Expedia Group’s financial results for the first quarter of 2021 come on the heels of major news for the online travel giant in recent weeks.
Just this week, Expedia Group sold its corporate travel division Egencia to American Express Global Business Travel, and last month, the company unveiled a significant rebrand to Expedia.com designed to capture demand as travel returns in tandem with its biggest ad spend in five years.
The company has also made a significant push around its alternative accommodations business Vrbo to attract new hosts as rentals remain a bright spot amid the pandemic.
As Expedia Group aims to differentiate its offerings and capitalize on returning travel demand, it’s focusing investment on brand marketing, vice chairman and CEO Peter Kern said in a call with analysts.
“Travel remains a study in contrasts,” he said. “For our part, we continue to invest in bolstering our technology platform and in marketing where we can best get ahead of the demand curve. Because the market has clearly shown that when people feel safe to travel, demand comes roaring back.”
Expedia Group total revenue in Q1 2021 decreased 44% to $1.2 billion year-over-year, with the group’s retail segment revenue declining 35% and its B2B segment’s revenue decreasing 62%. The slower decline in retail reflects improvement in leisure travel trends, particularly in North America, while corporate travel demand remains sluggish.
As a percentage of total worldwide revenue for Q1 2021, lodging made up 72%, advertising and media accounted for 7% and air accounted for just 4%.
Lodging revenue decreased 41% in the quarter on a 47% decrease in room nights stayed, partly offset by a 10% increase in revenue per room night. Revenue per room night benefited from an increase in the percentage of alternative accommodation stayed room nights, which have a higher revenue per room night.
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Air revenue decreased 55%, reflecting a 50% decline in tickets sold and a 10% decline in revenue per ticket.
Adjusted EBITDA for the first quarter of 2021 was a loss of $58 million, a decrease of 24% compared to Q1 2020.
For the first quarter of 2021, total gross bookings declined 14% to $15.4 billion. While trends for lodging, air and other travel products improved sequentially from the fourth quarter, lodging bookings experienced year-over-year growth.
Although Expedia Group does not break out Vrbo numbers, Kern said Expedia Group has benefitted greatly from its rental business and business in the United States, where COVID-19-related restrictions have eased.
He said booking trends are well above 2019 levels for leisure destinations including beach and mountain destinations for both vacation rentals and conventional lodging.
Marketing expenses for the quarter came in at $660 million, up from $500 million in the fourth quarter of 2020, and spend is expected to increase in Q2.
"I've mentioned in past quarters that we've taken a relatively conservative bias on how we've approached marketing ... but in the course of the first quarter, we've sort of changed that bias and moved, particularly in the back half of the quarter, toward investing in getting in front of the wave of demand we think is coming,” Kern said.
"That's taken the form of a number of brand marketing rollouts," including the new Expedia brand marketing campaign as well as a relaunch of its Orbitz brand with a focus on LGBTQ+ travelers and a push to attract Vrbo hosts.
He added that the “up funnel” push to create a direct interaction takes time compared to performance marketing. "We have to invest over time to build that, but we think it does have returns ultimately for performance marketing as the brands become more well-loved and more highly thought of.”
He said 75% of Expedia Group's SEM spend is now on a new consolidated technical and data platform compared to 15% at the end of last year.
In February, Expedia Group pulled Vrbo from Google’s vacation rental metasearch product, and Kern said it has pulled back from other vacation rental meta players over the past quarter with "excellent" results.
In April, Vrbo unveiled a campaign to target Airbnb Superhosts as part of its new “Fast Start” program. It is also rolling out an ad campaign called “Your Dream Guest Awaits” to illustrate the value of listing on the platform.
In the earnings call with analysts, Kern said: “The reality is that Vrbo hosts on average make more than Airbnb hosts on average. It’s a great opportunity for people to monetize their assets. All our stats make for a great sales story and we just need to get it out there and are spending to get it out there.”
The sale of Egencia to Amex GBT includes Expedia Group receiving approximately 14% of the combined entity - estimated at about $750 million - along with a 10-year lodging supply agreement with Expedia Partner Solutions.
Kern said the sale of Egencia fits into Kern's objective over the past year to simplify Expedia Group and puts the company in "a great position to focus on our B2C and B2B businesses and our core technology platform."
The deal is expected to close in the next nine to 12 months.