Expedia Beats Estimates With Growth in Vacation Rentals Gaining
(Bloomberg) -- Expedia Group Inc.’s vacation rental business reported an uptick in revenue growth after the unit was rebranded, reversing two quarters of declines and signaling renewed momentum in the travel giant’s fastest-growing category.
Bellevue, Washington-based Expedia’s short-term rental unit reported revenue growth of 17% in the three months ended June 30. That’s more than the 14% in the previous period when it switched the division name to Vrbo, a moniker more familiar to Americans than the previous HomeAway label, which is more well-known in Europe. Total revenue grew to $3.15 billion, exceeding Wall Street’s forecast of $3.12 billion for the quarter.
Expedia has been plowing resources into Vrbo in a bid to challenge rivals Airbnb Inc. and Booking Holdings Inc. in the booming market for alternative accommodation. While Vrbo dominates the market in the U.S. for purely vacation-rental accommodations, Airbnb and Booking capture a much larger share of the broader global $34 billion alternative accommodation market, which also includes non-traditional hotels and home sharing.
Vrbo only pulls in just over 10% of Expedia’s overall revenue, but analysts and investors focus on the division because it represents the company’s best bet for growth.
“The reason we think alternative accommodation is so important is because it’s one of the fastest growing parts of the wider online travel sector,” Needham & Co. Inc. analyst Brad Erickson said in an interview before the results were published Thursday. “The stock’s multiple will be disproportionally tied to how they are doing in that category.”
Expedia shares fluctuated in extended trading, and were up 3.56%. They have recovered from a steep slide after the first-quarter earnings and closed at $138.21 in New York Thursday, their highest this year.
Gross bookings for the travel giant climbed 9% in the second quarter, the company reported. Adjusted earnings before interest, tax, depreciation and amortization came in at $568 million, beating average analyst estimates of $539 million. Earnings per share rose to $1.77, excluding some items. The average analyst estimate was for $1.63.
The deceleration in vacation-rental revenue growth over the previous two quarters stemmed in part from the streamlining of Expedia’s home-rental brands and services, which have pushed its websites down in Google search results, Expedia’s Chief Executive Officer Mark Okerstrom said last quarter. He estimated growth in Vrbo would remain tepid until the company has time to rebuild the brand and drive consumers to its new sites.
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