US: Expedia Group has announced an 82 per cent drop in revenue for the second quarter of 2020, as total gross bookings for the three-month period up to 30 June also saw a 90 per cent decline on the equivalent period in 2019, to $2.71 billion.
The plummeting figures for the Seattle-based online travel agency are one of the clearest illustrations yet of the overall impact of the coronavirus on the global travel sector.
Bloomberg said the latest revenue figures of $566 million were the lowest reported by Expedia in roughly a decade, in the fallout of the global financial crash in 2008, widely considered to be the worst economic disaster since the 1929 Great Depression. On current estimates, the consequences of the Covid-19 pandemic threaten to eclipse that, as initial analyst predictions for revenue and adjusted losses [before interest, taxes, depreciation and amortisation] fell way short of the actual figures.
In a statement, CEO Peter Kern said: “The second quarter of 2020 represented likely the worst quarter the travel industry has seen in modern history and Expedia was of course not spared.”
One upside for Expedia is the steady recovery of bookings in May and June seen by its vacation rental unit Vrbo, following the group’s decision to phase out its HomeAway brand in the United States and elevate attention for Vrbo instead. Domestic vacation rentals in non-urban locations, such as mountains, lakes and national parks have seen a significant rise in interest among families who reside in cities.
However, Kern warned the entire vacation rental sector would still be in for a “bumpy and inconsistent recovery”, even though cancellations are sharply down. He also cited the “volatile” virus numbers being seen around the globe and the possibility of further regional restrictions as reasons to be cautious about any short-term recoveries.
The recovery of the aviation industry is being seen more noticeably in the United States than in Europe, it was revealed on the company conference call, which in turn is aiding domestic travel and staycations, raising hopes that vacation rentals will be the preferred accommodation choice to meet the demands for travel.
Expedia is far from the sole OTA to face the strain of Covid-19 on its business but increased market competition from Airbnb and the emergence of Google has already played a part in the company’s decision to cut 3,000 jobs even before the pandemic in February and appoint Kern as its new CEO at the end of April to guide it through the crisis. Chairman Barry Diller forged plans for a major restructuring project at the company earlier this year in any case, including trimming an already “bloated and sclerotic” workforce.
At the same time, the group raised $3.2 billion in incoming capital, made up of $2 billion in debt financing and $1.2 billion in equity investment injected by Apollo Global Management and Silver Lake Partners, who had each participated in separate bailouts for Airbnb earlier that month.
The likes of Airbnb and TripAdvisor have been forced to cut their workforces by around 25 per cent, while Booking.com reportedly took out a $4 billion loan in government aid alongside committing to a number of widespread cost-cutting measures.
While restrictions on travel are still ongoing and cases continue to rise in the United States and around the world, it marked the first time that the full effect of the coronavirus had been laid bare for all to see on its balance sheets.
Kern expressed his optimism for the future of Expedia post-pandemic given the changes made over the last few months and the long-term planning should cases spike again in these unpredictable times.
He said: “We cannot control these short-term changes in demand, so we are instead focused on our needed long-term strategic work. By reshaping and simplifying our organisation, we have put ourselves in position to optimise our brands, our data, and our platform technologies.
“These changes have also allowed us to streamline our business as we look to drive significant efficiency across the company. Thanks to the tremendous efforts of our team, I am confident we are on track to come out of the pandemic in a much better place,” he added.