Expedia Group, like many others in the travel industry, has faced a challenging global economy and a noticeable softening in travel demand as it navigated through July 2024. The company’s second-quarter earnings report presents a mixed picture—there are bright spots, such as strong growth in room nights, particularly at Expedia.com, but also significant challenges that have prompted strategic shifts, especially regarding its loyalty program and platform migrations.
Strong Second Quarter Results Amid Growing Challenges
In the second quarter of 2024, Expedia Group achieved results at the high end of its expectations, with gross bookings and revenue growing by 6%. This performance reflects steady progress in a complex and fluctuating travel market, supported by momentum and sequential improvement across its consumer brands.
However, as July unfolded, the company encountered significant headwinds. The global economic landscape became increasingly challenging, and this was reflected in a softening of travel demand. In response, Expedia Group made the strategic decision to lower its outlook for the remainder of the year, signaling a more cautious approach given the external environment.
The Success and Setbacks of One Key Loyalty Program
One of the most significant developments in Expedia Group’s recent history is the introduction of its One Key loyalty program. Launched a year ago, One Key was designed to unify the loyalty programs of the company’s three core brands—Expedia.com, Hotels.com, and Vrbo—into a single, cohesive program. The vision was to introduce this loyalty scheme globally, providing a streamlined and integrated experience for users across all of Expedia Group’s platforms.
However, the rollout of One Key has encountered some significant hurdles, particularly outside the U.S. and UK. In its earnings announcement, Expedia Group revealed that it is “pausing” the global rollout of One Key beyond these two markets. This decision was made in part due to the adverse impact the program has had on the Hotels.com brand, which had a simple and popular loyalty program that rewarded users with a free night after every 10 nights booked. The introduction of One Key disrupted this system, leading to dissatisfaction among some users and a negative impact on Hotels.com’s performance.
It was noted that most international markets only have either Expedia.com or Hotels.com operating at scale, with limited presence from Vrbo. As a result, the company plans to take additional time to tailor its value proposition for these markets. This approach is intended to minimize further disruption, particularly to Hotels.com, which was the brand most affected by the U.S. rollout of One Key.
Despite the challenges faced by Hotels.com, Expedia.com appeared to be less disrupted by the introduction of One Key. In fact, Expedia.com saw robust growth, with room nights jumping by 20% in the second quarter, highlighting the brand’s resilience and strength in the market.
Platform Migration and the Impact on Vrbo and Hotels.com
Another significant factor affecting Expedia Group’s performance has been its years-long technology platform migration, which aimed to bring Expedia.com, Hotels.com, and Vrbo onto a common platform. This migration was intended to streamline operations, improve user experience, and enhance collaboration across the brands. However, the transition has not been without its difficulties.
Vrbo, in particular, has struggled to regain its footing following the migration. The platform, which had been a standout performer in previous years, has lagged notably in 2023. While Expedia.com experienced a robust 20% growth in booked room nights during the second quarter, the overall room night activity at Vrbo and Hotels.com was significantly lower. This disparity is reflected in Expedia Group’s overall room night growth of 10%, which, while positive, indicates that Vrbo and Hotels.com underperformed relative to Expedia.com.
Challenges faced by Vrbo and Hotels.com during the platform migration were acknowledged. While the migration brought some benefits, such as trip planning collaboration from Vrbo being added to Expedia.com, it also resulted in the loss of some critical functionalities on the Vrbo platform. The company has since been working to restore these functionalities, but there is still work to be done.
Similarly, the migration to One Key downplayed a key differentiator for Hotels.com—its highly regarded loyalty program. Hotels.com had built strong brand awareness and customer loyalty around this program, and the changes brought by One Key have required the company to rethink its approach. Moving forward, Expedia Group plans to “move back” a bit in terms of the migration or build specific features for Vrbo and Hotels.com on top of the shared platform to better cater to their unique value propositions.
Adjusting Expectations and Strategic Focus
As Expedia Group looks ahead, the company is taking a more cautious approach. The decision to pause the global rollout of One Key and to tailor the loyalty program for different markets reflects a strategic adjustment in response to the challenges encountered so far. This pause also aims to prevent further disruption to brands like Hotels.com, which have been adversely affected by the changes.
The company’s broader strategy will involve refining its platform capabilities and ensuring that each brand within the Expedia Group portfolio retains its unique strengths while benefiting from shared technological advancements. This balance between integration and differentiation will be critical as the company continues to navigate a complex and evolving travel market.
In conclusion, Expedia Group’s second quarter of 2024 highlights both the successes and challenges of its current strategy. While the company has achieved strong growth in certain areas, particularly with Expedia.com, it is also facing significant hurdles with its One Key loyalty program and platform migration efforts. As the travel industry continues to evolve, Expedia Group’s ability to adapt its strategy, manage disruptions, and maintain brand loyalty will be key to its ongoing success.
Barb is the president of NASTRA and has spent her professional career in hospitality and real estate. After acquiring her first short-term rental in 2018, Barb moved her focus to legal advocacy after she sued the city of Nashville over a permit issue. Over the last three years, she has mentored more than 2,800 new STR hosts and is the Community Leader for Airbnb in Nashville, as well as an Airbnb “Ask a Superhost” Ambassador. Barb has appeared on numerous radio broadcasts, television shows, and podcasts to talk about her love of hosting. She also manages and co-hosts a number of short term rentals across Tennessee and Arkansas. Barb and her husband Pat own a hotel brokerage, development and consulting company. Look for her upcoming podcast series, “Women of Airbnb.”