Expedia Beats Estimates With Travel Demand ‘Roaring Back’
(Bloomberg) -- Expedia Group Inc. blitzed analysts’ estimates for several growth metrics in the first quarter, buoyed by a surge in domestic travel and vacation-rental demand.
Gross bookings were down only 14% compared with a year earlier -- a significant improvement from the nearly 70% decline in the previous two quarters and better than analysts had expected. Revenue fell 44% to $1.25 billion, the Seattle-based company said Thursday in a statement, slightly ahead of analysts’ estimates. Shares climbed about 7% in extended trading.
Still, the travel industry remains a “study in contrasts,” Chief Executive Officer Peter Kern said, as demand for international and business travel and conventional lodging remain challenged. “Beach and outdoor destinations have shown robust rebounds while major cities remain muted, and some regions have been growing while others remain locked down,” Kern said. “The market has clearly shown that when people feel safe to travel, demand comes roaring back.”
After a year of pandemic-related border closures, steep revenue declines and mass layoffs, the travel sector is starting to see the green shoots of recovery. Booking Holdings Inc., the biggest online travel agency, on Wednesday reported a significant jump in the number of room-night reservations made in the beginning of the year. Analysts and industry experts expect the vaccine roll out in the U.S., which makes up more than 50% of Expedia’s revenue, will ignite a 2021 travel boom, driven largely by the alternative accommodation market.
Expedia has seen booking trends “well above 2019 levels,” Kern said on a conference call with analysts after the results were released. Gross bookings, net of cancellations, were down about 40% in January. This improved to 20% in March and continued to show signs of growth into April, Kern said.
“This is an unpredictable time,” Kern said. “Things could get worse before they get better, but we are optimistic we are seeing a lot of improvement across the globe.” The world will open up as the pace of vaccinations continues to increase, he said.
Vrbo, which competes directly with Airbnb Inc., has weathered the pandemic better than its parent as travelers sought out regional staycations and remote work getaways. Expedia doesn’t disclose Vrbo metrics, but analysts expect the unit will lead Expedia’s recovery. Cowen analyst Kevin Kopelman estimated Vrbo accounted for more than 40% of Expedia’s gross bookings value in the quarter, up from about 14% in the same period in 2019.
Expedia has “amped up” its marketing investment in order to woo successful hosts from rival platforms, like Airbnb. “We are driving it as fast as we can,” Kern said.
Truist Securities analyst Naved Khan predicted Vrbo would see “robust growth,” reflecting consumer interest in home rentals amid rising travel demand. “We estimate that Vrbo’s 2021 revenue could easily be 35% above 2019 levels,” Khan said in an interview before the results were released.
Earlier this week, Expedia sold its corporate business travel arm, Egencia, to American Express Global Business Travel. Financial terms of the deal were not disclosed. Expedia will become a shareholder and enter into a long-term commercial agreement with AmEx Global Business Travel as part of the agreement.
Expedia reported an adjusted loss before interest, taxes, depreciation and amortization of $58 million. Analysts were expecting a loss of $137.3 million. The adjusted loss per share was $2.02, beating the average analyst estimate of $2.27. Expedia’s shares are up about 25% this year, outperforming Booking and Airbnb, which were both up less than 5%.
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