Expedia’s Kern: Focus is now on faster growth fueled by years of tech work

With its tech migration and OneKey launch in the rear view, Expedia Group CEO Peter Kern said the company is now well positioned to drive even “faster and more profitable growth” in 2024 – a bold statement coming in tandem with the announcement of record revenue and profit figures in the third quarter of this year.

In a call with financial analysts to discuss the company’s Q3 results, Kern repeatedly expressed excitement about the opportunities that the cross-brand loyalty program and unified technology platform will create in terms of efficiency and driving growth for the company’s three primary brands – Expedia.com, Vrbo and Hotels.com.

“Our high level strategy is not going to change – best products, best loyalty program, best marketplace and best service,” Kern said.

“But instead of spending most of the year doing surgery on our own business, we’ll be focused on growth, innovation and efficiency.”

Kern acknowledged the effort to get to this point took many years and the company had to give up “many short- term opportunities,” but he said it is now in a position to go “back on offense.”

“No one in travel is innovating faster than us, and with so much important platform work behind us … we will out-innovate in the space for many years to come.” 

Specifically Kern said he expects to see Vrbo’s share of bookings in the vacation rental sector to improve, in part due to the “core differentiation” that OneKey provides.

“It allows all our members across Expedia to have the option to use OneKey cash on Vrbo … it’s a way to pull a lot more customers into Vrbo, it’s a way to make Vrbo decidedly better as a value proposition than its competition,” he said. 

But for Q3, the technology migration process did create a “conversion drag” for Vrbo. According to Expedia Group CFO Julie Whalen that, along with the impact of the wildfires in Maui and a shift in demand to more urban rentals, pulled down the company’s growth in overall lodging bookings. While its hotel business grew 14% in Q3 compared to the same quarter of 2022, total lodging gross bookings – which includes Vrbo’s rentals – came in just 8% up year-over-year. Still, at $18.5 billion it marked the company’s highest gross lodging bookings for any third quarter.

Record B2B growth

Along with the new tech stack and OneKey program, Expedia Group has been prioritizing growth in its B2B business, where the focus is on operating private label and cobranded programs to sell travel through third-party branded websites.

In October the company announced several new B2B partners, starting with a string of travel companies in Asia Pacific and a few weeks later with news it is working with the Air Miles rewards program and Afterpay, a buy now, pay later provider in Australia. 

The focus on B2B with new clients such as those, as well as Mastercard that came on board in May and Walmart in July, is paying off.

In the third quarter, Expedia Group’s B2B revenue was $995 million, up 26% year-over-year and a record for the company. 

Kern said the company is continuing to add new partners and increase “wallet share” with existing ones, particularly in China where Expedia Group powers some of the offline and online travel agents. Kern said they have seen 150% jump in demand from those partners, primarily due to a surge in intra-China and intra-Asia travel. 

“We are still finalizing plans for next year … but in terms of double digit growth we are confident the B2B business can continue to grow,” Kern said. 

When asked about Expedia Group’s work with generative AI such as ChatGPT, Kern said the company has recently begun highlighting the ChatGPT tool that has been part of the Expedia website and app since April to users and as a result it is seeing “much more engagement” with it. But, he acknowledged, it is still “early days” and is not yet having a noticeable impact on conversions or revenue. 

Beyond that, Kern said the company is still in the midst of a “lot of discovery” to determine how best to use the technology, but that he does view “generative AI as a bigger story for us long term.” In September, the company announced several new features using generative AI, such as the ability to answer questions about a property’s amenities and services by using the technology to pull details from user reviews.

Both revenue and adjusted EBITDA in the quarter were records for the company. Revenue came in at $3.9 billion in Q3, up 9% compared to the same period in 2022 while adjusted EBITDA in the quarter was $1.2 billion, up 13% year-over-year. Sales and marketing expenses in the quarter were $1.85 billion, up 11% compared to Q3 2022. Whalen said this was primarily due to increases in commissions paid in the B2B business.

The company also announced it has completed a record $1.8 billion in share repurchases year-to-date and now has a new $5 billion share repurchase authorization from its board.

“We have confidence we are on the right path, and there is a huge opportunity in front of us,” Whalen said.