May 10, 2023

Traveler Preferences Shift Away From Long-Stay Beach and Mountain Vacations, Expedia CEO Says

Company Reports of 21.1 Billion Lodging Bookings in First Quarter

Strength in travel demand driven by an increase in international travel and a growing desire for major city destinations has resulted in record lodging bookings for Expedia Group in the first quarter.

During the company's first-quarter earnings call, Expedia Vice Chairman and CEO Peter Kern told analysts and investors the company achieved a record quarter for lodging gross bookings, free cash flow and revenue.

"Throughout the quarter, we saw strong consumer demand with acceleration in international and big city travel [along with] more of Asia reopening," he said. "The reemergence of major international cities has meant an increase to hotel demand offset in part by flattening demand in vacation rentals as travel demand mix [shifted] to shorter-stay, urban destinations over extended beach and mountain trips. Similarly, air has continued to [lean] towards international travel and away from COVID-era concentration on domestic."

Kern added that broad travel demand remains strong, and the shift in travel preferences appears to resemble a "post-pandemic environment."

Consumers are also prioritizing travel above most other categories of spend, he added.

"This has held up despite inflation and recession worries, and even more recently, bank system concerns," he said.

During the first quarter, Expedia recorded total gross bookings of 29.4 billion, which is up 20% compared to first quarter 2022. There was sequential acceleration in the year-over-year growth rate from the fourth quarter as well, said Executive Vice President and Chief Financial Officer Julie Whalen.

"Growth was driven primarily by total lodging gross bookings, which grew 19% versus last year, and reached a record quarterly level of 21.1 billion," she said. "In our hotel business, we saw significant growth from our [business-to-business] segment, driven by strong demand in" the Europe, Middle East and Africa region and Asia-Pacific.

Whalen added that the increase in flexible work-from-home policies introduced by companies during the pandemic has led to an increased demand in urban markets and a reduction in length of stay.

"While these trends are helping our hotels business, the same trends are also putting some pressure on our VRBO [Vacation Rental by Owner] business," she said. "Yet this pressure was far outweighed by our hotels [business] strength, enabling us to maintain total lodging bookings at record levels."

Strength in air bookings, both in number of tickets sold and air ticket price for domestic and international, held strong during the quarter compared to first quarter 2022. This momentum is aiding in a recovery in international air travel that's close to 2019 levels, she said.

Through Expedia's business-to-business initiatives, Kern said he expects to reach pockets of demand that the company has yet to reach or doesn't reach well.

"That might be geographical. China, for example, where we expect a good rebound there and we have a nice book of business with partners in China. Or it might be a loyalty program in a market we're already in," he said. "That business definitely gives us ways to participate in travel economies that we are not otherwise going head to head on the [business to consumer] side."

By the Numbers

During the quarter, Expedia achieved revenue of $2.7 billion, an increase of 18% in comparison to first quarter 2022. Lodging revenue was $2 billion.

Its adjusted earnings before interest, taxes, depreciation and amortization was $185 million. Free cash flow for the quarter was $2.9 billion.

As of press time, Expedia's stock was trading at $92.86 a share, up 6% year to date. The NASDAQ Composite Index was up 1.2% for the same period.

Copyright 2023 CoStar Group. All rights reserved. From By Dana Miller, Hotel News Now.

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