Expedia reports double-digit growth in key metrics in 2018, continues international push

Expedia Group finished 2018 on the upswing, reporting double-digit growth in bookings, revenue, adjusted net income and adjusted EBITDA for the full year compared to 2017.

The diverse online travel company reported gross bookings increased 13% year-over-year to nearly $100 billion for 2018.

Revenue grew nearly as much – 12% - compared to 2017 to $11.2 billion, split nearly evenly between domestic and international growth. Adjusted net income was up 33% and adjusted EBITDA was up 15%.

There are now more than one million properties on Expedia Group’s core lodging platform. About 200,000 of those were added in 2018, roughly twice the amount added in 2017.

More than 370,000 of the properties on the platform are integrated from HomeAway listings – a fraction of that brand’s total of more than 1.8 million online bookable listings.

In its earnings release, the company reports the increase in gross bookings was driven primarily by growth in Brand Expedia, HomeAway, Hotels.com and Expedia Partner Solutions.

HomeAway was also the big driver of revenue – up 20% in the fourth quarter compared to the same period a year earlier and up 29% for the year.

Lodging makes up the bulk of the Expedia Group’s revenue, accounting for 69%, with advertising and media bringing in 10%, air 8% and all other revenue accounting for the remaining 13%.

Global outlook

In a call with analysts to discuss the results, Expedia Group president and CEO Mark Okerstrom highlighted the company’s focus on becoming locally-relevant in markets around the world.

While in the United States and Canada, Expedia Group accounts for 13% of the total travel market, in other parts of the world it is much less visible. It owns just 3% of the EMEA market and 2% in both Asia Pacific and Latin America.

Okerstrom says they are working aggressively to change that, starting with delivering better products and services for travelers in those parts of the world.

“We’ve been, up until 15 months ago, going with really much more of a land-grab strategy where we were expanding simultaneously, 30 to 60 countries around the world, depending on what brand you are looking at,” he says.

“The approach now is really this focused strategy… making sure we have incredibly easy to use websites that have great descriptions and photos, all translated into local tone of voice, promotional offers that talk about things that are locally relevant in a similar way that we do in the U.S.

"We’ve got all of the lodging and inventory on our sites, we’ve got local payment types and then we layer on good marketing with locally-relevant messages, both performance marketing and brand channels. That’s the recipe for success.”

Direct business

The company says investments in its mobile strategy are succeeding in driving growth and engagement.

Across its brands, Expedia Group says more than one in three transactions were booked on mobile in 2018 and for Brand Expedia and Hotels.com there was a nearly 50% increase in app transactions in 2018.

When asked about whether figures from a few years ago that the company brings in about two-thirds of its customers through direct, proprietary channels – such as its apps - chief financial officer Alan Pickerill says they do not have an update to report at this time.

He did acknowledge they look to balance customer acquisition through paid search channels such as Google and metasearch while providing a quality product and service so repeat customers will buy direct.

Okerstrom says the paid marketing is an essential driver for customer acquisition, particularly in new markets, but they continue to work to drive direct business.

“It’s an overall formula of, in the U.S. and our core markets where we are locally relevant, very strong direct, proprietary channel booking volume,” he says.

“In international markets less so, but always improving, and the playbook is essentially to make them all look like the U.S. And we track those metrics very closely in terms of repeat customer usage, new customers versus existing customers, cost of customer acquisition, etc. And generally we feel very good about the trends we are seeing there.”

For 2018, adjusted selling and marketing expenses, which includes search engines, as well as TV, radio and print advertising and affiliate program commissions, were up 12% over 2017.

The company says Expedia Partner Solutions, Brand Expedia and Hotels.com accounted for the majority of the increase in direct costs.

European unease

When asked whether the company is concerned about the coming year due the “macro environment” in Europe, Okerstrom says that while the travel market is “somewhat counter-cyclical” and ended 2018 in a “very stable and healthy state,” there is still concern.

“We have seen a drop off in U.K. flight bookings – both outbound as well as inbound. We had expected uncertainty around Brexit and just overall uncertainty in Europe. [But] we are a very global business, so we are broadly diversified across all of these movements,” he says.

“As we sit here right now, particularly as we look at Europe, there is a little bit more uncertainty in the air.”

* Check out our interview with Okerstrom during The Phocuswright Conference 2018 in Los Angeles.