Expedia faces headwinds in new short-term rental business – Skift

All recognize that alternative accommodation is a popular category, but the short-term hiring activity of the Expedia group, renamed HomeAway in Vrbo, is cooling the financial performance of Expedia.

In a statement on the first quarter results released Thursday, Mark Okerstrom, CEO of Expedia Group, said his short-term rental business of vacation homes and apartments was facing optimization problems. search engines because it consolidated some of its brands. during the last years.

Vrbo's gross bookings growth of 5% in the first quarter is well below that of its gross bookings of 46% in the first quarter of 2018.

Alan Pickerill, Chief Financial Officer of Expedia Group, said, "The platform consolidation and brand streamlining has allowed Vrbo to become our leading alternative hosting brand globally. which contributed to the further slowdown in SEO optimization. These factors, along with those of the performance marketing chains, were the main drivers of deceleration compared to the fourth quarter. [when HomeAway’s gross bookings increased 15 percent]. We expect gross growth trends in gross bookings to continue in the near term, as we track these changes and exceed high performance marketing goals. "

Pickerill added that the company "expects gross booking trends to improve later this year."

The Expedia group bought HomeAway for $ 3.9 billion in 2015, but the parent company announced that it was changing the name of its alternative accommodation division in Vrbo, which has also been announced "ver- boh ".

Expedia has announced its intention to launch Vrbo-branded sites in several new markets where it is not present and will rename Vrbo to country-specific sites in the coming year "and beyond". local websites, VRBO, and a handful of regional brands.

For the moment, the HomeAway brand and its regional short-term rental brands, including Stayz.com.au in Australia and Abritel.fr in France, will remain and travelers can still book on these sites for the moment.

HomeAway, founded in 2005, bought VRBO in 2006. According to Expedia, consumers are more likely to remember the name Vrbo than HomeAway, and that Vrbo is easier to pronounce than the acronym VRBO. Expedia has operated both HomeAway and VRBO in the United States, and VRBO has far outstripped HomeAway at the national level, officials said.

Expedia had high hopes for HomeAway when it acquired the company in 2015 with the idea of ​​competing with Airbnb and Booking.com for alternative accommodation. Along the way, during the restructuring of its short-term rental business, Expedia made a series of changes to the business model, such as adding pbadenger charges and minimizing subscriptions for reservation-based payments. . HomeAway missed a few performance targets and proved very difficult for the parent company.

The chart below illustrates the contributions of HomeAway, now called Vrbo, to gross bookings of Expedia Group (7%), sales (5.5%) and current income (7%) from 2016 to 2018.

The disappointing performance of Vrbo in the first quarter led an badyst to question whether the problems were due to the general slowdown in the short-term rental category or whether it was specifically Expedia.

Okerstrom said the deceleration of Vrbo depended "largely on societal factors. If you take a look at where we really focus our efforts, the Vrbo brand in the United States was good double-digit growth and healthy growth. And really, what's causing the deceleration is a combination of the brand rationalization we've been doing, the redesign of the platform we've made, and the more difficult compositions. "

Google plays an unwanted role

Okerstrom added that HomeAway and VRBO have traditionally relied on search engine marketing and have posed some of the problems at Google's door.

"Google offers absolutely free and goes from paying to private, as is the case for its Hotel Ads products," Okerstrom said. "What we did with Vrbo, of course, was above that. And Vrbo and essentially HomeAway and all the brands they own internationally are traditionally dependent on SEO. And as we consolidated our platforms, the link structure of these brands was fundamentally changed, which ultimately resulted in greater disadvantages. "

The entrance to Marriott Homesharing is a positive thing

Speaking on the announcement of Marriott's entry into the timeshare industry, Okerstrom said that the French hotel company Accor was also interested in the short-term rental market.

"I think it's very interesting," said Okerstrom, referring to hotel chains that are entering the arena of alternative accommodations. "I think that alternative accommodation is one that is ripe for a certain degree of professionalization. If you look at big hotel operators and big hotel chains, they're really good at these things and they have a great customer experience. So, I think that in general, it could be very good that the industry adds this type of professionalism to the space. "

When asked to comment on Expedia's new distribution and marketing agreement with Marriott, Okerstrom rejected the idea that Expedia was awarding commission concessions to major chains.

He said that Expedia had made it clear that it was "no longer resetting our pay rates" with major chains.

"And so the dialogue is far from us in relation to you and how can we redistribute this cake to allow us to really extend the cake," Okerstrom said. "How can we create new sources of value and both participate in ways that generate benefits for both of us?"

Expedia Group revenues increased 4% in the first quarter to $ 2.6 billion. According to Pickerill, "trends at Trivago and the Easter shift had a negative impact on revenue in the quarter." For the first quarter, Expedia reduced its net loss to $ 103 million. A year earlier, this loss was greater: $ 137 million.

Night growth of the slowed room

Expedia's overnight stay growth in the first three months of the year increased 9%, a deceleration from 15% the year before.

Trivago and Metasearch, controlled by Expedia, generally "constituted a significant barrier to us when we pulled out. [in marketing spend] and as they somehow reset the business, "said Pickerill. "If this goes as planned and they start to normalize at the end of the year, regain growth and simply because of the benefits we have there, the situation should start to improve, and we should benefit from it. in the second half of the year. "

See the full article