July and August are typically the months when people go on vacation. But Expedia (experience) They are warning of a slump in travel demand this summer.
“We saw a more challenging macro environment in July and weakening demand for travel, so we are adjusting our outlook for the remainder of the year,” Expedia CEO Ariane Gorin said on the company’s second-quarter earnings call, suggesting the U.S. economy remains under pressure and travelers are being cautious with discretionary spending.
The company now expects third-quarter gross bookings and revenue growth to be in the range of 3% to 5%.
Expedia isn’t the only travel booking company sounding the alarm about the travel trend.
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Airbnb (ABNB) In a letter to shareholders published on August 6, the company warned that demand from American travelers could slow.
“We are seeing signs of slowing U.S. guest demand coupled with shorter booking lead times globally,” the company said, adding that it expects “year-over-year growth in room nights and experience bookings to gradually slow compared to the second quarter of 2024.”
Amsterdam-based travel agency Booking.com (back) The company also noted “signs of some declining activity in the United States” during its earnings call on Aug. 1, saying the U.S. market was an exception to a broadly stable global outlook.
But Expedia shares surged more than 10% to $130.01 on August 9 after strong second-quarter results, especially from international bookings, helped offset concerns about slowing demand, leading analysts to rethink their price targets.
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Recovering from previous declines
The Seattle-based company reported second-quarter adjusted earnings per share of $3.51, up 21% from a year ago and beating expectations of $3.14. Revenue of $3.60 billion rose 6% from a year ago and beat expectations of $3.53 billion. Net income was $386 million.
Total bookings, which generally represents the total retail value of booked transactions, increased 6% to $28.8 million. Room nights growth accelerated to 10%, “the highest rate since the first quarter of 2023,” the company said.
Financial results also reversed an earlier decline. Adjusted first-quarter earnings came in at $0.21 per share after a net loss of $135 million, or 99 cents per share. For the fourth quarter of 2023, the company reported net income of $132 million, down 25% year over year.
“This exceeded our expectations and was driven by significant improvement at Vrbo and continued strength of our brand Expedia in our advertising business and B2B division,” Golin said in the earnings call.
Vrbo is one of Expedia’s three main brands, alongside Expedia and Hotels.com. By the end of 2023, the Expedia Group will offer more than 3 million accommodations, with more than 2 million alternative accommodations available to book online through Vrbo.
Vrbo is an online marketplace where property owners can list their rental properties and travelers can book them. It’s a direct competitor to Airbnb.
Related: Airbnb CEO reveals biggest mistake he made during pandemic layoffs
In contrast, Airbnb shares fell 13.4% on August 7 after the company reported weaker-than-expected second-quarter profit. The company reported earnings per share of 86 cents in the June quarter, below the 92 cents expected. Revenue of $2.75 billion was slightly above the $2.74 billion estimate.
Analysts make inconsistent adjustments to Expedia’s stock price targets
JPMorgan and Citi raised their price targets on Expedia shares to $135 from $128 and $145 from $140, respectively, and maintained a neutral rating.
JPMorgan analysts said they saw the full-year outlook cut as a better thing than feared, and Citi analysts said Expedia’s 2024 bookings outlook remained at the low end of expectations, but the stock has turned “incrementally positive” since the second-quarter report.
Other Wall Street analysts:
Barclays lowered Expedia’s price target to $134 from $138 and maintained an equal weight rating.
Analysts are concerned about macro risks and the halt in travel in July, saying it’s unclear whether this is a temporary situation or a sign of a more sustained decline in demand.
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