Expedia (NASDAQ:EXPE) shares rose more than 6% in Thursday’s extended session after the Company reported record-breaking second-quarter results. The Company’s second-quarter sales are above analysts’ expectations, indicating a strong start to the peak travel season as travellers shake off two years of Covid-19 limitations.
The Seattle-based online travel company earned $1.96 per share and increased revenue by more than 50% yearly to $3.18 billion. Analysts had predicted $1.56 billion and $2.99 billion, respectively. The beats were able to overcome a 13% increase in sales costs due to higher merchant processing fees, customer service costs, and cloud costs due to increased transaction volume. Gross bookings grew 26% yearly to $26.14 billion in the third quarter.
“We set a new record for second-quarter revenue and adjusted EBITDA.” “These were especially remarkable in light of the simplification initiatives we made two years ago, which included the sale of our Egencia corporate travel business,” CEO Peter Kern stated. “Travel demand has remained high despite delays over the summer travel season and an uncertain macroeconomic background.”
The Company’s results report did not contain third-quarter guidance, which has been a source of contention for both Airbnb (ABNB) and Booking Holdings (BKNG).
Kern’s colleagues at Airbnb Inc. and Booking Holdings Inc. have likewise maintained their optimism about travel demand, despite signals that the industry’s troubles this summer have begun to take their toll. Airbnb and Booking reported great second-quarter results earlier this week, and their executives expressed confidence that third-quarter revenue would be even stronger. Still, they also revealed slowing growth in summer room nights booked.
Analysts on Expedia
On a conference call with analysts, Expedia (NASDAQ:EXPE) Chief Financial Officer Eric Hart said the Company’s rapid growth in April and May is slowing. The Seattle-based Company anticipates that lodging bookings will be higher in the third quarter than in the previous year and that this trend will continue throughout the year.
Despite customers’ fervent desire to travel, this season has thrown some stumbling blocks in the best-laid plans. Long airport queues, thousands of cancelled flights, and misplaced bags have all contributed to travel turmoil. Due to the cancelled flights, Airbnb reported more cancellations than expected in the second quarter.
According to Kern, Expedia experienced “some choppiness” in bookings in July due to service issues in North America and Europe. Those returned to 2019 levels after normalizing in the second half of the month. “There’s been a lot of noise and cancellations, and we think that’s responsible for a lot of it,” he said on an analyst call. “We believe it was more of a passing phase than anything else.”
The hospitality industry has also remained optimistic. Hilton Worldwide Holdings Inc. is upping its profitability prediction for the rest of the year, indicating that inflation fears aren’t preventing people from taking vacations. In addition, Airbnb stated that higher average daily fees would compensate for the drop in bookings.
Expedia reported 82.5 million room nights booked in the second quarter, compared to 87.5 million predicted by analysts. The US dollar’s strength, which has increased significantly versus most foreign currencies, has impacted performance at technology businesses ranging from Microsoft Corp. to Airbnb. However, Expedia (NASDAQ:EXPE) is less vulnerable to currency swings than its counterparts because only roughly a quarter of its income comes from outside the United States.
During the epidemic, Expedia, which provides airfare, hotel, and rental car accommodations, gained from its short-term rental service Vrbo, as workers took advantage of remote-work options and retreated to vacation homes. Vrbo emphasizes renting complete properties and does not have as large a market share in cities where Airbnb reigns supreme.
To expand its business-to-business division, the Company has been restructuring for two years, selling off corporate travel arm Egencia and developing a new e-commerce platform. Open World, a new platform, enables partners of all sizes to leverage Expedia’s technology to book rental cars or detect fraud.
Expedia’s (NASDAQ:EXPE) stock has dropped 43% this year, compared to 30% for Airbnb and 19% for Booking.
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