Expedia shares hit their lowest level since November after the company posted disappointing first-quarter bookings and lowered its full-year guidance. The online travel giant blamed a slower-than-expected recovery in its vacation rental business.
The shares fell as much as 14% to $116.50 on Friday. Piper Sandler analysts cut their rating for the stock to neutral from overweight as they wrote that “bookings growth is deteriorating” while increases in margins from tech improvements “remain elusive.”
Seattle-based Expedia on Thursday posted first-quarter gross bookings of $30.2 billion, missing analysts’ average estimate of $30.5 billion. The company cited a “slower than anticipated” recovery in its vacation rental business Vrbo. That, combined with slower-than-expected growth in the rest of its consumer business, led the company to lower its full-year sales guidance to “a range of mid to high single digit top line growth with margins relatively in line versus last year.” Room night growth and revenue were otherwise in-line with estimates.
Vrbo’s recovery has been slower than expected and has put pressure on gross bookings, Expedia CEO Peter Kern said Thursday, adding in an earnings call with analysts that Vrbo has lost share to Airbnb and Booking Holdings, the parent company to brands like Kayak and Priceline. Kern also pointed to a yearslong and resource-intensive back-end update that was completed around late last year, which served to unify Expedia’s two other main brands, Expedia.com and Hotels.com, onto a single technical platform.
The company has vowed to spend a record amount on marketing this year to narrow the gap in vacation rentals with Airbnb as it emerges from its costly technical update. But the broader environment has seen headwinds as the lifting of pandemic-induced travel restrictions has led to more travelers seeking out urban adventures, as opposed to the sort of rural destinations and resorts where most Vrbos are located. Vrbo also doesn’t offer the sort of home-sharing that rival Airbnb is known for. In contrast, Expedia saw share gains in its hotel lodging business, since most of its hotels are concentrated in urban areas.
“We’ve got to spend on brand and build it, and that’s taking some time to lean back into,” Kern said on the call. “But we feel very good about the progress. It’s just a question of how far, how fast, and what’s the timing, and the seasonality differences, etc. That’s what we’re spending into this year to get it back on a growth trajectory.”
The travel industry is expected to make record contributions to the global economy this year of $11.1 trillion, surpassing even pre-pandemic spending, but online travel companies have cautioned that it will be difficult to top the strong performance during the comparable early 2023 travel season.
The recovery of the global travel market has also been uneven. Growth in the U.S. has stagnated while demand in Europe and Asia Pacific markets has been more enduring, according to analysts at Jefferies. That has hurt Expedia more than peers like Booking as most of its business is in the U.S., while Booking is more exposed to Europe.
Booking, which owns nearly a dozen travel brands, reported on Thursday first-quarter room night reservations and gross bookings that beat analysts’ expectations. The shares jumped as much as 7.9% Friday, the biggest intraday gain since August, as analysts saw past its weaker-than-expected second-quarter guidance, which it blamed on geopolitical conflict in the Middle East.