Continued strength in overall travel demand boosted Expedia Group to record performance during the third quarter.
During the online travel agency's third-quarter earnings call, Expedia Vice Chairman and CEO Peter Kern said the company had its highest-ever quarterly revenue and adjusted earnings before interest, taxes, depreciation and amortization.
Adjusted EBITDA topped $1 billion for the first time in company history, and the company also had a record third quarter in total lodging bookings.
“Despite macroeconomic uncertainty and some short-term impact from Hurricane Ian, travel demand does remain strong, and [average daily rates] remain substantially elevated relative to pre-pandemic levels,” Kern said.
Total bookings were down 11% on a reported basis and down 2% on a like-for-like basis compared to the third quarter of 2019, said Julie Whalen, executive vice president and chief financial officer.
She said trends have since meaningfully improved, driven mainly by lodging bookings growth. Total lodging bookings for the third quarter were up 5% on a reported basis and 7% on a like-for like basis compared to 2019.
Bookings on a reported basis dipped 1% in July and rebounded in the rest of the quarter, growing 9% in August, Whalen said. Hurricane Ian and its aftermath had an impact on performance in September and October, which was still up 6% and 5% year over year, respectively.
“If not for the hurricane, both September and October would’ve been relatively in line with August,” she said.
Strong travel demand is extending into the fourth quarter as consumers continue to prioritize travel spending over other discretionary spending, Whalen said.
“While it is still early in the quarter, we are seeing total lodging bookings for stays expected to occur in the balance of the year and into 2023 continuing to outpace 2019 levels,” she said.
Loyalty Program
During the quarter, Expedia reached an all-time high in active loyalty members, passing 2019 levels in August, Kern said. New Expedia customers who became loyalty members in the quarter grew by nearly 50% compared to the third quarter of 2019. Its loyalty program that will tie together all of its online travel agency brands, One Key, is on track for next year and will be a catalyst for further membership growth, he said.
App usage was also at an all-time high, growing by nearly 40% compared to 2019, he said. Nearly two-thirds of all bookings came from direct traffic.
In its marketing mix, Expedia has been shifting toward longer-term channels, such as app downloads, to capture travel intent outside of classic performance channels, he said. These longer-term marketing investments are helping to build a larger base of long-term, high-value customers, Kern said.
Upgraded app features — including price and flight tracking, Trip Boards and smart shopping — have led to greater engagement, Kern said.
Trip Boards allows users to save their favorite lodging and activities as well as share and collaborate on trip details. The Smart Shopping tool helps travelers compare and choose among different available rooms at any given property.
Business-to-Business
Partnerships, through Expedia's Business-to-Business program, are helping to drive innovation in technology and products, executives said.
During the quarter, the company signed its first pilot partner for a best-in-class fraud prevention product.
“It’s a real opportunity for us to take our technological advances and bring them to the industry and help create greater efficiency in our partners running their businesses and then ultimately expand the universe of partners who can sell travel,” he said.
The company is working on several new products and features, many of them in early stages, that it plans to roll out in the future, he said.
By the Numbers
Net income was $482 million in the third quarter, up 33% compared to 2021, according to the company’s earnings release. Its adjusted EBITDA was roughly $1 billion, up 26% compared to 2021 and a company record.
Free cash flow for the first nine months of 2022 was $3.1 billion, more than double 2019 levels. The company retired $500 million of debt, resulting in cumulative debt and preferred equity reduction of more than $3.4 billion over the past 18 months.
Total bookings for lodging, air and other travel products brought in more than $23.9 billion, a 28% increase compared to the third quarter of 2021. Lodging revenue reached $2.8 billion, a 25% year-over-year increase, driven by a 20% increase in room nights and a 4% increase in average daily rate.
At press time, Expedia’s stock was trading at $87.63 per share, down 51.5% year to date. The NASDAQ Composite Index was down 33.9% for the same period.