Once again in the fourth quarter of 2020, Vrbo was a relative
bright spot in Expedia Group’s financial report, with most of the vacation rental site's bookings
coming direct through Vrbo.com.
That’s part of the reason Expedia Group CEO Peter Kern
says the company has removed Vrbo from Google’s vacation rental metasearch product.
“We are very sharp-minded about [performance marketing]
in the sense that we are happy to invest in anything that drives ... good
revenue and good profit, and we are not keen to continue on a path of just
continuing where investment was not productive,” Kern says in a call with analysts
to discuss the company’s 2020 full year and fourth quarter financial results.
“We didn’t find investment in the Google vacation rental
product particularly incremental, we didn’t think the customer experience was particularly
valuable and we are of course also having a period where we are seeing great
direct traffic for Vrbo. So we found other ways, and I’d argue more profitable
ways, to drive traffic.”
Kern says overall the company continues be conservative on
performance marketing, as lockdowns and other closures have caused cancellation
spikes that can make that strategy “very unattractive very quickly.”
Marketing expenses came in at $500 million in the fourth
quarter of 2020, down 60% year-over-year, and $2.5 billion for the year, down from $6 billion in 2019. Kern says
most of that is invested in brand marketing – particularly for Vrbo and Expedia
Group’s other alternative accommodation brands around the globe such as Wotif
in Australia.
“We are leaning into those and seeing good growth across all
our alternative accommodation brands,” he says.
“Longer term ... we
are also intending to drive alternative accommodations through our OTA brands ...
and that will be the way we attack markets where we don’t have an existing Vrbo
or other alternative accommodation brand.”
Kern says there is an opportunity to sell alternative
accommodations through B2B partners, but that is a distribution channel that is
“not currently piped.”
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Also on the topic of marketing, Kern says Brand Expedia will
roll out a new campaign this spring focused on attracting customers who are
interested in booking complex trips.
“We think there is a big opportunity there, and the brand has
not sufficiently landed that message over the years. So we are optimistic about
our new approach to that,” Kern says.
Financial details
Expedia Group revenue was $920 million in the fourth quarter
of 2020, down 67% compared to the same period in 2019 when it came in at $2.7
billion. Adjusted EBITDA for the quarter was a loss of $160 million compared to
adjusted EBITDA of $478 million in Q4 2019.
For the fourth quarter of 2020, total gross bookings
decreased 67% year-over-year.
“That did moderate toward the holiday season, and at the end
of the fourth quarter we saw that moderate into the high 50s down, and that improvement
has seemed to continue through January. And in the latter part of January we
have seen down in the high 40s, so the trends are generally good, although very
bad overall, but going in the right direction,” Kern says.
“But I would caution everybody that we continue to expect it
to be bumpy as this is the story of a thousand different geographies.”
Kern says the two positive drivers for the company have been
Vrbo and the fact that Expedia Group has a strong presence in North America, where
generally people have been able and willing to travel more than in some other
countries.
For the full year, revenue came in at $5.2 billion compared
to $12.1 billion in 2019 – a drop of 57%. And adjusted EBITDA was a loss of
$368 million compared to adjusted EBITDA of $2.1 billion in 2019.
When asked if the company might be exploring any mergers or
acquisitions, CFO Eric Harts says, “We are certainly out and having conversations
and seeing what might be opportunistic, if you will, but right now I would say
we are primarily focused on ourselves.”
Kern adds, “Our historical M&A [mergers and acquisitions] was ... successful. Also
it’s what made us as complicated as we were as a company, and we are keen to make
sure we don’t make those mistakes again.”
Other initiatives
Kern says an important focus for the company continues to be
its redesign of its tech platform.
“This is an area fraught with opportunity for us. It will be
years of mining that opportunity,” he says.
“2021 is an important year, where we expect to have
significant delivery on important steps forward in simplifying our tech platform ...
and we are keenly focused on turning ourselves into a tier-one tech company ... [to
solve] consumer problems and our business partners’ problems.”
Kern also highlighted that company has reset its mission,
purpose and values, built on the concept of “travel as a force for good.”
“We want to bring that to everything we do. .. and in doing that
we also acknowledge as a company that what we do has a tax on the environment.
And we are refocusing ourselves on the tax that travel creates on the environment,
particularly and initially around tools and information to help our travelers and
help our suppliers make better choices to drive better outcomes for the environment.”
He adds that Expedia Group has made “some bold, ambitious
goals for ourselves around diversity and inclusion.”
Kern says these goals relate both to its workforce and to
how it can support diversity and inclusion in travel.
“There are many people who have challenges in having
successful travel outcomes,” he says.
“We have not done enough to help all people in that. And we want
to drive that through everything we do, every time we roll a product out, every
time we think about building a product and a consumer experience.”