictions and enable comparison shopping; and to make customer service more efficient, according to Kern.

“It has yet to be seen how impactful large language models will be in facilitating travel shopping, but for us this is just one step in a journey to bring the best technology to our members and partners at an accelerated pace,” he said.

Kern said he’s talked for a number of quarters about Expedia Group’s platform journey and in particular about last year’s drag on business resulting from the migration of Hotels.com to the Expedia brand platform. Hotels.com is now back in growth mode, he said.

Expedia Group has also been “innovating a lot on air,” Kern said. “We’ve made huge progress on it as a product,” through price tracking and predictions, improved search speed and the use of AI to suggest the best options for customers.

Positive Q1 figures

The company saw an acceleration in international and big-city travel in Q1, Kern said. It also saw a rise in hotel demand in urban areas, which was offset by a flattening in pandemic-era demand for extended stays at the beach or in the mountains.

First-quarter total gross bookings were $29.4 billion, a 20% increase year-over-year. Lodging bookings at $21.1 billion were at record levels.

Adjusted EBITDA rose 7% year over year to $185 million. B2B revenue was $668 million, an increase of 55% over the same period in 2022.

For the quarter, selling and marketing expenses were up from $1.3 billion in Q1 2022 to $1.7 billion in the same period this year.