The popular vacation-rental platform dragged down the results of its parent company Expedia Group in the second quarter of the year, according to an earnings call Thursday.
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Fewer people booked stays on the vacation rental platform Vrbo in the second quarter of the year, contributing to weaker-than-expected financial numbers for its parent company that disappointed investors even as profits grew.
The reduction in Vrbo activity is part of a broader trend that began in the back half of last year in which travelers shifted away from vacation rentals and toward hotels, Expedia Group CEO Peter Kern said Thursday on a call with investors.
“Travelers worldwide continue to pay for shorter stays in urban locations vs. longer trips in sun and ski destinations,” Kern said.
This reduction in Vrbo bookings dragged down parent company Expedia Group’s stronger booking numbers in its hotel business and its Expedia brand, Chief Financial Officer Julie Whalen said on the call.
Whalen expects Vrbo’s business to face continued challenges in the coming months.
For one thing, reduced Vrbo bookings in the second quarter of the year will carry over into fewer stays in the third quarter, which is historically the highest-earning period of the year for the vacation-rental platform, Whalen said. For another, the Vrbo service is migrating into Expedia Group’s main platform and app, which is expected to affect its bookings for a few months.
Combine those with the general trend of more travelers booking with hotels, and it’s a challenging spot for homeowners that rely on the short-term rental platform for revenue.
Still, company officials stressed that they expect long-term benefits from the tech transition the service is undergoing. Vrbo, which has never had a loyalty rewards program, is now folded into Expedia Group’s newly rolled-out One Key rewards program. This means customers who earn points by booking through Expedia, Hotels.com, Travelocity or other brands will be able to spend them on Vrbo rentals.
“It’s a chance to get them involved in our whole universe of products,” Kern told investors.
Vrbo’s slow second quarter was part of an earnings call in which Expedia Group posted a $385 million profit, an improvement from the $185 million loss reported during the same period last year. Across all the company’s brands, gross bookings were up 5 percent year over year to $27 billion, and company revenues rose 6 percent year over year to $3.4 billion.
Still, investors largely reacted negatively to the latest earnings numbers, which came in below expectations on bookings and revenue.
Expedia Group stock value dropped 17 percent in the early hours of trading following the report’s release. Company officials have insisted that they believe it remains undervalued. Expedia Group has bought back $1.2 billion of its own stock since the beginning of the year.
Once the company consolidates its brands onto its main platform and completes the rollout of its new loyalty program, it will be able to turn the page toward the cutting of some cloud-related costs, Whalen told investors.