Expedia Plays Long Game as it Awaits Fourth Quarter Finish to Vrbo Tech Shift

25.08.2023 - 13:05 / skift.com / Dennis Schaal / Long

Investors looking for short-term gains may be disappointed in Expedia Group’s second quarter — it missed analysts’ revenue expectations by $10 million. But if things actually work out according to Expedia’s playbook, a carefully laid foundation may start to trigger more lucrative results in 2024.

Plank #1 — In July, Expedia rolled out its long-awaited One Key loyalty program, which for the first time consolidates its brands’ disparate loyalty programs into one unified plan for Expedia, Hotels.com, and vacation rental unit Vrbo, which gets a rewards scheme for the first time. Of Expedia Group’s dozen or more brands, these three are the core.

“This quarter, active loyalty members continued to hit new highs and were up 15% year-over-year in our core brands and the percentage of bookings coming through our apps was up 300 basis points sequentially versus the first quarter,” CEO Peter Kern told analysts Thursday in discussing the company’s second-quarter results.

But these are very early days and the financial benefits to Expedia so far have been inconsequential.

Plank #2 — Since early 2020, Expedia has been on a mission to transform the company. It consolidated brand teams that were sometimes working at cross-purposes, and eliminated a few non-core brands. In addition to the launch of One Key, one of the “final” — transformation is never final — pieces of the plan is to migrate the Vrbo platform onto the Expedia tech stack, and officials said that is expected to be completed in the fourth quarter. All of Vrbo’s U.S. web traffic has already been transitioned.

The fact that the Vrbo tech stack migration is incomplete — Expedia migrated the Hotels.com tech platform last year — negatively impacted Expedia’s second quarter results, officials said, and it also dampened Vrbo bookings.

One underlying reason for a soft quarter is that Expedia shifted some marketing spend into the third quarter to take advantage of the One Key rollout. With less marketing than previously anticipated, revenue came in at $3.4 billion, a tepid 6% increase.

“As we finish our technology work in the coming quarters and look to redeploy resources and deprecate systems next year, we expect to realize cost efficiencies going forward,” said Chief Financial Officer Julie Whalen. “Despite this overhead pressure, we are pleased to see that with another quarter of strong revenue and overall expense discipline, including our decision to shift some marketing spend, we delivered record second quarter EBITDA of $747 million, which was up 15% with an EBITDA margin of 22.2%, expanding approximately 190 basis points versus the second quarter of 2022.”

The wait to complete Vrbo’s technology migration means engineers will be working up until then on