US: Expedia Group has reported a decline in revenue growth within its vacation rental business, Vrbo, in the third quarter of 2019, leading the way to a lower profit margin for the year.
Expedia’s Washington-based short-term rental unit, Bellevue, reported revenue growth of 14 per cent to $467 million in the three months leading up to 30 September. That figure is a drop in the 17 per cent growth rate seen in the previous quarter, while total revenue went up by 8.6 per cent to $3.56 billion in the same period.
Given the success of competitors in the alternative accommodation such as Airbnb and Booking.com, Expedia has sought to plough investment and resources into its own home-sharing Vrbo section. While Vrbo is the dominant player in the pure vacation rental market in the United States, the likes of Airbnb and Booking Holdings manage a significantly larger share of the global alternative accommodation market [which also includes niche hotels and condos], estimated to be worth $34 billion.
Expedia Group CEO Mark Okerstrom told Bloomberg this week: “We continue to be happy with the trends we are seeing at Vrbo and we continue to see growth rates in double digits.”
He added that Expedia expects “continued muted growth rates” at Vrbo while it continues to grow its brand in the face of more-established home-sharing competition.
Okerstrom said: “Once we get past some changes, we will be able to return to growth rates we’re more satisfied with.”
Expedia Group substituted its vacation rental division name of HomeAway to Vrbo earlier this year to identify closer with its American audience, where the moniker was more familiar known rather than in Europe.
In a conference call, Okerstrom said that Expedia adjusted its Ebitda growth of five per cent to nine per cent in 2019. This represented a drop from the original forecast, which predicted growth of up to 15 per cent.
Currently, the Vrbo division brings in just over ten per cent of Expedia’s overall revenue, but it attracts attention from analysts and investors as they see it as the company’s best potential route to growth.
At the same time, Expedia reported that:
- Gross bookings rose by nine per cent to $26.9 billion
- Adjusted earnings before interest, tax, depreciation and amortisation were reported at $912 million, below average analyst estimates of $973.3 million.
- Earnings per share came in at $3.38, below analysts’ average forecasts of $3.77