With competitors issuing gloomy forecasts, Expedia Group (EXPE, Financial) saw an 8% rise in its stock despite a bearish Q3 and lowered FY24 forecasts. Recently, Airbnb (ABNB, Financial) and Booking Holdings (BKNG, Financial) highlighted a rapid demand decline starting in July, which affected their quarterly forecasts and set the stage for EXPE's Q2 report. Investors are focusing on EXPE's internal successes and the positive impact of its new CEO, Ariane Gorin, who took over in May.
- EXPE's Q2 performance matched its peers with solid headline numbers. The company grew its bottom line by 21% year-over-year to $3.51 per share on a 6% revenue increase to $3.56 billion. Gross bookings also grew by 6%, an improvement from the 3% growth last quarter, while room nights increased by 10%, indicating a healthy travel environment.
- Vrbo showed substantial improvement in Q2, contributing to EXPE's bookings growth. Other segments like advertising and B2B also saw a 20% bookings growth. Traffic growth across EXPE's core brands—Expedia, Hotels.com, and Vrbo—accelerated by around 500 basis points sequentially, supporting a nearly 400 basis point jump in the consumer business, which saw a 1% increase in gross bookings year-over-year.
- Vrbo's recovery was notable, given its previous drag on quarterly results due to minimized marketing spend during its technical migration. The success in Q2 was driven by higher marketing spend and improved supply. Management noted that while there's still work to be done, they are excited about Vrbo's early success.
- Looking ahead, EXPE faces turbulence starting in July, with macroeconomic demand slowing, consistent with ABNB and BKNG's remarks. Although average daily rates (ADRs) held steady last month, they were affected by FX headwinds and consumers opting for lower-priced properties. Air ticket prices also faced pressures.
- EXPE expects Q3 bookings and revenue growth of 3-5%, a slowdown from Q2. For FY24, EXPE projected bookings growth around 4%, at the low end of its previous mid-to-high-single-digits forecast, a decline from the 10% posted in FY23.
EXPE's Q2 report was solid, but its guidance mirrored the industry challenges already highlighted by peers, softening the impact. The quarter had several positives, especially regarding Vrbo's recovery. While travel demand may remain sluggish due to lingering inflation effects, EXPE's diverse range of travel products offers some defense, and the headwinds from its technical migration are mostly behind it.
