A slight improvement in May and June was not enough to offset
the near elimination of revenue and bookings for Expedia Group in the beginning
of the second quarter of 2020.
Overall for the three months ending June 30, gross bookings
were down 90% compared to the same period in 2019, and revenue was down 82%, to
$566 million from $3.2 billion last year.
In April, cancellations exceeded new bookings, but by May and
into June, as some regions began to see improvements in their COVID-19 statistics
and some countries lifted travel restrictions, bookings turned positive, led
by activity in Vrbo’s alternative accommodation business.
In a call to discuss the results with analysts, CEO Peter
Kern says the uptick in business “speaks to humanity's demand and desire to
travel,” but now business is leveling off and the recovery will continue to be “bumpy”
– and dependent on what happens with the COVID-19 virus.
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“In general July has plateaued, cancellation rates have stayed
consistent, so we haven’t seen a real rise in those in July. So I think the world
has sort of stabilized here, and we’ll see what the next few months bring in terms
of restrictions, virus growth, etc., and I think that will largely tell the
tale,” he says.
As a percentage of total worldwide revenue, lodging
accounted for 86% in the second quarter. But while the number of room nights
stayed dropped 81%, lodging revenue dropped just 78% because of a 15% increase
in revenue per room night due to a higher percentage of rooms coming from Vrbo
where rates are higher than other lodging options.
It was a different story for air.
Due to higher-than-anticipated cancellations of previous period
bookings and cash refunds to customers, air was a 12% detriment to revenue in
the second quarter. Air tickets sold dropped 85% in the second quarter compared
to the same period in 2019.
Advertising and media revenue accounted for just 4% of total
revenue in the quarter and dropped 91% due to declines at Trivago and Expedia
Group Media Solutions.
Referring to Vrbo as “a great driver and the strongest part
of our story,” Kern says it has been valuable not just in the volume of
bookings but also because a higher percentage of those bookings are coming
direct.
“Many of us retrenched, got out of competitive advertising and
out of the auctions to a large extent when things got really bad in March and
April. We have been wading back in with all our brands but much more delicately
with Vrbo because, candidly, Vrbo has been the beneficiary of a huge amount of
direct traffic and essentially organic traffic,” Kern says.
“So the mix of business has been extremely profitable on a
relative basis for Vrbo, and that has been terrific. We are not against using performance
marketing at Vrbo, and we certainly are trying to use it deftly, but our mix
and our returns on marketing are at massively higher levels that they were
historically running in, call it, late-2019.”
In the second quarter, Expedia Group spent just $296 million
on selling and marketing, compared to $1.6 billion in the same period last
year.
Adjusted EBITDA in the second quarter was down $436 million,
compared to a gain of $566 million in the second quarter of 2019.
But Kern says the second quarter numbers are not “terribly
telling” and it would be a “waste of energy” to try to dissect them because
Expedia Group is simply a reflection of what is going on at the macro level
worldwide.
Instead Kern says he is focused on the internal work Expedia
Group is doing to simplify its structure and accelerate innovation, work he is confident
will put the company in a good position as the travel industry recovers.
“We are keenly focused on our long-term fixes and strategy
and less focused on the day-to-day tactics of finding another dollar in the
marketplace,” Kern says.
“It doesn’t mean we don’t care; we just think there is so
much more upside in doing the really foundational work that we need to do.”
Examples, he says, include the
move in June to eliminate the HomeAway brand in the United States and to consolidate the vacation rental business in the Vrbo portfolio – something that
was originally not scheduled to take place until 2021.
Expedia Group also consolidated its European car rental business
into Brand Expedia and sold two businesses
it bought in 2018, Pillow and ApartmentJet.
Kern says the company is also focused on helping its suppliers
get through this crisis, as evidenced by the partner
recovery program announced in May that gives $250 in marketing credits to
participating hotels and a $25 million fund for destination partners. Expedia
Group says the program has now been rolled out to partners in 80 countries.